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As filed with the Securities and Exchange Commission on September 29, 1995
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1933 Act Registration No. 33-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No.
THE EBI FUNDS, INC.
on behalf of
INCOME PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (800) 554-1156
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
(Address of Principal Executive Offices) (Zip Code)
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, Vermeire Kirkpatrick & Lockhart
& Gorrell 1800 M Street, N.W., Suite 900
1225 17th Street, Suite 2900 Washington, D.C. 20036
Denver, Colorado 80202
Approximate Date of Proposed Public Offering: As soon
as practicable after the effective date of this Registration
Statement.<PAGE>
<PAGE>
The Registrant has registered an indefinite amount of
securities under the Securities Act of 1933 pursuant to Section
24(f) under the Investment Company Act of 1940; accordingly, no
fee is payable herewith. A Rule 24f-2 Notice for the Registrant's
most recent fiscal year ended December 31, 1994 was filed with the
Commission on February 27, 1995.
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The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall
become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.<PAGE>
<PAGE>
CROSS REFERENCE SHEET FOR
THE EBI FUNDS, INC.
Item of Part A Location in
of Form N-14 Prospectus
1 ................................ Cross Reference Sheet;
Cover Page
2 ................................ Table of Contents
3 ................................ Synopsis; Comparison of
Investment Policies and
Restrictions, and Risk
Factors
4 ................................ Reasons for and Purpose of
the Reorganization; Informa-
tion About the Reorganiza-
tion; Comparative Information
on Shareholder Rights
5 ................................ Information About the
Portfolios
6 ................................ Information About the
Portfolios
7 ................................ Voting Information
8 ................................ Synopsis
9 ................................ Inapplicable
Item of Part B Location in Statement
of Form N-14 of Additional Information
10 ................................ Cover Page
11 ................................ Cover Page
12 ................................ Statement of Additional
Information of The EBI Funds,
Inc. dated May 1, 1995
13 ................................ Inapplicable
14 ................................ Statement of Additional
Information of The EBI Funds,
Inc. dated May 1, 1995;
Annual Report of The EBI
Funds, Inc. for the fiscal
year ended December 31, 1994;
Semi-Annual Report of The EBI
Funds, Inc. for the fiscal
period ended June 30, 1995;
pro-forma financial
statements.
<PAGE>
THE EBI FUNDS, INC.
RELATIVE RETURN BOND PORTFOLIO
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
____________, 1995
Dear Shareholder:
The Board of Directors of The EBI Funds, Inc. (the "Fund")
has recently reviewed and unanimously endorsed a proposal for
reorganization of the Relative Return Bond Portfolio (the
"Portfolio"), a series of the Fund, which they judge to be in the
best interests of its shareholders. This proposal calls for
combining the assets of the Portfolio with Income Portfolio, a
separate series of the Fund, which has similar investment
objectives.
We have therefore called a Special Meeting of Shareholders
to be held on December 14, 1995 to consider this transaction. WE
STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW,
COMPLETE AND RETURN YOUR PROXY AS SOON AS POSSIBLE.
As a result of this transaction, your Portfolio would be
combined with Income Portfolio, and you would become a
shareholder of Income Portfolio, receiving shares of Income
Portfolio having an aggregate net asset value equal to the
aggregate net asset value of your investment in the Portfolio.
No sales charge will be imposed in the transaction and the
Closing of the transaction will be conditioned upon receiving an
opinion of counsel to the effect that the proposed transaction
will qualify as a tax-free reorganization for Federal income tax
purposes.
Detailed information about the proposed transaction and the
reasons for it are contained in the enclosed materials. Please
exercise your right to vote by completing, dating and signing the
enclosed proxy card. A self-addressed, postage-paid envelope has
been enclosed for your convenience. IT IS VERY IMPORTANT THAT
YOU VOTE AND THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER
THAN DECEMBER 13, 1995.
NOTE: You may receive more than one proxy package if you
hold Portfolio shares in more than one account. You must return
separate proxy cards for separate holdings. We have provided a
postage-paid return envelope for each, which requires no postage
if mailed in the United States.
Sincerely,
Hubert L. Harris, Jr.
President<PAGE>
<PAGE>
THE EBI FUNDS, INC.
RELATIVE RETURN BOND PORTFOLIO
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on December 14, 1995
To the shareholders of
Relative Return Bond Portfolio
of The EBI Funds, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of
Shareholders of Relative Return Bond Portfolio (the "Portfolio"),
a series of The EBI Funds, Inc. (the "Fund"), will be held at the
offices of the Fund at 1315 Peachtree Street, N.E., Atlanta,
Georgia 30309, at 10:00 a.m.(local time), on December 14, 1995,
for the following purposes:
1. To consider and vote on an Agreement and Plan of
Reorganization providing for the acquisition of all or
substantially all of the assets of the Portfolio by Income
Portfolio, in exchange for shares of Income Portfolio and the
assumption by Income Portfolio of certain identified liabilities
of the Portfolio, and for the distribution of such Income
Portfolio shares to shareholders of the Portfolio and the
subsequent termination and dissolution of the Portfolio; and
2. To transact such other business as may properly come
before the meeting, or any adjournment or adjournments thereof.
The Board of Directors of the Fund has fixed the close of
business on October 31, 1995 as the record date for determination
of shareholders entitled to notice of, and to vote at, the
meeting.
EACH SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING
IN PERSON IS REQUESTED TO DATE, FILL IN, SIGN AND RETURN PROMPTLY
THE ENCLOSED FORM OF PROXY IN THE ENCLOSED ENVELOPE, WHICH NEEDS
NO POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
TONY D. GREEN
Secretary
YOUR PROMPT ATTENTION TO THE ENCLOSED FORM OF PROXY WILL
HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
_______________, 1995
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be
of assistance to you and may help avoid the time and expense
involved in validating your vote if you fail to sign your proxy
card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of
the party signing should conform exactly to a name shown in the
registration.
3. ALL OTHER ACCOUNTS: The capacity of the individual
signing the proxy card should be indicated unless it is reflected
in the form of registration. For example:
Registration Valid Signature
____________ _______________
Corporate Accounts
(1) ABC Corp. ...................... John Doe, Treasurer
(2) ABC Corp.
c/o John Doe .................. John Doe, Treasurer
(3) ABC Corp. Profit Sharing Plan... John Doe, Trustee
Trust Accounts
(1) ABC Trust....................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78................. Jane B. Doe, Trustee
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o
John B. Smith, Jr., UGMA....... John B. Smith
(2) John B. Smith................... John B. Smith, Jr.,
Executor
<PAGE>
THE EBI FUNDS, INC.
RELATIVE RETURN BOND PORTFOLIO
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
PROXY STATEMENT/PROSPECTUS
_______________, 1995
This Proxy Statement/Prospectus is being furnished to
shareholders of Relative Return Bond Portfolio (the "Portfolio"),
a series of The EBI Funds, Inc. (the "Fund"), in connection with
a proposed reorganization (the "Reorganization") in which all or
substantially all of the assets of the Portfolio would be
acquired by Income Portfolio, a separate series of the Fund, in
exchange for shares of Income Portfolio and the assumption of
certain identified liabilities of the Portfolio. The shares of
Income Portfolio thereby received would then be constructively
distributed to shareholders of the Portfolio, and the Portfolio
would be completely liquidated and dissolved. As a result of the
Reorganization, each shareholder of the Portfolio would receive
that number of full and fractional shares of Income Portfolio
having an aggregate net asset value equal to the aggregate net
asset value of such shareholder's shares of the Portfolio held as
of the close of business on the closing date of the
Reorganization. No sales charge will be imposed on the
transaction.
The EBI Funds, Inc. is an open-end, diversified management
investment company organized as a Maryland corporation. The
investment objective of 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
Income Portfolio's assets will consist of income producing
securities. Securities in which Income Portfolio invests consist
primarily of U.S. Government obligations and carefully selected
fixed income corporate obligations. The Income Portfolio may
invest up to 35% of its assets in mortgage-backed securities.
There can be no assurance that the investment objective of Income
Portfolio will be achieved.
The investment objective, policies and restrictions of
Income Portfolio (and consequently, the risks of investing in it)
are substantially the same as those of the Portfolio, but differ
in certain respects. For a comparative discussion of these
differences, see "Comparison of Investment Policies, and
Restrictions, and Risk Factors" in this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus, which should be retained
for future reference, sets forth concisely certain information
about Income Portfolio that a prospective investor should know
before investing. For a more detailed discussion of the
investment objectives, policies and restrictions of the Portfolio
and Income Portfolio, and the risks of investing in either, see
the prospectus for the Fund, dated May 1, 1995, as supplemented
October 1, 1995, which is included herewith and incorporated
herein by reference. A Statement of Additional Information dated
_____________, 1995, containing additional information about the
Reorganization and the parties thereto has been filed with the
Securities and Exchange Commission and is incorporated by
reference into this Proxy Statement/Prospectus. A copy of such
Statement is available upon request and without charge by writing
to the Fund at the address above or by calling the Fund at
1-800-972-9030.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Acquisition of the assets of
RELATIVE RETURN BOND PORTFOLIO
by and in exchange for shares of
INCOME PORTFOLIO
Proxy Statement/Prospectus
________________, 1995
TABLE OF CONTENTS
Page
1. Synopsis 5
2. Fees and Expenses 6
3. Comparison of Investment Policies and
Restrictions, and Risk Factors 9
4. Information About the Reorganization 11
5. Comparative Information on 14
Shareholder Rights
6. Information About the Portfolios 14
Other Business 15
Voting Information 16
Exhibit A Agreement and Plan of Reorganization
<PAGE>
1. Synopsis.
The following is a summary of certain information contained
in this Proxy Statement/Prospectus. This summary is qualified by
reference to the more complete information contained elsewhere in
this Proxy Statement/Prospectus, the prospectus of the Fund and
the Agreement and Plan of Reorganization attached to this Proxy
Statement/Prospectus as Exhibit A.
The Proposed Reorganization. The Board of Directors of the
Fund, including the Directors who are not "interested persons" of
the Fund (the "Independent Directors"), as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), has
unanimously approved an Agreement and Plan of Reorganization (the
"Plan") providing for the acquisition of all or substantially all
of the assets of the Portfolio by Income Portfolio, in exchange
for shares of Income Portfolio and the assumption by Income
Portfolio of certain identified liabilities of the Portfolio.
See "Information About the Reorganization" regarding details of
the transaction. The Board of Directors of the Fund recommends
approval of the Plan effecting the Reorganization, and therefore
has submitted the Reorganization for approval by shareholders of
the Portfolio at a Special Meeting of Shareholders to be held on
December 14, 1995 (the "Meeting").
Approval of the Reorganization with respect to the Portfolio
requires the vote of a majority of the Portfolio's outstanding
shares. See "Voting Information."
Investment Objectives, Policies and Restrictions. The
investment objective of the Income Portfolio is to achieve a high
total return on the investment through capital appreciation and
current income, without regard to federal income tax
considerations.
The investment objective of the Portfolio is to achieve a
high total return on investments through current income and
capital appreciation, without regard to federal income tax
considerations.
While the investment objectives, policies and restrictions
of the Portfolio and Income Portfolio (and consequently, the
attendant risk of investing in either the Portfolio or Income
Portfolio) are substantially the same, there are certain
differences between the Portfolio and Income Portfolio, which are
outlined herein. See "Comparison of Investment Policies and
Restrictions, and Risk Factors." For further discussion of the
investment objectives, policies, and restrictions applicable to
the Portfolio and Income Portfolio, see "Investment Objectives
and Policies" in the accompanying prospectus of the Fund.
Purchase, Redemption and Exchange Procedures. Shares of
Income Portfolio and the Portfolio are offered at net asset value
without a sales charge, but are subject to a contingent deferred
sales charge ("CDSC") of a set percentage of the dollar amount
subject thereto during the first year after purchase. The set
percentage for the Income Portfolio is 0.60%, and for the
Portfolio is 0.50%. Shares of the Income Portfolio
constructively distributed for shares of the Portfolio upon the
reorganization contemplated herein will retain a CDSC rate of
0.50%. Purchases of both Income Portfolio and the Portfolio may
be made through a professional financial consultant whose firm
has a Selling/Servicing Agreement with INVESCO Services, Inc.
Shares of Income Portfolio and the Portfolio may be redeemed
through a broker-dealer, by mail, or by telephone in accordance
with procedures described in the Fund's prospectus.
Investors in the Portfolio and Income Portfolio may exchange
shares of their respective portfolio held for at least 15 days
for shares of the other portfolios of the Fund without payment of
a CDSC; the sales charge will be assessed, if applicable, when
the shareholder redeems such shares or has them repurchased
without a corresponding purchase of shares in another portfolio.
The exchange privilege is limited to residents of states in which
the shares of the portfolio being acquired are registered for
sale.
The Portfolio and Income Portfolio each requires a minimum
initial investment of at least $25,000. Subsequent purchases of
shares of the Portfolio and Income Portfolio are subject to a
minimum investment requirement of $1,000 ($250 for an IRA
Account). For further discussion on purchases, redemptions and
exchange procedures, see "The EBI Funds, Inc. Shareholder
Services Guide" in the accompanying prospectus.
Tax Consequences. As a condition of closing, the Portfolio
and Income Portfolio will obtain an opinion of counsel, based on
certain facts, assumptions and representations made by the
Portfolio and Income Portfolio, to the effect that the
Reorganization will qualify as to a tax-free reorganization for
Federal income tax purposes. See "Information About the
Reorganization."
Dividend Policy. Both the Portfolio and Income Portfolio
usually make monthly distributions of net investment income
(including any net short-term capital gains), and an annual
distribution of net realized capital gains during the month of
December.
Management of the Fund. INVESCO Services, Inc. ("ISI"), a
Georgia corporation having its principal office at 1315 Peachtree
Street, N.E., Atlanta, Georgia 30309, serves as the Investment
Adviser, Manager, and Distributor of the Fund, including the
Portfolio and Income Portfolio. ISI has been engaged in the
investment advisory business since 1983, and is a wholly-owned
subsidiary of INVESCO Capital Management, Inc. ("ICM").
ICM is the sub-adviser to the Income Portfolio and INVESCO
Management & Research, Inc. ("IMR"), formerly Gardner and Preston
Moss, Inc., is the sub-adviser to the Portfolio. For further
discussion of the management of the Portfolios, see "Management
of the Fund" in the accompanying prospectus of the Fund.
2. Fees and Expenses.
For services to be rendered and the expenses to be assumed
by ISI under the Investment Advisory Agreement, the Portfolio and
the Income Portfolio each pay to ISI 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 applicable Portfolio. On an annual basis, the advisory fee
is equal to 0.65% of the average net asset value of the Income
Portfolio, and 0.50% of the average net asset value of the
Portfolio. For a minimum of three years beginning October 1,
1995, ISI has agreed to waive that portion of its advisory fees
with respect to Income Portfolio in excess of 0.40%.
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, including
Income Portfolio and the Portfolio, pays to ISI 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 ISI 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.
Pursuant to Rule 12b-1, the Portfolio and the Income
Portfolio, as well as certain other portfolios of the Fund, have
adopted a plan of distribution (the "Plan of Distribution") 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 Portfolio, and
0.60% of the average annual net assets of Income Portfolio. 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 combined effect of the Advisory Agreement, Operating
Services Agreement, and Plan of Distribution of the Fund is to
place a cap or ceiling on the total expenses of each portfolio of
the Fund, 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. In any calendar year, the expenses
of the Portfolio and Income Portfolio may not exceed 1.50% and
1.75%, respectively, of average net assets. For a minimum of
three years beginning October 1, 1995, ISI has agreed to waive
that portion of its fees with respect to Income Portfolio such
that expenses may not exceed 1.50%.
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases of Shares
(as a percentage of offering price).......... None
Contingent Deferred Sales Charge Income Portfolio, 0.60%
(as a percentage of original first year; Portfolio
purchase price, or redemption 0.50%* first year
price, whichever is lower..... Both Portfolios, 0% after
first year
* Shares of the Income Portfolio constructively distributed
for shares of the Portfolio upon the reorganization contemplated
herein will retain a CDSC rate of 0.50%.
The table below compares the Portfolio's annual fund
operating expenses for the fiscal year ended December 31, 1994
(restated to reflect current fees) with Income Portfolio's
operating expenses for the same period (restated to reflect
current fees).
Annual Operating Expenses After Expense Reimbursement,
(as a percentage of average net assets):
Advisory 12b-1 Other Total
Portfolio Fees Fees(1) Expenses Operating
Expenses
Income
Portfolio(2) 0.40% 0.60% 0.50% 1.50%
The Portfolio 0.50% 0.50% 0.50% 1.50%
(1) Under rules of the 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 certain of its fees
with respect to Income Portfolio for a minimum of three years
beginning October 1, 1995. But for ISI's waiver of expenses, the
fees paid by Income Portfolio (restated to reflect current fees)
would have been as follows: advisory fees, 0.65%; 12b-1 fees,
0.60%; other expenses, 0.50%; total operating expenses, 1.75%.
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 years 5 years 10 years
Income Portfolio $21 $47 $82 $179
The Portfolio $20 $47 $82 $179
A shareholder would pay the following expenses on the same
investment, assuming no redemption:
1 year 3 years 5 years 10 years
Income Portfolio $15 $47 $82 $179
The Portfolio $15 $47 $82 $179
The foregoing table is intended to assist investors in
understanding the costs and expenses that a shareholder in the
applicable Portfolios will bear directly or indirectly. The
Examples 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 future annual returns.
3. Comparison of Investment Policies and Restrictions, and Risk
Factors.
Although the investment objectives, policies and
restrictions of the Portfolios are similar, there are certain
differences between them. This section will discuss and compare
the investment policies of the Portfolios and will discuss and
compare the risks associated with investing the Portfolios.
There can be no assurance that either the Portfolio or Income
Portfolio will achieve its stated investment objective.
Investment restrictions for the Portfolios are listed in the
Statement of Additional Information, under "Investment
Restrictions."
Income Portfolio invests primarily in U.S. Government
obligations and fixed income corporate obligations which ICM
considers to be of investment grade quality. It may also invest
in mortgage-backed securities, including mortgage pass-through
securities and collateralized mortgage obligations ("CMOs"), and
may enter into contracts for the future delivery of fixed income
securities commonly referred to as "interest rate futures
contracts". 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. The Income Portfolio may use financial
futures contracts and related options only for "bona fide
hedging" purposes. For further discussion on the Income
Portfolio's investment policies and restrictions, see "Investment
Objectives and Policies" and "Risk Factors and Policies Relevant
to the Portfolios" in the accompanying prospectus of the Fund.
The Portfolio invests primarily in a diversified portfolio
of U.S. Government obligations and corporate securities. It may
also invest in mortgage- and asset-backed securities, CMOs, zero-
coupon bonds, municipal obligations, dollar-denominated
obligations of U.S. branches of foreign banks ("Yankee Bonds"),
foreign currency denominated securities and foreign fixed income
securities. Additionally, the Portfolio may invest in interest
rate futures contracts and options thereon, commodity futures
contracts and options, and foreign currency futures contracts and
options. The Portfolio may use financial futures contracts and
related options only for "bona fide hedging" purposes. For
further discussion on the Portfolio's investment policies and
restrictions, see "Investment Objectives and Policies" and "Risk
Factors and Policies Relevant to the Portfolios" in the
accompanying prospectus of the Fund.
The following section discusses the only investment policy
permitted by Income Portfolio which is not permitted by the
Portfolio, and the associated risk factors of the policy:
Income Portfolio may invest in mortgage pass-through
securities which are securities representing interests in "pools"
or 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 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.
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.
The following section discusses the investment policies of
the Income Portfolio, which are more restrictive than comparable
policies of the Portfolio:
(1) The Income Portfolio may enter into interest rate
futures contracts and options 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 total assets.
The Portfolio has no such restriction.
(2) The Income Portfolio may lend up to 10% of its
securities to broker-dealers or other institutional investors.
The Portfolio may lend up to 40% of its assets.
(3) 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. This is a fundamental policy of the Income
Portfolio. As an operating policy, however, the Income
Portfolio does not intend to invest in non-income producing
securities. The Portfolio has no such policy.
(4) The Income Portfolio may not, with respect to 100% of
the Income 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 Income Portfolio.
In contrast, the Portfolio may not, 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 the Income
Portfolio.
The following discusses the investment policies not
permitted by the Income Portfolio which are permitted by the
Portfolio:
The Income Portfolio may not invest in corporate securities
not considered to be investment grade quality (as defined in the
prospectus to the Fund), asset-backed securities, zero-coupon
bonds, municipal obligations, Yankee Bonds, foreign currency-
denominated securities, foreign fixed income securities,
commodity futures contracts and options, and foreign currency
futures contracts and options.
Portfolio Transactions and Brokerage. ISI, ICM or IMR
arrange for the placement of orders and the execution of
portfolio transactions for the Portfolios. Various brokerage
firms may be used to carry out securities transactions. ISI, ICM
and IMR have agreed 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.
Subject to primary consideration of best execution at prices
most favorable to the Portfolios, ISI, ICM or IMR 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 ISI, ICM and IMR the views
and information of individuals and research staffs of many
securities firms for ISI's, ICM's or IMR's analysis and
consideration. Although such information may be a useful
supplement to ISI's, ICM's and IMR's own investment information,
the value of such research and services is not expected to reduce
materially the expenses of ISI, ICM or IMR in the performance of
its services under the Advisory Agreements and will not reduce
the advisory fee payable to ISI by the Portfolios. In
recognition of the value of the above-described brokerage and
research services provided by certain brokers, ISI, ICM and IMR,
consistent with the standard of seeking to obtain the best
execution on securities 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 effecting the same transactions.
Further information on portfolio transactions and brokerage is
discussed in the Statement of Additional Information.
4. Information About the Reorganization.
Reasons for and Purposes of the Reorganization.
The Reorganization has been recommended by the Board of
Directors of the Fund as a means of combining similar portfolios
of the Fund with similar investment objectives and policies in
order to attempt to achieve enhanced investment performance and
economies of scale. Achievement of this goal cannot, of course,
be assured.
In reaching the decision to recommend that the shareholders
of the Portfolio vote to approve the Reorganization, the Board of
Directors concluded that the participation of the Portfolio in
the Reorganization is in the best interests of the shareholders
of the Portfolio and would not result in the dilution of
shareholders' interests. Their conclusion was based on a number
of factors, including the following:
1. The Reorganization would permit the shareholders of the
Portfolio to pursue substantially the same investment goals in a
larger fund. A larger fund should enhance the ability of the
investment adviser to effect portfolio transactions on more
favorable terms and give the investment adviser greater
investment flexibility and the ability to select a larger number
of securities transactions for the combined funds, with the
attendant ability to spread investment risks among a larger
number of securities transactions. Combining the Portfolios will
permit the reduction or elimination of certain duplicate costs
and expenses which will contribute to the strength and viability
of the surviving portfolio. In this regard, it was noted that
the Portfolio and Income Portfolio have similar management
arrangements.
2. The Board of Directors considered the qualifications
and experience of ICM in the field of investment management and
concluded that they were very well qualified to provide the
services currently provided by IMR to the Portfolio.
Plan of Reorganization. The following summary of the
proposed Plan is qualified in its entirety by reference to the
Plan attached to this Proxy Statement/Prospectus as Exhibit A.
The Plan provides that Income Portfolio will acquire all or
substantially all of the assets of the Portfolio in exchange for
shares of Income Portfolio and the assumption by Income Portfolio
of certain identified liabilities of the Portfolio on December
18, 1995, (the "Closing Date"), or such later date as provided
for pursuant to the Plan. Income Portfolio will not assume any
liabilities or obligations of the Portfolio, other than those
reflected in an unaudited statement of assets and liabilities of
the Portfolio as of the normal close of business of the New York
Stock Exchange (currently 4:00 p.m., New York City time) on
December 15, 1995 (the "Valuation Date"). The number of full and
fractional shares of Income Portfolio to be issued to
shareholders of the Portfolio will be determined on the basis of
the relative net asset values per share and aggregate net assets
of Income Portfolio and the Portfolio computed as of the close of
business on the New York Stock Exchange on the Valuation Date.
The net asset value per share for both Income Portfolio and the
Portfolio will be determined by dividing their respective assets,
less liabilities, by the total number of their respective
outstanding shares. Portfolio securities of both Income
Portfolio and the Portfolio will be valued in accordance with the
valuation practices of Income Portfolio as described under "Net
Asset Value" in the current prospectus of the Fund.
The Board of Directors of the Fund has determined that the
interests of existing shareholders will not be diluted as a
result of the transactions contemplated by the Reorganization,
and that participation in the Reorganization is in the best
interests of shareholders of the Portfolio and Income Portfolio,
respectively.
Prior to the Closing Date, the Portfolio will endeavor to
discharge all of its known liabilities and obligations. The
liabilities assumed are expected to relate generally to expenses
incurred in the ordinary course of the Portfolio's operations,
such as accounts payable relating to custodian and transfer
agency fees, legal and accounting fees, and expenses of state
securities registration of the Portfolio's shares. Income
Portfolio will assume all liabilities, expenses, costs, charges
and reserves reflected on an unaudited statement of assets and
liabilities of the Portfolio as of the close of the New York
Stock Exchange on the Valuation Date prepared by Fund/Plan
Services, Inc., the Fund's transfer agent, in accordance with
generally accepted accounting principles consistently applied
from the prior audited period. Income Portfolio will assume only
those liabilities of the Portfolio reflected in that unaudited
statement of assets and liabilities and will not assume any other
liabilities.
As of or prior to the Closing Date, the Portfolio
contemplates declaring and paying a dividend or dividends which
are intended to have the effect of distributing to the
Portfolio's shareholders all of the Portfolio's net income which
has not been distributed previously.
Immediately after the Closing, the Portfolio will
constructively distribute pro rata to its shareholders of record
as of the close of business on the Valuation Date the full and
fractional shares of Income Portfolio received by the Portfolio,
and the Portfolio will then terminate. Such constructive
distribution will be accomplished by the establishment of
accounts on the shareholder records of Income Portfolio in the
name of Portfolio shareholders, each representing the respective
pro rata number of full and fractional shares of Income Portfolio
due such shareholders. After the Closing Date, any outstanding
certificates representing shares of the Portfolio will represent
shares of Income Portfolio constructively distributed to the
record holders of the Portfolio. Share certificates of the
Portfolio will, upon presentation to the Transfer Agent of the
Fund, be exchanged for shares of Income Portfolio. Certificates
for Income Portfolio shares will be issued only upon written
request.
The consummation of the Plan is subject to the conditions
set forth therein. The Plan may be terminated at any time prior
to the Closing Date, before or after approval by shareholders of
the Portfolio, by resolution of the Board of Directors of the
Fund, if circumstances should develop that, in the opinion of the
Board, make proceeding with the Reorganization inadvisable.
Approval of the Plan will require the affirmative vote of
the holders of a majority of the outstanding voting securities of
the Portfolio, as defined by the 1940 Act. If the Reorganization
is not approved by the shareholders of the Portfolio, the Board
of Directors of the Fund intends to terminate and liquidate the
Portfolio on or before December 27, 1995. The shareholders of
the Portfolio, in the event the Reorganization is not approved,
would be notified promptly by ISI of the options shareholders
would have to avail themselves of prior to liquidation. The
primary options would be (1) exchanging shares of the Portfolio
for shares of the Income Portfolio or any other portfolio of the
Fund, or (2) complete redemption of shares. Any shareholders who
had not availed themselves of options (1) or (2) prior to
December 27, 1995, would received a liquidating distribution from
the Portfolio (option 3). All such options could involve a
taxable transaction to the shareholder.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS
APPROVAL OF THE PLAN.
Description of shares of Income Portfolio. Full and
fractional shares of common stock of Income Portfolio will be
issued to shareholders of the Portfolio in accordance with the
procedures under the plan as described above. Each share will be
fully paid and non-assessable and will be redeemable at the net
asset value per share (subject to the CDSC discussed above), and
will have no preemptive or conversion rights. See "Comparative
Information on Shareholder Rights" below for additional
information with respect to the shares of Income Portfolio.
Federal Income Tax Consequences. The Reorganization is
intended to qualify for Federal income tax purposes as a tax-free
reorganization under Section 368 (a) (1) (C) of the Internal
Revenue Code of 1986, as amended (the "Code"), with no gain or
loss recognized as a consequence of the Reorganization by Income
Portfolio, the Portfolio, or the shareholders of the Portfolio.
As a condition to the closing of the Reorganization, the Fund, on
behalf of the Portfolio and Income Portfolio, will have received
an opinion from the law firm of Dechert Price & Rhoads to that
effect. That opinion will be based in part upon representations
made by the Fund on behalf of the Portfolio and Income Portfolio
and certain facts and assumptions.
Shareholders of the Portfolio should consult their tax
advisers regarding the effect, if any, of the proposed
Reorganization in light of their individual circumstances. Since
the foregoing discussion only relates to the Federal income tax
consequences of the Reorganization, shareholders of the Portfolio
should also consult their tax advisers as to state, local, and
other tax consequences, if any, of the Reorganization.
Capitalization. The following table, which is unaudited,
shows the capitalization of the Portfolio and Income Portfolio as
of June 30, 1995, as well as the pro forma combined
capitalization of both funds assuming the Reorganization had been
approved.
Income Portfolio The Portfolio Pro Forma
Net assets $27,584,603 $2,962,190 $30,546,793
Net asset value
per share $50.03 $39.91 $50.03
Shares
outstanding 551,410 74,220 610,618
The Reorganization is being accounted for by Income
Portfolio by the method used for a tax-free reorganization of an
investment company. Under this method (sometimes referred to as
a "pooling without restatement"), the aggregate net asset value
of the Income Portfolio shares issued will equal the aggregate
net asset value of the Portfolio.
Expenses of the Transaction. The expenses relating to the
Reorganization will be borne as follows. ISI, the Portfolio and
Income Portfolio will each pay one-third of the expenses incurred
in connection with entering into and consummating the transaction
contemplated by the Agreement and Plan of Reorganization.
5. Comparative Information on Shareholder Rights.
General. The Portfolio and Income Portfolio are each
governed by the Articles of Incorporation of the Fund, the Fund's
By-Laws, and applicable Maryland law.
As a result of the Reorganization, shareholders of the
Portfolio will have identical voting rights and rights upon
dissolution as they currently have with respect to the Fund. As
shareholders of Income Portfolio, shareholders of the Portfolio
will continue to have one vote for each share of stock for which
they are record owners, together with pro-rata voting rights for
any fractional shares held. The Fund is not required to hold
annual meetings unless specifically required to do so under
applicable law or regulation. If at any time, less than a
majority of the directors of the Fund then in office shall
consist of directors elected by stockholders, a meeting of
shareholders shall be called by the Fund for the purpose of
electing directors. A special meeting of the shareholders will
be called at the request of shareholders entitled to cast at
least 25% of all votes entitled to be cast at the meeting,
provided the shareholders calling such special meeting have
committed to paying the reasonably estimated cost of preparing
for and holding such meeting.
6. Information About the Portfolios.
Information concerning the operation and management of the
Portfolio and Income Portfolio is incorporated herein by
reference from the current prospectus of the Fund dated May 1,
1995, as supplemented October 1, 1995. Additional information is
included in the Statement of Additional Information dated May 1,
1995, which has been filed with the Securities and Exchange
Commission. A copy of that Statement is available upon request
and without charge by calling 1-800-972-9030. Reports and other
information filed by the Fund including charter documents, can be
inspected and copied at the Public Reference Facilities
maintained by the Securities and Exchange Commission, located at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Atlanta Regional Office of the Securities and Exchange
Commission, 3475 Lenox Road, Suite 1000, Atlanta, Georgia 30326.
Copies of such material can also be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C.
20549 at prescribed rates.
Certain Affiliations
INVESCO Services, Inc., the Fund's investment adviser,
manager and distributor, INVESCO Capital Management, Inc., the
sub-adviser to Income Portfolio, and INVESCO Management &
Research, Inc., the sub-adviser to the Portfolio, each are
controlled by INVESCO PLC, an English public limited company
which is a holding company of global investment managers.
Financial Statements and Experts
The financial statements of the Fund contained in the Fund's
annual report to shareholders for the fiscal year ended
December 31, 1994, included in the Statement of Additional
Information to this Proxy/Prospectus, and incorporated by
reference herein, have been included and incorporated herein in
reliance on the report of Price Waterhouse LLP, independent
certified public accounts.
Legal Matters
Certain legal matters concerning the issuance of shares of
Income Portfolio will be passed upon by Kirkpatrick & Lockhart,
LLP. Dechert Price & Rhoads will render an opinion as to certain
Federal income tax consequences of the Reorganization.
THE BOARD OF DIRECTORS OF THE FUND, INCLUDING THE
INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS APPROVAL OF THE
PLAN OF REORGANIZATION, AND ANY UNMARKED PROXIES WILL BE SO
VOTED.
Shareholder Proposals for Subsequent Meetings
The Fund does not, as a general matter, hold regular annual
or other meetings of shareholders. Any shareholder who wishes to
submit proposals to be considered at a subsequent meeting of
shareholders should send such proposals to the principal
executive offices of the Fund, located at 1315 Peachtree Street,
N.E., Atlanta, Georgia 30309. It is suggested that proposals be
submitted by certified mail, return receipt requested.
Other Business
The Directors of the Fund know of no other business to be
brought before the Meeting. However, if any other matters
properly come before the Meeting, proxies will be voted in
accordance with the judgment of the Directors.
If you cannot attend the Meeting in person, please complete
and sign the enclosed proxy and return it in the envelope
provided so that the Meeting may be held and action taken on the
matters described herein with the greatest possible number of
shares participating.
Voting Information
Proxies from the shareholders of the Portfolio are being
solicited by the Board of Directors of the Fund for the Special
Meeting to be held on December 14, 1995, at the Fund's offices at
1315 Peachtree Street, N.E., Atlanta, Georgia 30309 at
10:00 a.m. (local time), or at such later time made necessary by
adjournment. A proxy may be revoked at any time at or before the
meeting by oral or written notice to the Secretary of the Fund.
Unless revoked, all valid proxies will be voted in accordance
with the specifications thereon or, in the absence of such
specifications, for approval of the Plan and the Reorganization.
Approval of the Plan and the Reorganization will require the
affirmative vote of the holders of a majority of the Fund's
outstanding voting securities. For purposes of determining the
presence of a quorum for transacting business at the Special
Meeting, abstentions and broker "non-votes" will be treated as
shares that are present, but which have not been voted. For this
reason, abstention and broker "non-votes" will have the effect of
a "no" vote for purposes of obtaining approval of the Plan of
Reorganization.
Proxies are to be solicited by mail. Additional
solicitations may be made by telephone, telegraph or personal
contact by officers, employees or agents of INVESCO Services,
Inc. and its affiliates.
Shareholders of the Portfolio of record at the close of
business on October 31, 1995 ("Record Date") will be entitled to
vote at the Special Meeting or any adjournment thereof. The
holders of one third of the shares of the Portfolio outstanding
at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the meeting.
Shareholders are entitled to one vote for each share held and
fractional votes for fractional shares held. As of __________,
1995, as shown on the books of the Portfolio, there were issued
and outstanding _______________ shares of common stock of the
Portfolio. As of __________, 1995 , as shown on the books of
Income Portfolio, there were issued and outstanding
shares of common stock.
In the event that a quorum is present at the meeting, but
sufficient votes to approve the Plan are not received, the
persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of
those shares represented at the meeting in person or by proxy.
If a quorum is present, the persons names as proxies will vote
those proxies which they are entitled to vote FOR the Plan in
favor of such an adjournment and will vote those proxies which
they are required to vote AGAINST the Plan against any such
adjournment.
The votes of the shareholders of Income Portfolio are not
being solicited, since their approval or consent is not necessary
for the Reorganization to take place.
As of __________, 1995, the officers and Directors of the
Fund as a group beneficially owned less than 1% of the
outstanding shares of Income Portfolio and the following persons
owned of record or beneficially 5% or more of Income Portfolio's
outstanding shares;
As of __________, 1995, the officers and Directors of the
Fund as a group beneficially owned less than 1% of the
outstanding shares of the Portfolio and the following persons of
record or beneficially owned 5% or more of the Portfolio's
outstanding shares.
[To be completed by amendment.]
<PAGE>
APPENDIX A
[FORM OF]
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is made as of this ____ day of ___________, 1995, by and between
Income Portfolio (the "Acquiring Fund"), a series of The EBI
Funds, Inc. ("The EBI Funds"), a Maryland corporation with its
principal place of business at 1315 Peachtree Street, N.E.,
Atlanta, Georgia 30309, and Relative Return Bond Portfolio (the
"Acquired Fund"), a separate series of The EBI Funds.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section
368(a) of the United States Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization (the "Reorganization")
will consist of the transfer of all or substantially all of the
assets of the Acquired Fund to the Acquiring Fund in exchange
solely for shares of common stock, ($0.001 par value per share),
of the Acquiring Fund (the "Acquiring Fund Shares"), the
assumption by the Acquiring Fund of certain identified
liabilities of the Acquired Fund, and the constructive
distribution of the Acquiring Fund Shares to the shareholders of
the Acquired Fund in complete liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, The EBI Funds is an open-end, registered investment
company of the management type, and the Acquired Fund owns
securities which generally are assets of the character in which
the Acquiring Fund is permitted to invest;
WHEREAS, The EBI Funds is authorized to issue its shares of
common stock in separate series, including the Acquiring Fund and
the Acquired Fund, each of which maintains a separate and
distinct portfolio of assets;
WHEREAS, the Board of Directors of The EBI Funds, on behalf
of the Acquiring Fund, has determined that the exchange of all or
substantially all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of certain identified
liabilities of the Acquired Fund by the Acquiring Fund is in the
best interests of the Acquiring Fund and its shareholders and
that the interests of the existing shareholders of the Acquiring
Fund would not be diluted as a result of this transaction;
WHEREAS, the Board of Directors of The EBI Funds, on behalf
of the Acquired Fund, has determined that the exchange of all or
substantially all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of certain identified
liabilities of the Acquired Fund by the Acquiring Fund is in the
best interests of the Acquired Fund and its shareholders and that
the interests of the existing shareholders of the Acquired Fund
would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties
hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING
FUND IN EXCHANGE FOR THE ACQUIRING FUND'S SHARES, THE
ASSUMPTION OF CERTAIN IDENTIFIED ACQUIRED FUND LIABILITIES
AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained
herein, The EBI Funds on behalf of the Acquired Fund agrees to
transfer all of the Acquired Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund, and The EBI Funds on behalf
of the Acquired Fund agrees in exchange therefor (i) to deliver
to the Acquired Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by
dividing the value of the Acquired Fund's net assets computed in
the manner and as of the time and date set forth in paragraph 2.1
by the net asset value of one Acquiring Fund Share computed in
the manner and as of the time and date set forth in paragraph
2.2; and (ii) to assume certain identified liabilities of the
Acquired Fund, as set forth in paragraph 1.3. Such transactions
shall take place at the closing provided for in paragraph 3.1
(the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of all property, including, without
limitation, all cash, cash equivalents, securities, commodities
and futures interests and dividends or interest receivables,
claims and rights of action, rights to register shares under
applicable securities laws, and books and records, which are
owned by the Acquired Fund and any deferred or prepaid expenses
shown as assets on the books of the Acquired Fund on the closing
date provided in paragraph 3.1 (the "Closing Date").
1.3 The Acquired Fund will endeavor to discharge all of its
known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume all liabilities, expenses, costs,
charges and reserves (expected to include expenses incurred in
the ordinary course of the Acquired Fund's operations, such as
accounts payable relating to custodian and transfer agency fees,
legal and audit fees, and expenses of state securities
registration of the Acquired Fund's shares) reflected on an
unaudited statement of assets and liabilities of the Acquired
Fund prepared by Fund/Plan Services, Inc., the transfer agent of
the Acquired Fund and the Acquiring Fund, as of the Valuation
Date (as defined in paragraph 2.1) in accordance with generally
accepted accounting principles consistently applied from the
prior audited period. The Acquiring Fund shall assume only those
liabilities of the Acquired Fund reflected on that unaudited
statement of assets and liabilities and shall not assume any
other liabilities.
1.4 Immediately after the transfer of assets provided for
in paragraph 1.1, the Acquired Fund will distribute pro rata to
the Acquired Fund's shareholders of record, determined as of
immediately after the close of business on the Closing Date (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares received
by the Acquired Fund pursuant to paragraph 1.1 and will
completely liquidate. Acquired Fund shall take any further
actions in connection with its liquidation as required by
applicable law. Such distribution and liquidation will be
accomplished by the transfer of the Acquiring Fund Shares then
credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders.
The aggregate net asset value of Acquiring Fund Shares to be so
credited to Acquired Fund Shareholders shall be equal to the
aggregate net asset value of the Acquired Fund shares owned by
such shareholders as of immediately after the close of business
on the Valuation Date. All issued and outstanding shares of the
Acquired Fund will simultaneously be canceled on the books of the
Acquired Fund, although share certificates representing interests
in the Acquired Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with
paragraph 2.3. The Acquiring Fund will not issue certificates
representing the Acquiring Fund Shares in connection with such
exchange except upon request by a shareholder of the Acquired
Fund.
1.5 Ownership of Acquiring Fund Shares will be shown on the
share transfer books of the Acquiring Fund. Shares of the
Acquiring Fund will be issued in the manner described in The EBI
Funds' then-current prospectus and statement of additional
information.
2. VALUATION
2.1 The value of the Acquired Fund's assets to be acquired
by the Acquiring Fund hereunder shall be the value of such assets
computed as of the normal close of business of the New York Stock
Exchange on December 15, 1995, the Valuation Date (such time and
date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in The EBI Funds' then-current
prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be
the net asset value per share computed as of immediately after
the close of business of the New York Stock Exchange on the
Valuation Date, using the valuation procedures set forth in The
EBI Funds' then-current prospectus or statement of additional
information.
2.3 The number of the Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the
Acquired Fund's assets shall be determined by dividing the value
of the net assets of the Acquired Fund determined using the same
valuation procedures referred to in paragraph 2.1 by the net
asset value of an Acquiring Fund Share determined in accordance
with paragraph 2.2.
2.4 All computations of value with respect to the Acquiring
Fund shall be made by Fund/Plan Services, Inc. in accordance with
its regular practice for the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 18, 1995 or such
later date as the parties may agree in writing. All acts taking
place at the Closing shall be deemed to take place simultaneously
as of immediately before the start of business on the Closing
Date unless otherwise agreed to by the parties. The start of
business on the Closing Date shall be as of 9:00 a.m., New York
time. The Closing shall be held at the offices of INVESCO
Services, Inc., Atlanta, Georgia or at such other place and time
as the parties shall mutually agree. If, immediately before the
Valuation Time, (a) the NYSE is closed to trading or trading
thereon is restricted or (b) trading or the reporting of trading
on the NYSE or elsewhere is disrupted, so that accurate appraisal
of the net asset value of Acquired Fund and the NAV per Acquiring
Fund Share is impracticable, the Effective Time shall be
postponed until the first business day after the day when such
trading shall have been fully resumed and such reporting shall
have been restored.
3.2 United Missouri Bank of Kansas City, N.A., as custodian
for The EBI Funds (the "Custodian"), shall deliver at the Closing
a certificate of an authorized officer stating that: (a) the
Acquired Fund's portfolio securities, cash, and any other assets
shall have been delivered in proper form to the Acquiring Fund;
and (b) all necessary taxes including without limitation all
applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in
conjunction with the delivery of portfolio securities.
3.3 Fund/Plan Services, Inc. (the "Transfer Agent"), on
behalf of each of the Acquired Fund and the Acquiring Fund, shall
deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the
Acquired Fund Shareholders and the number and percentage
ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue
and deliver a confirmation evidencing the Acquiring Fund Shares
to be credited on the Closing Date to the Acquired Fund or
provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing each
party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The EBI Funds, with respect to the Acquired Fund,
represents and warrants to the Acquiring Fund as follows:
(a) The EBI Funds is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maryland;
(b) The EBI Funds is a registered open-end investment
company and its registration with the Securities and Exchange
Commission (the "Commission") as an investment company with
respect to each series of Shares it offers, including those of
the Acquired Fund, under the Investment Company Act of 1940 (the
"1940 Act") and the registration of its shares under the
Securities Act of 1933 (the "1933 Act") are in full force and
effect;
(c) The Acquired Fund is not, and the execution, delivery
and performance of this Agreement will not result, in a material
violation of its Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquired Fund or The EBI Funds is a
party or by which either is bound;
(d) The Acquired Fund has no material contracts or other
commitments (other than this Agreement) which will be terminated
with liability to it prior to the Closing Date;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquired Fund or any properties or assets held by it. The
Acquired Fund knows of no facts which might form the basis for
the institution of such proceedings and is not a party to or
subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects
its business or its ability to consummate the transactions herein
contemplated;
(f) The Statement of Assets and Liabilities of the Acquired
Fund at December 31, 1994, has been audited by Price Waterhouse,
independent certified public accountants, and is in accordance
with generally accepted accounting principles consistently
applied, and such statement (a copy of which has been furnished
to the Acquiring Fund) presents fairly, in all material respects,
the financial position of the Acquired Fund as of such date, and
there are no known contingent liabilities of the Acquired Fund as
of such date not disclosed therein;
(g) Since December 31, 1994, there has not been any
material adverse change in the Acquired Fund's financial
condition, assets, liabilities or business other than changes
occurring in the ordinary course of business, or any incurrence
by the Acquired Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund. For the
purposes of this subparagraph (g), a decline in net asset value
per share of the Acquired Fund, the discharge of Acquired Fund
liabilities, or the redemption of Acquired Fund shares by
Acquired Fund Shareholders shall not constitute a material
adverse change;
(h) At the Closing Date, all material Federal and other tax
returns and reports of the Acquired Fund required by law to have
been filed by such date shall have been filed and are or will be
correct, and all Federal and other taxes shown as due or required
to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof,
and, to the best of the Acquired Fund's knowledge no such return
is currently under audit and no assessment has been asserted with
respect to such returns;
(i) For each taxable year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has elected
to be treated as such;
(j) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued
and outstanding shares of the Acquired Fund will, at the time of
Closing, be held by the persons and in the amounts set forth in
the records of the Transfer Agent, as provided in paragraph 3.3.
The Acquired Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Acquired
Fund shares, nor is there outstanding any security convertible
into any of the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good
and marketable title to the Acquired Fund's assets to be
transferred to the Acquiring Fund pursuant to paragraph 1.2,
subject to the shareholder approval referred to in Section 5, and
full right, power, and authority to sell, assign, transfer and
deliver such assets hereunder, and upon delivery and payment for
such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the Acquiring Fund;
(l) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing
Date by all necessary action on the part of The EBI Funds'
Directors, and, subject to the approval of the Acquired Fund
Shareholders, this Agreement will constitute a valid and binding
obligation of the Acquired Fund, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(m) The information to be furnished by the Acquired Fund
for use in registration statements, proxy materials and other
documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete
in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations
thereunder applicable thereto; and
(n) The proxy statement of the Acquired Fund (the "Proxy
Statement") to be included in the Registration Statement referred
to in paragraph 5.6 (other than information therein that relates
to the Acquiring Fund) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
such statements are made, not materially misleading.
4.2 The EBI Funds, on behalf of the Acquiring Fund,
represents and warrants to the Acquired Fund as follows:
(a) The EBI Funds is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maryland;
(b) The EBI Funds is a registered open-end investment
company and its registration with the Commission as an investment
company with respect to each series of shares it offers,
including those of the Acquiring Fund, under the 1940 Act, and
the registration of its shares under the 1933 Act, are in full
force and effect;
(c) The current prospectus and statement of additional
information of The EBI Funds conform in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act and
the rules and regulations of the Commission thereunder and do not
include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good
and marketable title to the Acquiring Fund's assets;
(e) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result in a material
violation of The EBI Funds' Articles of Incorporation or By-Laws
or of any agreement, indenture, instrument, contract, lease or
other undertaking to which the Acquiring Fund or The EBI Funds is
a party or by which either is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or threatened against the Acquiring Fund or any
of its properties or assets. The Acquiring Fund knows of no
facts which might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities of the
Acquiring Fund at December 31, 1994, has been audited by Price
Waterhouse, independent certified public accountants, and is in
accordance with generally accepted accounting principles
consistently applied, and such statement (a copy of which has
been furnished to the Acquired Fund) presents fairly, in all
material respects, the financial position of the Acquiring Fund
as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date not disclosed therein;
(h) Since December 31, 1994, there has not been any
material adverse change in the Acquiring Fund's financial
condition, assets, liabilities or business other than changes
occurring in the ordinary course of business, or any incurrence
by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred. For the purposes
of this subparagraph (h), a decline in net asset value per share
of the Acquiring Fund, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund shares by
Acquiring Fund shareholders, shall not constitute a material
adverse change;
(i) At the Closing Date, all material Federal and other tax
returns and reports of the Acquiring Fund required by law to have
been filed by such date shall have been filed and are or will be
correct, and all Federal and other taxes shown as due or required
to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof,
and, to the best of the Acquiring Fund's knowledge no such return
is currently under audit and no assessment has been asserted with
respect to such returns;
(j) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable by the Acquiring Fund.
The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any
Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares;
(k) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing
Date by all necessary action, if any, on the part of the
Directors of The EBI Funds, as issuer of the Acquiring Fund, and
this Agreement will constitute a valid and binding obligation of
the Acquiring Fund enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to
the Acquired Fund, for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement will, at
the Closing Date, have been duly authorized and, when so issued
and delivered, will be duly and validly issued Acquiring Fund
Shares, and will be fully paid and non-assessable by the
Acquiring Fund;
(m) The information to be furnished by the Acquiring Fund
for use in registration statements, proxy materials and other
documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete
in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations
applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on
the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not
materially misleading;
(o) The Acquiring Fund agrees to use all reasonable efforts
to obtain the approvals and authorizations required by the 1933
Act, the 1940 Act and such of the state blue sky or securities
laws as may be necessary in order to continue its operations
after the Closing Date; and
(p) For each taxable year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has elected
to be treated as such.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will
operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such
ordinary course of business will include the declaration and
payment of customary dividends and distributions, and any other
distributions that may be advisable.
5.2 The Acquired Fund will call a meeting of the Acquired
Fund Shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the
transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund
Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the Acquired Fund
Shares.
5.5 Subject to the provisions of this Agreement, the
Acquiring Fund and the Acquired Fund will each take, or cause to
be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.
5.6 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of a
prospectus (the "Prospectus") which will include the Proxy
Statement, referred to in paragraph 4.1(n), all to be included in
a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act
in connection with the meeting of the Acquired Fund Shareholders
to consider approval of this Agreement and the transactions
contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the
transactions provided for herein shall be subject, at its
election, to the performance by the Acquiring Fund of all the
obligations to be performed by it hereunder on or before the
Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations and warranties of The EBI Funds on
behalf of the Acquiring Fund contained in this Agreement shall be
true and correct in all material respects as of the date hereof
and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
6.2 The Acquiring Fund shall have delivered to the Acquired
Fund a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in a form
reasonably satisfactory to the Acquired Fund and dated as of the
Closing Date, to the effect that the representations and
warranties of the Acquiring Fund made in this Agreement are true
and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement and
as to such other matters as the Acquired Fund shall reasonably
request; and
6.3 The Acquired Fund shall have received on the Closing
Date the opinion of Kirkpatrick & Lockhart, LLP, counsel to the
Acquired Fund, in a form reasonably satisfactory to the Acquired
Fund, and dated as of the Closing Date, that:
(a) The EBI Funds has been duly formed and is validly
existing and in good standing under the laws of the State of
Maryland; (b) the Acquiring Fund has the power to carry on its
business, including that of the Acquiring Fund, as presently
conducted; (c) the Agreement has been duly authorized, executed
and delivered by The EBI Funds on behalf of the Acquiring Fund
and constitutes a valid and legally binding obligation of The EBI
Funds on behalf of the Acquiring Fund enforceable against the
Acquiring Fund in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(d) the execution and delivery of the Agreement did not and the
exchange of the Acquired Fund's assets for shares of the
Acquiring Fund pursuant to the Agreement will not violate The EBI
Funds' Articles of Incorporation or Bylaws or result in a default
under or breach of any of the agreements filed as exhibits to (or
incorporated by reference in) The EBI Funds' most recent post-
effective amendment of its registration statement on Form N-1A;
and (e) to the knowledge of such counsel, all regulatory
consents, authorizations, approvals or filings required to be
obtained or made by The EBI Funds on behalf of the Acquiring Fund
under the Federal laws of the United States or the State of
Maryland for the exchange of the Acquired Fund's assets for
shares of the Acquiring Fund, pursuant to the Agreement have been
obtained or made.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the
transactions provided for herein shall be subject, at its
election, to the performance by the Acquired Fund of all of the
obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of The EBI Funds
with respect to the Acquired Fund contained in this Agreement
shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
7.2 The Acquired Fund shall have delivered to the Acquiring
Fund a statement of the Acquired Fund's assets and liabilities,
as of the Closing Date, certified by the Treasurer of the
Acquired Fund;
7.3 The Acquired Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by
its President or Vice President and its Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Acquiring
Fund and dated as of the Closing Date, to the effect that the
representations and warranties of The EBI Funds with respect to
the Acquired Fund made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request; and
7.4 The Acquiring Fund shall have received on the Closing
Date the opinion of Kirkpatrick & Lockhart LLP, counsel to the
Acquiring Fund dated as of the Closing Date, that:
(a) The EBI Funds has been duly formed and is validly
existing and in good standing under the laws of the State of
Maryland; (b) The EBI Funds has the power to carry on its
business, including that of the Acquired Fund, as presently
conducted; (c) the Agreement has been duly authorized, executed
and delivered by The EBI Funds with respect to the Acquired Fund
and constitutes a valid and legally binding obligation of The EBI
Funds with respect to the Acquired Fund enforceable against the
Acquired Fund in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(d) the execution and delivery of the Agreement did not and the
exchange of the Acquired Fund's assets for shares of the
Acquiring Fund pursuant to the Agreement will not violate The EBI
Funds' Articles of Incorporation or Bylaws or result in a default
under or breach of any of the agreements filed as exhibits to (or
incorporated by reference in) The EBI Funds' most recent post-
effective amendment of its registration statement on Form N-1A;
and (e) to the knowledge of such counsel, all regulatory
consents, authorizations, approvals or filings required to be
obtained or made by The EBI Funds with respect to the Acquired
Fund under the Federal laws of the United States or the State of
Maryland for the exchange of the Acquired Fund's assets for
shares of the Acquiring Fund, pursuant to the Agreement have been
obtained or made.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND
If any of the conditions set forth below do not exist on or
before the Closing Date with respect to the Acquired Fund or the
Acquiring Fund, the other party to this Agreement shall, at its
option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of
the outstanding shares of the Acquired Fund in accordance with
the provisions of The EBI Funds' Articles of Incorporation and
By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set
forth in this paragraph 8.1;
8.2 On the Closing Date, no action, suit or other
proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents,
orders and permits of Federal, state and local regulatory
authorities deemed necessary by the Acquiring Fund or the
Acquired Fund to permit consummation, in all material respects,
of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit
would not involve a risk of a material adverse effect on the
assets or properties of the Acquiring Fund or the Acquired Fund,
provided that either party hereto may for itself waive any of
such conditions;
8.4 The Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the effective-
ness thereof shall have been issued and, to the best knowledge of
the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Dechert
Price & Rhoads, counsel to INVESCO Services, Inc. addressed to
The EBI Funds substantially to the effect that the transaction
contemplated by this Agreement constitutes a tax-free
reorganization for Federal income tax purposes. The delivery of
such opinion is conditioned upon receipt by Dechert Price &
Rhoads of representations it shall request of the parties.
Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the condition set
forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The EBI Funds on behalf of Acquiring Fund and The EBI
Funds on behalf of the Acquired Fund each represents and warrants
to the other that it has no obligations to pay any brokers or
finders fees in connection with the transactions provided for
herein.
9.2 Each party to this Agreement shall pay one-third of the
expenses incurred in connection with entering into and
consummating the transaction contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Acquired Fund agree that
neither party has made any representation, warranty or covenant
not set forth herein and that this Agreement constitutes the
entire agreement between the parties.
10.2 The representations and warranties contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall not survive the consummation of the
transactions contemplated hereunder.
11. TERMINATION
This Agreement and the transaction contemplated hereby may
be terminated and abandoned by either party, by mutual agreement
or by resolution of the party's Board of Directors at any time
prior to the Closing Date, if circumstances should develop that,
in the opinion of such Board, make proceeding with the Agreement
inadvisable. In the event of termination under this Section 11,
there shall be no liability for damages on the part of either
Fund, its officers, or Directors.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in
such manner as may be mutually agreed upon in writing by the
authorized officers of the Acquired Fund and the Acquiring Fund;
provided, however, that following the meeting of the Acquired
Fund Shareholders called by the Acquired Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of
the Acquiring Fund Shares to be issued to the Acquired Fund
Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or
permitted by any provisions of this Agreement shall be in writing
and shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, addressed to the Acquired Fund,
1315 Peachtree Street, N.E., Atlanta, Georgia 30309, Attention:
Mark F. Moots, Jr. or to the Acquiring Fund, 1315 Peachtree
Street, N.E., Atlanta, Georgia 30309, Attention: Mark F. Moots,
Jr.
14. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.3 This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns,
but no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto
and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
14.4 It is expressly agreed that the obligations of the
Acquiring Fund hereunder shall not be binding upon any of the
Directors, shareholders, nominees, officers, agents, or employees
of The EBI Funds personally, but bind only the property of the
Acquiring Fund. The execution and delivery of this Agreement
have been authorized by the Directors of The EBI Funds and signed
by authorized officers of the Acquiring Fund acting as such, and
neither such authorization by such Directors nor such execution
and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of
them personally, but shall bind only the property of the
Acquiring Fund.
14.5 It is expressly agreed that the obligations of the
Acquired Fund hereunder shall not be binding upon any of the
Directors, shareholders, nominees, officers, agents, or employees
of The EBI Funds personally, but bind only the property of the
Acquired Fund. The execution and delivery of this Agreement have
been authorized by the Directors of The EBI Funds and signed by
authorized officers of the Acquired Fund acting as such, and
neither such authorization by such Directors nor such execution
and delivery by such officers shall be deemed to have been made
by any of them individually or to impose any liability on any of
them personally, but shall bind only the property of the Acquired
Fund.
14.6 This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland; provided that,
in the case of any conflict between such laws and the federal
securities laws, the latter shall govern.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed by its President or Vice President
and its seal to be affixed thereto and attested by its Secretary
or Assistant Secretary.
Attest: THE EBI FUNDS, INC.
on behalf of
INCOME PORTFOLIO
______________________________ By:___________________________
Secretary
Attest: THE EBI FUNDS, INC.
on behalf of
RELATIVE RETURN BOND PORTFOLIO
______________________________ By:___________________________
Secretary
<PAGE>
APPENDIX B
PROXY
THE EBI FUNDS, INC.
SPECIAL MEETING OF SHAREHOLDERS, December 14, 1995
The undersigned hereby appoints and ,
and each of them, his attorneys and proxies with full power of
substitution, to vote and act with respect to all shares of
Relative Return Bond Portfolio (the "Portfolio"), a series of The
EBI Funds, Inc. (the "Fund") of the undersigned at the Special
Meeting of Shareholders of the Portfolio to be held at 10:00
a.m., (local time) on December 14, 1995 and at offices of the
Fund, 1315 Peachtree Street, N.E., Atlanta, Georgia 30309, and at
any adjournment thereof (the "Meeting"), and instructs them to
vote as indicated on the matters referred to in the Proxy
Statement for the Meeting, receipt of which is hereby
acknowledged, with discretionary power to vote upon such other
business as may properly come before the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
FUND. The Board of Directors recommends that you vote FOR the
following proposal:
I. Approval of an Agreement and Plan of Reorganization
providing for the acquisition of all of the assets of the
Portfolio by the Income Portfolio in exchange for shares of
Income Portfolio, the distribution of such Income Portfolio
shares to shareholders of the Portfolio, and the subsequent
dissolution of the Portfolio.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This Proxy will be voted as specified. IF NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTE FOR THIS PROPOSAL.
Receipt of the Notice of Special Meeting
and Proxy Statement is hereby
acknowledged.
DATED: ---------------------, 1995
---------------------------------------
---------------------------------------
Signature(s) of Shareholder(s)
This Proxy must be signed exactly as your name(s) appear hereon.
If as attorney, executor, guardian or in some representative
capacity or as an officer of a corporation, please add title as
such.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED POSTAGE PAID ENVELOPE.
<PAGE>
THE EBI FUNDS, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1995
Effective October 1, 1995
This supplement includes information for shareholders
of the EBI Funds, Inc. Shareholders of the following portfolios
should pay particular attention to: Income Portfolio (pages 1-6),
Flex Portfolio (page 3) and the Relative Return Bond Portfolio
(page 6).
The PURCHASES and REDEMPTIONS sections in the Summary
on pages 2 and 3 of the prospectus are deleted in their entirety
and replaced with the following:
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 a set
percentage of the dollar amount subject thereto during the first
year after purchase. This set percentage for the Equity, Flex,
MultiFlex, Real Estate, and International Value Portfolios is 1%,
and for the Income Portfolio is 0.60% (for the period May 1,
1995, through September 30, 1995, the rate was 1.0%), and for the
Relative Return Portfolio is 0.50%. 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 or more at any time.
Retirement plans may make subsequent investments of $250 or more.
The Portfolios reserve the right to reduce or waive 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 distributions 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
0.60% per annum of the Income Portfolio s average daily net
assets. All other Portfolios distribution costs may not exceed
1.0% per annum of their 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 for the
Equity, Flex, MultiFlex, Real Estate, and International Value
Portfolio assets; for Relative Return Bond Portfolio this sales
commission is 0.50% and for Income Portfolio it is 0.60%. There
are no charges to the shareholder on purchase of shares at the
time of purchase. (See "Plan of Distribution").
REDEMPTIONS:
A CDSC is applicable to shares purchased by new investors on or
after May 1, 1995, and redeemed within the first year after
purchase. For the Relative Return Bond Portfolio the CDSC is
0.50%, for the Income Portfolio it is 0.60% (for the period May
1, 1995, through September 30, 1995, the rate was 1.0%) and for
all other Portfolios it is 1.00%. There is no CDSC applicable
to additional purchases of shares in any of the Portfolios by
shareholders of record on April 30, 1995. 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 if the redeemed shares were
exchanged from another Portfolio. The 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 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 as a result of redemptions of shares
($10,000 or less for all Portfolios, except the Cash Management
Portfolio, which is $1,000 or less. See "The EBI Funds, Inc.
Shareholder Services Guide - How to Redeem Shares").
Page 4, FEE TABLE, is deleted in its entirety and replaced with
the following:
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 First year
or redemption price, whichever is equal to
lower)........................................... 12b-1 column
shown below,
0% after
first year
Annual Operating Expenses (as a percentage of average net
assets):
Advisory 12b-1
Portfolio Fees Fees (1)
Equity Portfolio 0.75% 1.00%
Income Portfolio (3) 0.40% 0.60%
Flex Portfolio 0.75% 1.00%
MultiFlex Portfolio 1.00% 1.00%
Relative Return Bond Portfolio 0.50% 0.50%
Real Estate Portfolio 0.90% 1.00%
International Value Portfolio 1.00% 1.00%
Cash Management Portfolio 0.50% N/A
Other Total Operating
Portfolio Expenses Expenses (2)
Equity Portfolio 0.50% 2.25%
Income Portfolio (3) 0.50% 1.50%
Flex Portfolio 0.50% 2.25%
MultiFlex Portfolio 0.50% 2.50%
Relative Return Bond Portfolio 0.50% 1.50%
Real Estate Portfolio 0.50% 2.40%
International Value Portfolio 0.50% 2.50%
Cash Management Portfolio 0.50% 1.00%
(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 sacale as the Portfolios grow in
size. (See "Management of the Fund").
(3) ISI has voluntarily agreed to limit certain of its fees with
respect to Income Portfolio for the three-year period beginning
October 1, 1995. If these limitations were not in effect, the
portfolio s advisory fees, 12b-1 fees, other expenses and total
operating expenses would be 0.65%, 0.60%, 0.50% and 1.75%,
respectively, of average daily net assets. (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:
10
1 year 3 years 5 years years
Equity Portfolio $33 $70 $120 $258
Income Portfolio $21 $47 $82 $179
Flex Portfolio $33 $70 $120 $258
MultiFlex Portfolio $35 $78 $133 $284
Relative Return Bond $20 $47 $82 $179
Portfolio
Real Estate Portfolio $34 $75 N/A N/A
International Value $35 $78 N/A N/A
Portfolio
Cash Management Portfolio $10 $32 $55 $122
A shareholder would pay the following expenses on the
same investment, assuming no redemption:
10
1 year 3 years 5 years years
Equity Portfolio $23 $70 $120 $258
Income Portfolio $15 $47 $82 $179
Flex Portfolio $23 $70 $120 $258
MultiFlex Portfolio $25 $78 $133 $284
Relative Return Bond $15 $47 $82 $179
Portfolio
Real Estate Portfolio $24 $75 N/A N/A
International Value $25 $78 N/A N/A
Portfolio
Cash Management Portfolio $10 $32 $55 $122
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 Examples
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.
Flex Portfolio section on page 13 of the prospectus is
deleted in its entirety and replaced with the following:
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 investment 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 as are
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 20% of the total assets of the Flex
Portfolio will be invested in equity securities and a minimum of
20% of total assets will be invested in fixed and variable income
securities. The remaining 60% of the 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.
The first full paragraph on page 29 of the prospectus
is deleted in its entirety and replaced with the following:
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 each of the Equity 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 the MultiFlex and
International Value Portfolios; 0.50% of the average net asset
value of each of the Cash Management and Relative Return Bond
Portfolio, and 0.65% of the average net asset value of the Income
Portfolio (the Adviser has agreed to reimburse the Income
Portfolio for a three-year period beginning October 1, 1995, so
that the advisory fee shall not exceed 0.40% of average daily net
assets).
The first full paragraph on page 30 of the prospectus is deleted
in its entirety and replaced with the following:
If, in any calendar quarter, the average net assets of each of
the Equity or Flex Portfolios are less than $500 million, each
Portfolio's 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
each 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, 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, 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, the expenses of the
Income Portfolio may not exceed 1.75%, and the expenses of the
Cash
Management Portfolio may not exceed 1% of average net assets.
The
Adviser has agreed to reimburse the Income Portfolio for a
three-year period beginning October 1, 1995, so that the
expenses
any calendar year beginning 1996 shall not exceed 1.50% of
average
net assets.
The section entitled THE DISTRIBUTOR on page 30 of the
prospectus,
is deleted in its entirety and replaced with the following:
ISI, the Fund s distributor (the "Distributor"), a Georgia
corporation, is the principal underwriter of the Fund
under a Distribution Agreement (the "Distribution Agreement").
All of the Distributor s outstanding voting shares 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 of Equity, Flex, MultiFlex, Real Estate and
International Portfolios are subject to a 1% CDSC on redemptions
made within one year of purchase. Shares purchased on or after
May 1, 1995, by new investors of Income and Relative Return Bond
Portfolios are subject to a CDSC of a set percentage on
redemptions made within one year of purchase. The set
percentage for the Income Portfolio is 0.60% (for the period
May 1, 1995, through September 30, 1995, the rate
was 1.0%), and for the Relative Return Bond Portfolio
is 0.50%. The proceeds of the CDSC are paid to the Distributor
to defray its expenses in providing certain distribution-related
services to the Fund, including the payment of a sales
commission to broker-dealers who sell shares of the Fund, as
described below.
The section entitled PLAN OF DISTRIBUTION on page 30 of
the prospectus, is deleted in its entirety and replaced
with the following:
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,
0.60% per annum of the average net assets of the Income
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 rates
indicated above, 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 to dealers who sell
shares of the relevant Portfolios. These sales commissions may
equal 0.50% on sales of Relative Return Bond Portfolio, 0.60% on
sales of Income Portfolio and 1.0% on all other 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 and 0.60% for
the Income 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".
The section entitled THE EBI FUNDS, INC., SHAREHOLDER
SERVICES GUIDE - Contingent Deferred Sales Charges on page 33 of
the prospectus, is deleted in its entirety and replaced
with:
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 purchases are
subject to a CDSC. The CDSC rate is 0.50% for Relative Return
Bond Portfolio, 0.60% for the Income Portfolio (for the
period May 1, 1995, through September 30, 1995, the rate was
1.0%) and 1.0% for all other Portfolios. This rate is applied to
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.
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 if the redeemed shares were exchanged 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 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 the CDSC on
"old" shares has been discontinued.
The following new PROPOSED REORGANIZATION section is
inserted prior to the Miscellaneous Section on page 41 of the
prospectus:
PROPOSED REORGANIZATION
The Board of Directors of The EBI Funds, Inc. (the
"Fund") has approved, subject to approval by the shareholders of
the Relative Return Bond Portfolio, a proposed reorganization
whereby the Relative Return Bond Portfolio would transfer all or
substantially all of its assets to the Income Portfolio
in exchange for shares of the Income Portfolio. Under the
terms of the proposed reorganization, each shareholder of the
Relative Return Bond Portfolio would become a shareholder of the
Income Portfolio, receiving shares of the Income Portfolio
equal in value to the shareholder s investment in the Relative
Return Bond Portfolio. The Relative Return Bond Portfolio would
thereafter be terminated.
The Income Portfolio has investment objectives and policies
that are substantially similar to those of Relative Return
Bond Portfolio. The Income Portfolio s objective is to
achieve a high total return on investment through capital
appreciation and current income, without regard to federal
income tax considerations.
The reorganization is being recommended to shareholders as a
means of combining similar Portfolios of the Fund with
similar investment objectives and policies in order to attempt
to achieve enhanced investment performance and economies of
scale.
A Special Meeting of Shareholders of the Relative Return Bond
Portfolio will be held on December 14, 1995, to consider and
vote on the proposed reorganization. If approved by
shareholders of the Relative Return Bond Portfolio, the
reorganization, which is intended to qualify as a tax-free
reorganization for Federal income tax purposes, is expected to
occur on approximately December 15, 1995. Shareholders of the
Relative Return Bond Portfolio of record at the close of
business on October 31, 1995, will be entitled to receive
notice of and to vote at the shareholder meeting concerning the
reorganization.
<PAGE>
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.
<PAGE>
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
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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
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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.
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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
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the assets of
Relative Return Bond Portfolio
of The EBI Funds, Inc.
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telephone: (800) 972-9030
By and in exchange for shares of
Income Portfolio
of The EBI Funds, Inc.
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telephone: (800) 972-9030
This Statement of Additional Information, relating
specifically to the proposed acquisition of all of the assets of
Relative Return Bond Portfolio (the "Portfolio") by Income
Portfolio, in exchange for shares of Income Portfolio, consists
of this cover page and the following described documents, each of
which is attached hereto and incorporated by reference herein:
(1) The Statement of Additional Information of The EBI
Funds, Inc. (the "Fund") dated May 1, 1995.
(2) Annual Report of the Fund for the fiscal year ended
December 31, 1994 and Semi-Annual report of the Fund
for the fiscal period ended June 30, 1995.
(3) Pro forma financial statements as of June 30, 1995.
This Statement of Additional Information is not a
prospectus. A Proxy Statement/Prospectus dated ,
1995 relating to the above-referenced matter may be obtained from
the Fund. This Statement of Additional Information relates to,
and should be read in conjunction with, such Proxy
Statement/Prospectus.
The date of this Statement of Additional Information is
____________________, 1995.
<PAGE>
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.
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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
<PAGE>
The EBI Funds, Inc.
1 9 9 4
ANNUAL REPORT
[INVESCO LOGO]
EBI PORTFOLIO MANAGEMENT PROGRAM<PAGE>
<PAGE>
The EBI Funds, Inc. is an open-end, diversified management
investment company consisting of eight separate investment
portfolios (the "Funds"). The Funds are as follows:
EBI Flex Portfolio
EBI Equity Portfolio
EBI Multiflex Portfolio
EBI International Value Fund
EBI Real Estate Fund
EBI Income Portfolio
EBI Relative Return Bond Portfolio
EBI Cash Management Portfolio
TABLE OF CONTENTS
Shareholder Letter
Statement of Investment Securities
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Financial Highlights
The financial statements contained herein are submitted for
the general information of the shareholders of the Funds. This
report is not authorized for distribution to prospective
investors in the Funds unless preceded or accompanied by an
effective Prospectus.
<PAGE>
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
<PAGE>
<PAGE>
INVESCO SERVICES, INC.
Investment Advisor
Manager
Distributor
INVESCO CAPITAL MANAGEMENT, INC.
Sub-Advisor:
EBI Equity Fund
EBI Income Fund
EBI Flex Fund
EBI International Value Fund
EBI Cash Management Fund
INVESCO MANAGEMENT & RESEARCH, INC.
Sub-Advisor:
EBI Multiflex Fund
EBI Relative Return Bond Fund
INVESCO REALTY ADVISORS, INC.
Sub-Advisor:
EBI Real Estate Fund
FUND/PLAN SERVICES, INC.
Transfer Agent and Administrator
UNITED MISSOURI BANK OF KANSAS CITY, N.A.
Custodian
PRICE WATERHOUSE
Independent Accountants
EBI PORTFOLIO MANAGEMENT PROGRAM
Invesco Services, Inc.
1355 Peachtree Street, N.E.
Atlanta, Georgia 30309
(404) 892-0666
(800) 972-9030
<PAGE>
The EBI Funds, Inc.
1 9 9 5
SEMI-ANNUAL REPORT
[INVESCO LOGO]
EBI PORTFOLIO MANAGEMENT PROGRAM<PAGE>
<PAGE>
The EBI Funds, Inc. is an open-end, diversified management
investment company consisting of eight separate investment
portfolios (the "Funds"). The Funds are as follows:
EBI Flex Portfolio
EBI Equity Portfolio
EBI Multiflex Portfolio
EBI International Value Fund
EBI Real Estate Fund
EBI Income Portfolio
EBI Relative Return Bond Portfolio
EBI Cash Management Portfolio
TABLE OF CONTENTS
Shareholder Letter
Statement of Investment Securities
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Financial Highlights
The financial statement contained herein are submitted for
the general information of the shareholders of the Funds. This
report is not authorized for distribution to prospective
investors in the Funds unless preceded or accompanied by an
effective Prospectus.<PAGE>
[INVESCO LOGO] 1315 Peachtree Street, N.E.
INVESCO SERVICES, INC. Suite 500
EBI Portfolio Management Program Atlanta, Georgia 30309
Hubert L. Harris, Jr. Telephone: (404) 892-0896
President Facsimile: (404) 876-4692
August 15, 1995
Dear INVESCO/EBI Shareholder:
We are pleased to offer this Semi-Annual Report of the EBI
Funds, Inc. and hope that you will take a few moments to review
the information contained herein. This report will give you
additional perspective on the capital markets and how INVESCO
manages your money.
The financial environment in the U.S. for both stocks and
bonds so far this year could not have been much better. Interest
rates declined, corporate profits were strong, inflation remained
under control, and corporate mergers added to a rising U.S. stock
market in the first six months of 1995. Interest rates came down
substantially as the economy continued to slow and the demand for
credit fell. The result of the decline in rates was significant
price appreciation in bonds, quite a change from the difficult
bond market of 1994 and the best first half since the inception
of the Government/Corporate bond index in 1973. Most major stock
markets around the world performed relatively well in the first
half of 1995 with the strength of both U.S. stocks and bonds
providing a very positive background. The one exception was Japan
which suffered from fears of asset deflation.
Whatever the investment option, INVESCO maintains an
investment philosophy derived from our many years of managing
very risk-averse institutional accounts. Our disciplines are
designed to do three things:
o maximize predictability and consistency of
investment returns
o minimize reliance on uncertain forecasts of future
events
o control risk by strict attention to portfolio design
The EBI Flex Portfolio our "flagship" portfolio, adds value
several ways: stock selection, bond selection and asset
allocation. Each component worked well in the first half of 1995.
Year-to-date, EBI Flex has gained 16.1% versus 13.9% for the
Lipper Average. The fund has favored equities all year, and this
has proven beneficial as stocks have outperformed bonds. At
June 30, 1995 the asset mix was 63% equities and 37% bonds.
The EBI MultiFlex Portfolio also provided strong returns for
the first half. MultiFlex was up 10.6%, with five of six asset
classes having matched or outperformed their benchmarks.
MultiFlex provides equity investors with tremendous
diversification, offering participation in rising markets and
protection of principal in falling markets. The target allocation
for MultiFlex accounts at June 30, 1995 was: large capitalization
stocks 18.6%, small capitalization stocks 24.7%, international
stocks 22.7%, real estate securities 21.1%, and fixed income
12.9%.
The EBI Equity Portfolio has continued to participate in a
rapidly rising stock market for the first six months of 1995
without relying on the hot technology sector where we are
underweighted. The fund was up 16.5% for the first half which
lagged the market slightly. In the more difficult market of 1994,
the Equity Fund exceeded the S&P 500 2.7% versus 1.3%, and for
the twelve months ended June 30, 1995 EBI Equity was up 22.9%.
Since its inception at May 1, 1995, the EBI International
Value Portfolio is up 2.2%. The Fund's goal is to produce above
market returns with less than market risk. As with our other
disciplines, INVESCO's international approach emphasizes
stability and consistency of returns. We are typically
underweighted in Japan which historically has been a more
volatile market. INVESCO, as a global organization, is uniquely
positioned to manage international securities, drawing on the
local knowledge and expertise of our portfolio managers and
analysts in our eleven foreign offices.
The EBI Real Estate Portfolio, also initiated May 1, 1995,
utilizes the same risk-averse investment disciplines which have
been employed for institutional accounts since 1988. The fund's
goal is to provide a high total return over a long term
investment period through a combination of dividend yield and
capital appreciation. Real estate is currently rebounding from a
deep depression. Equity real estate securities are an efficient
way for investors to access the current return, appreciation
potential and diversification benefits offered by the real estate
market. Since inception (two months), the EBI Real Estate Fund is
up 2.0%.
Both fixed income portfolios, the EBI Income Portfolio and
the EBI Relative Return Bond Portfolio exhibited strong
performance for the first six months of 1995. EBI Income had a
total return of 13.2% for the six months, resulting from our
discipline which called for lengthening average maturities to
thirteen years. The Relative Return Fund also posted strong
gains, growing 10.1% for the six months.<PAGE>
<PAGE>
Once again, let me say how much we appreciate the confidence
you have placed in INVESCO by allowing us to manage your
investments in INVESCO/EBI. 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,
/s/ HUBERT L. HARRIS, JR.
HLH:jm
Enclosure<PAGE>
<PAGE>
The EBI Funds, Inc.
Statement of Investment Securities
June 30, 1995 (unaudited)
Shares or
Principal
Description Amount Value
EBI Flex Fund
COMMON STOCKS 63.60%
BASIC MATERIALS 3.79%
Alcan Aluminum Ltd................. 75,000 $ 2,268,750
Dow Chemical Co.................... 45,000 3,234,375
Imperial Chemical Industries PLC
Sponsored ADR..................... 50,000 2,437,500
Westvaco Corp...................... 90,000 3,982,500
11,923,12
CAPITAL GOODS 6.57%
Boeing Co.......................... 80,000 5,010,000
COMPAQ Computer Corp.*............. 75,000 3,403,125
General Electric Co................ 75,000 4,228,125
Lockheed Martin Corp............... 81,500 5,144,687
Snap-On Tools Corp................. 75,000 2,906,250
20,692,187
CONSUMER CYCLICAL 8.99%
Deluxe Corp........................ 100,000 3,312,500
Ford Motor Corp.................... 150,000 4,462,500
K Mart Corp........................ 200,000 2,925,000
Liz Claiborne, Inc................. 125,000 2,656,250
McDonald's Corp.................... 110,000 4,303,750
Melville Corp...................... 100,000 3,425,000
Rite-Aid Corp...................... 125,000 3,203,125
Tandy Corp......................... 75,000 3,890,625
U.S. Industries, Inc............... 7,500 102,188
28,280,938
CONSUMER STAPLES 14.37%
Abbott Laboratories................ 100,000 4,050,000
American Brands, Inc............... 100,000 3,975,000
American Home Products Corp........ 60,000 4,642,500
Anheuser-Busch Cos., Inc........... 60,000 3,412,500
Columbia/HCA Healthcare, Inc....... 100,000 4,325,000
Fleming Companies, Inc............. 75,000 1,987,500
Heinz (H.J.) Co.................... 100,000 4,437,500<PAGE>
<PAGE>
EBI Flex Fund CONSUMER STAPLES (continued)
Lilly (Eli) & Co................... 50,000 $ 3,925,000
Marion Merrell Dow, Inc............ 100,000 2,550,000
Philip Morris Cos., Inc............ 65,000 4,834,375
SuperValu, Inc..................... 87,000 2,533,875
Unilever N.V....................... 35,000 4,554,375
45,227,625
DIVERSIFIED 5.44%
DuPont (E.I.) de Nemours & Co...... 50,000 3,437,500
Hanson PLC, Sponsored ADR.......... 175,000 3,084,375
Minnesota Mining & Manufacturing Co. 60,000 3,435,000
National Service Industries, Inc... 75,000 2,165,625
Norsk Hydro, Sponsored ADR......... 50,000 2,087,500
Textron, Inc. 50,000 2,906,250
17,116,250
ENERGY 3.33%
Amoco Corp......................... 50,000 3,331,250
Repsol, Sponsored ADR.............. 110,000 3,478,750
Royal Dutch Petroleum Co........... 30,000 10,466,250
FINANCE 10.36%
American General Corp.............. 70,000 2,362,500
Dun & Bradstreet Corp.............. 60,000 3,150,000
First of America Bank Corp......... 75,000 2,784,375
Morgan Stanley Group, Inc.......... 50,000 4,050,000
NationsBank Corp................... 75,000 4,021,875
NBD Bancorp, Inc................... 190,000 6,080,000
Ohio Casualty Corp................. 100,000 3,150,000
SAFECO Corp........................ 60,000 3,446,250
Wachovia Corp...................... 100,000 3,575,000
32,620,000
TECHNOLOGY 4.90%
Computer Associates International, Inc. 80,000 5,420,000
Hewlett-Packard Co................. 70,000 5,215,000
International Business Machines Corp. 50,000 4,800,000
15,435,000
TRANSPORTATION & SERVICES 1.09%
Browning-Ferris Industries, Inc.... 95,000 3,431,875
UTILITIES 4.76%
NYNEX Corp......................... 75,000 3,018,750
Telefonica de Espana, Sponsored ADR 75,000 2,906,250
Telefonos de Mexico, Sponsored ADR 100,000 2,962,500
Texas Utilities Co................. 100,000 3,437,500
Unicom Corp........................ 100,000 2,662,500
14,987,500
TOTAL COMMON STOCKS (Cost $154,682,044) $200,180,750<PAGE>
<PAGE>
EBI Flex Fund (continued)
FIXED INCOME SECURITIES 31.93%
U.S. GOVERNMENT OBLIGATIONS 27.22%
U.S. Treasury Notes
8.500%, 08/15/1995................ 1,000,000 $ 1,003,125
7.375%, 05/15/1996................ 2,500,000 2,534,375
5.500%, 07/31/1997................ 4,000,000 3,975,000
8.250%, 07/15/1998................ 2,000,000 2,127,500
7.125%, 10/15/1998................ 5,000,000 5,181,250
8.875%, 02/15/1999................ 4,250,000 4,657,732
6.375%, 07/15/1999................ 5,000,000 5,073,435
8.750%, 08/15/2000................ 5,000,000 5,598,435
7.875%, 08/15/2001................ 5,000,000 5,457,810
9.375%, 02/15/2006................ 4,250,000 5,254,063
9.250%, 02/15/2016................ 15,000,000 19,279,680
8.125%, 08/15/2019................ 12,000,000 13,998,740
7.250%, 08/15/2022................ 7,000,000 7,476,875
81,618,024
U.S. Treasury Strips PO
0.000%, 08/15/2014................ 15,000,000 4,055,250
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $78,207,185)................. 85,673,274
U.S. GOVERNMENT AGENCY OBLIGATIONS 1.61%
Government National Mortgage Assn.
6.500%, 10/15/2008 Pool #354668... 1,733,753 $ 1,709,364
7.000%, 10/15/2008 Pool #372807... 1,617,383 1,622,429
6.000%, 11/15/2008 Pool #365945... 1,779,711 1,722,974
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $5,273,596).................. 5,054,767
CORPORATE BONDS 3.10%
FINANCE 0.94%
Associates Corp., North America, 4.750%,
08/01/1996........................ 1,500,000 1,479,503
NationsBank Corp., 5.375%, 04/15/2000 1,550,000 1,479,977
2,959,480
INDUSTRIAL 1.81%
Conagra, Inc., 9.750%, 11/01/1997.. 1,000,000 1,072,772
Ford Motor Co., 7.500%, 11/15/1999 750,000 776,578
Illinois Tool Works, Inc., 7.500%,
12/01/1998........................ 600,000 621,904
PepsiCo, Inc., 5.000%, 02/24/1997 1,000,000 983,970
Rockwell International, Inc., 6.625%,
06/01/2005....................... 1,500,000 1,490,493
Wal Mart Stores, Inc., 5.500%,
03/01/1998........................ 750,000 738,011
5,683,728<PAGE>
<PAGE>
EBI Flex Fund (continued)
UTILITIES 0.35%
Carolina Power and Light Co., 5.000%,
09/15/1998........................ 1,000,000 $ 960,040
Union Electric Co., 6.750%, 10/15/1999 150,000 151,018
1,111,058
TOTAL CORPORATE BONDS (Cost $9,885,969) 9,754,266
TOTAL FIXED INCOME SECURITIES
(Cost $93,366,750)................. 100,482,307
SHORT TERM INVESTMENTS 4.47%
COMMERCIAL PAPER 1.58%
AT & T Capital Corp.
5.860%, 07/14/1995 (Cost $4,989,419) 5,000,000 4,989,419
OTHER SECURITIES 2.89%
United Missouri Bank, Money Market
Fiduciary ~ 5.079% (Cost $9,092,504)... 9,092,504 9,092,504
TOTAL SHORT TERM INVESTMENTS (Cost $14,081,923) 14,081,923
TOTAL INVESTMENTS
(100.00%)(Cost $262,130,717#)...... $314,744,980<PAGE>
<PAGE>
EBI Equity Fund
COMMON STOCKS 92.52%
BASIC MATERIALS 5.65%
Akzo N.V. ADR...................... 13,800 $ 826,275
Imperial Chemical Industries PLC ADR 33,200 1,618,500
Nalco Chemical Co.................. 21,000 763,875
Pioneer Hi-Bred International, Inc. 25,000 1,050,000
Westvaco Corp...................... 30,000 1,327,500
5,586,150
CAPITAL GOODS 10.98%
Automatic Data Processing, Inc..... 13,000 $ 817,375
Boeing Co.......................... 28,400 1,778,550
Browning-Ferris Industries, Inc.... 23,500 848,937
Dover Corp......................... 10,300 749,325
Emerson Electric Co................ 12,000 858,000
Lockheed Martin Corp............... 35,860 2,263,663
Pitney Bowes, Inc.................. 25,700 986,238
Raytheon Co........................ 19,700 1,529,213
WMX Technologies, Inc.............. 36,000 1,021,500
10,852,801
CONSUMER CYCLICAL 13.97%
Cooper Tire and Rubber Co.......... 52,000 1,267,500
Dillard Department Stores, Inc., Cl. A 31,300 919,437
Disney (Walt) Co................... 30,400 1,691,000
Donnelley (R.R.) & Sons Co......... 30,000 1,080,000
Fleming Companies, Inc............. 23,800 630,700
Home Depot, Inc.................... 25,000 1,015,625
K Mart Corp........................ 88,200 1,289,925
Maytag Corp........................ 66,900 1,070,400
McDonald's Corp.................... 53,400 2,089,275
Penney (J. C.) Co., Inc. 20,000 960,000
Russell Corp. 28,000 805,000
Shaw Industries, Inc. 54,500 926,500
U.S. Industries, Inc. 4,150 56,544
13,801,906
CONSUMER STAPLES 23.41%
Abbott Laboratories 50,400 2,041,200
American Home Products Corp. 21,000 1,624,875
Anheuser-Busch Cos., Inc. 23,200 1,319,500
Columbia/HCA Healthcare, Inc. 35,200 1,522,400
Giant Food, Inc., Cl. A 59,000 1,674,125
Heinz (H.J.) Co. 38,900 1,726,187
Lilly (Eli) & Co. 25,000 1,962,500<PAGE>
<PAGE>
EBI Equity Fund CONSUMER STAPLES (continued)
Manor Care, Inc. 48,400 $ 1,409,650
Merck & Co., Inc. 41,900 2,053,100
PepsiCo, Inc. 35,000 1,596,875
Philip Morris Cos., Inc. 25,000 1,859,375
Schering-Plough Corp. 15,600 688,350
Tyson Foods, Inc., Cl. A 46,000 1,063,750
UST, Inc. 34,000 1,011,500
Warner Lambert Co. 18,300 1,580,663
23,134,050
DIVERSIFIED 6.18%
General Electric Co. 29,000 1,634,875
Hanson PLC ADR 83,000 1,462,875
Minnesota Mining & Manufacturing Co. 20,000 1,145,000
Textron, Inc. 32,000 1,860,000
6,102,750
ENERGY 6.03%
Amoco Corp. 24,600 1,638,975
Exxon Corp. 22,000 1,553,750
Repsol, Sponsored ADR 30,000 948,750
Royal Dutch Petroleum Co. 14,900 1,815,937
5,957,412
FINANCE 14.25%
American General Corp. 52,000 1,755,000
American International Group, Inc. 15,400 1,755,600
Boatmen's Bancshares, Inc. 35,000 1,233,750
Dun & Bradstreet Corp. 35,000 1,837,500
First of America Bank Corp. 40,000 1,485,000
General RE Corp. 4,400 589,050
Jefferson-Pilot Corp. 16,000 876,000
MBIA, Inc. 7,000 465,500
Morgan Stanley Group, Inc. 18,500 1,498,500
NBD Bancorp, Inc. 53,800 1,721,600
SAFECO Corp. 15,000 861,562
14,079,062
TECHNOLOGY 6.95%
COMPAQ Computer Corp.* 21,000 952,875
Computer Associates International, Inc. 31,000 2,100,250
Hewlett-Packard Co. 28,000 2,086,000
International Business Machines Corp. 18,000 1,728,000
6,867,125
TRANSPORTATION & SERVICES 1.18%
Hunt (J.B.) Transport Services, Inc. 63,250 1,162,219<PAGE>
<PAGE>
EBI Equity Fund (continued)
UTILITIES 3.92%
Cinergy Corp....................... 61,000 $ 1,601,250
SCE Corp. 62,000 1,061,750
Telefonos de Mexico, Sponsored ADR 40,800 1,208,700
3,871,700
TOTAL COMMON STOCKS (Cost $73,130,687) 91,415,175
PREFERRED STOCKS 1.37%
AUTOMOBILE RELATED 1.37%
Ford Motor Corp. Pfd. A.
(Cost $1,297,827)................. 14,000 1,359,750
SHORT TERM INVESTMENTS 6.11%
COMMERCIAL PAPER 3.54%
Xerox Credit Corp.
5.950%, 07/07/95................... 1,500,000 1,498,513
Toys "R" Us, Inc.
5.900%, 07/11/95................... 1,000,000 998,361
Bell Atlantic Financial Services, Inc.
5.930%, 07/20/95................... 1,000,000 996,870
TOTAL COMMERCIAL PAPER (Cost $3,493,744) 3,493,744
OTHER SECURITIES 2.57%
United Missouri Bank, Money Market
Fiduciary ~ 5.079% (Cost $2,539,000)... 2,539,000 2,539,000
TOTAL SHORT TERM INVESTMENTS (Cost $6,032,744) 6,032,744
TOTAL INVESTMENTS
(100.00%) (Cost $80,461,258#)...... $98,807,669<PAGE>
<PAGE>
EBI MultiFlex Fund
COMMON STOCKS 84.78%
LARGE CAPITALIZATION EQUITIES 17.46%
Abbott Laboratories 13,400 $ 542,700
American General Corp. 11,500 388,125
American Home Products Corp. 5,500 425,563
American International Group, Inc. 3,700 421,800
Atlantic Richfield Co. 3,900 428,025
Boatmen's Bancshares, Inc. 14,100 497,025
Boeing Co. 3,400 212,925
Bristol-Myers Squibb Co. 6,500 442,812
Cinergy Corp. 18,000 472,500
Columbia/HCA Healthcare, Inc. 12,619 545,772
COMPAQ Computer Corp.* 5,100 231,412
Computer Associates International, Inc. 3,600 243,900
Cooper Tire and Rubber Co. 8,500 207,188
Dillard Dept. Stores, Inc., Cl. A 4,900 143,938
Disney (Walt) Co. 9,600 534,000
Dow Chemical Co. 6,600 474,375
Dun & Bradstreet Corp. 8,000 420,000
Emerson Electric Co. 6,200 443,300
Exxon Corp. 7,000 494,375
Federal National Mortgage Assn 5,200 490,750
Fleming Companies, Inc. 9,000 238,500
Ford Motor Corp. 18,400 547,400
Gannett Co., Inc. 4,000 217,000
General Electric Co. 8,000 451,000
General RE Corp. 1,800 240,975
Hewlett-Packard Co. 8,200 610,900
Home Depot, Inc. 8,000 325,000
Johnson & Johnson 7,900 534,238
K Mart Corp. 22,200 324,675
Lilly (Eli) & Co. 5,400 423,900
Lockheed Martin Corp. 7,116 449,198
Manor Care, Inc. 11,700 340,762
Marsh & McLennan Companies, Inc. 2,600 210,925
McDonald's Corp. 16,000 626,000
Merck & Co., Inc. 12,300 602,700
Morgan Stanley Group, Inc. 6,700 542,700
NBD Bancorp, Inc. 9,300 297,600
PepsiCo, Inc. 11,000 501,875
Philip Morris Cos., Inc. 9,000 669,375
Pioneer Hi-Bred International, Inc. 5,500 231,000
Pitney-Bowes, Inc. 14,000 537,250<PAGE>
<PAGE>
EBI MultiFlex Fund COMMON STOCKS (continued)
Raytheon Co. 7,000 $ 543,375
Roadway Services, Inc. 6,000 283,500
Royal Dutch Petroleum Co. 6,000 731,250
Russell Corp. 5,100 146,625
SAFECO Corp. 8,000 459,500
Schering-Plough Corp. 12,800 564,800
Shaw Industries, Inc. 21,000 357,000
Southern New England Telecommunications Corp.11,000 387,750
Texas Utilities Co. 9,100 312,813
Textron, Inc. 10,000 581,250
Toys "R" Us, Inc.* 4,400 128,700
Tyson Foods, Inc., Cl. A 15,000 346,875
Unicom Corp. 10,000 266,250
Vulcan Materials Co. 6,400 348,800
Wachovia Corp. 10,000 357,500
Westvaco Corp. 8,000 354,000
Whirlpool Corp. 6,500 357,500
WMX Technologies, Inc. 18,300 519,263
24,030,209
SMALL CAPITALIZATION EQUITIES 22.75%
Acordia, Inc. 4,600 $ 147,775
Acuson Corp.* 5,300 64,263
ACX Technologies, Inc.* 5,100 212,925
Advanced Technology Laboratories, Inc. 8,300 130,725
AGCO Corp. 4,050 151,875
Airborne Freight Corp. 1,400 28,350
A.L. Pharmaceuticals, Inc., Cl. A 4,000 75,000
Alaska Air Group, Inc.* 9,200 169,050
Albank Financial Corp. 13,200 344,850
Alberto-Culver Co., Cl. B 4,900 148,225
Alexander's, Inc.* 300 16,650
American Annuity Group, Inc. 20,400 201,450
AMSCO International, Inc.* 16,200 224,775
Ann Taylor Stores Corp.* 400 9,300
Apple South, Inc. 2,850 55,575
Applebee's International, Inc. 1,000 25,750
Arctco, Inc. 800 9,400
Armco, Inc. 33,100 223,425
Arrow Electronics, Inc. 262 13,035
Arthur J. Gallagher & Co. 1,500 54,562
Astoria Financial Group Corp.* 3,000 107,250
Augat, Inc. 1,900 38,950
Autocam Corp.* 840 10,080
Automotive Inds. Hldgs., Inc., Cl. A* 1,100 29,837
Baldor Electric Co. 2,100 60,113
Banta Corp. 3,000 99,750
Bergen Brunswig Corp., Cl. A 4,800 109,800
Berkley (W.R.) Corp. 2,300 81,650<PAGE>
<PAGE>
EBI MultiFlex Fund SMALL CAPITALIZATION (continued)
BHC Financial, Inc. 11,600 $ 189,950
Bio-Rad Laboratories, Inc., Cl. A* 8,000 288,000
Borg-Warner Automotive, Inc. 2,100 59,850
Cadence Design Systems, Inc. 7,100 229,863
Camco International, Inc. 7,700 179,988
Canandaigua Wine Co., Inc.,Cl. A* 6,100 272,975
Carlisle Cos., Inc. 2,700 103,275
Carmike Cinemas, Inc., Cl. A* 1,400 33,950
Carpenter Technology Corp. 2,800 190,750
Casey's General Stores, Inc. 600 10,800
Castle Energy Corp. 2,000 20,750
CCB Financial Corp. 2,500 104,375
Cellular Communications, Inc.* 3,100 94,938
Cellular Communications, Inc., Cl. 7,800 354,900
Central Maine Power Co. 19,600 232,750
Central Newspapers, Inc., Cl. A 6,400 189,600
Centura Banks, Inc. 3,200 89,200
Chefs International, Inc.* 400 200
Chesapeake Corp. 5,100 158,737
Chesapeake Energy Corp.* 500 12,875
Chris-Craft Industries, Inc.* 2,884 100,940
Citizens Corp. 900 14,738
Clear Channel Communications, Inc.* 1,100 70,812
Cleveland-Cliffs, Inc. 8,600 331,100
Coastal Bancorp. 9,100 147,875
Collagen Corp. 6,100 104,463
Commerce Bancorp, Inc. 800 15,500
Commonwealth Energy Systems 4,400 166,100
Community Psychiatric Centers* 4,600 51,750
Conner Peripherals, Inc.* 4,400 54,450
Consolidated Stores Corp.* 11,500 240,063
Corvel Corp.* 700 15,050
CPI Corp. 10,000 191,250
Credence Systems Corp.* 7,200 217,800
Credit Acceptance Corp.* 2,200 45,100
Cullen/Frost Bankers, Inc. 2,000 81,000
Cypress Semiconductor Corp.* 10,800 437,400
Cytec Industries, Inc.* 400 16,350
Davidson & Associates, Inc.* 400 15,900
Deposit Guaranty Corp. 2,400 93,600
Devon Group, Inc. 3,700 109,150
Dime Bancorp, Inc. 25,665 256,650
Donaldson Co., Inc. 2,000 52,250<PAGE>
<PAGE>
EBI MultiFlex Fund SMALL CAPITALIZATION EQUITIES (continued)
E. W. Blanch Holdings, Inc. 3,800 $ 70,775
Eckerd Corp.* 2,100 67,200
Electroglas, Inc.* 3,400 194,650
Emphesys Financial Group 2,800 66,150
Express Scripts, Inc., Cl. A* 1,000 35,250
Fibreboard Corp. 5,000 120,000
FINOVA Group, Inc. 5,400 189,000
First Commercial Corp. 5,200 132,600
First Financial Corp. Wisc 4,900 85,750
First Michigan Bank Corp. 9,450 233,888
First Midwest Bancorp, Inc. 600 14,813
Franklin Quest Co.* 2,200 52,800
Fremont General Corp. 4,620 111,457
FTP Software, Inc.* 12,000 360,000
G & K Services, Inc., Cl. A 1,050 20,475
Giant Industries, Inc.* 900 7,650
Gibson Greetings, Inc. 1,400 18,725
Global Marine, Inc.* 35,700 205,275
GoodMark Foods, Inc. 6,000 96,000
Grey Advertising, Inc. 300 57,600
Gymboree Corp.* 1,000 29,063
Harman International Industries, Inc. 2,100 85,050
Harnischfeger Industries, Inc. 7,100 245,838
Haverty Furniture Cos., Inc. 100 1,025
Healthsource, Inc.* 1,000 35,000
Hechinger Co., Cl. A 9,500 68,281
Helene Curtis Industries, Inc. 2,500 71,250
Heritage Media Corp., Cl. A* 2,500 72,188
Hillhaven Corp.* 11,800 333,350
Hondo Oil & Gas Co.* 3,000 54,000
Horizon Healthcare Corp.* 1,100 19,662
IDEX Corp.* 1,350 45,225
Imperial Credit Industries, Inc. 2,600 32,175
Infinity Broadcasting Corp., Cl. A* 2,850 95,119
Input/Output, Inc.* 1,000 36,000
Insurance Auto Auctions, Inc.* 1,000 29,250
Inter Regional Financial Group, Inc.* 12,600 371,700
International Imaging Materials, Inc.* 1,500 38,250
International Multifoods Corp. 400 9,000
Interstate Power Co. 14,500 349,812
InterVoice, Inc.* 6,800 119,000
Intuit, Inc.* 400 30,400
Invacare Corp. 1,300 53,950
J & L Specialty Steel, Inc. 10,900 209,825
John Alden Financial Corp. 1,800 30,825<PAGE>
<PAGE>
EBI MultiFlex Fund SMALL CAPITALIZATION EQUITIES (continued)
K N Energy, Inc. 4,600 $ 116,725
KEMET Corp.* 6,700 351,750
Kennametal, Inc. 11,400 401,850
Kent Electronics Corp.* 1,500 56,813
Kinetic Concepts, Inc. 8,100 57,712
KLA Instruments Corp.* 1,100 84,975
Landstar System, Inc.* 8,300 213,725
La-Z Boy Chair Co. 500 13,188
LCI International, Inc.* 3,600 110,250
Lennar Corp. 15,100 283,125
Life Partners Group, Inc. 3,900 78,000
Lincare Holdings, Inc.* 4,700 124,844
Liposome Company, Inc.* 100 1,087
Living Centers of America* 2,000 54,250
Logicon, Inc. 300 13,350
Luby's Cafeterias, Inc. 13,500 271,687
Lukens, Inc. 7,100 228,975
Lydall, Inc.* 17,200 378,400
MAF Bancorp, Inc. 3,000 70,500
Magna Group, Inc. 12,200 268,400
Mark Twain Bancshares, Inc. 2,800 90,300
Maxim Integrated Products* 3,400 173,400
McClatchy Newspapers, Inc., Cl. A 8,900 196,912
Measurex Corp. 15,200 461,700
Media General, Inc., Cl.A 3,300 103,125
Meredith Corp. 20,800 527,800
Meyer (Fred), Inc.* 100 2,712
Mine Safety Appliances Co. 3,700 196,100
Multicare Companies* 5,700 99,038
Mutual Risk Management Ltd 700 23,450
Nautica Enterprises, Inc.* 500 18,125
Nellcor, Inc.* 2,100 94,500
NovaCare, Inc.* 400 3,250
Oakwood Homes Corp. 11,000 281,875
OEA, Inc. 14,600 432,525
OrNda Healthcorp.* 1,100 18,837
Outboard Marine Corp. 4,800 94,200
Owens & Minor, Inc. 22,100 276,250
People's Bank of Bridgeport, Connecticut 12,200 201,300
Photronics, Inc.* 2,850 87,638
PhyCor, Inc.* 900 31,612
Physicians Health Svc., Inc., Cl. A* 100 2,650
Pioneer Group, Inc. 600 16,125
Pioneer Standard Electronics, Inc. 4,650 113,925
Pittson Minerals Group 7,800 77,025<PAGE>
<PAGE>
EBI MultiFlex Fund SMALL CAPITALIZATION EQUITIES (continued)
Players International, Inc.* 7,500 $ 150,000
Pope & Talbot, Inc. 600 9,750
Precision Castparts Corp. 13,350 468,919
Premier Bancorp* 1,700 30,600
Prime Hospitality Corp.* 1,800 17,775
Project Software & Development, Inc.* 2,600 77,350
Protective Life Corp. 22,600 615,850
Public Service Co., New Mexico* 14,400 205,200
Quick and Reilly Group, Inc. 500 18,125
Quintiles Transnational Corp.* 2,100 94,500
Ralcorp Holdings, Inc.* 7,200 164,700
Read-Write Corp.* 14,900 398,575
Regal Beloit Corp. 17,700 274,350
Regeneron Pharmaceuticals, Inc.* 400 3,600
Reliance Group Holdings, Inc. 1,300 8,450
Rex Stores Corp.* 800 11,200
Reynolds & Reynolds Co., Cl. A 2,300 67,850
Riggs National Corp.* 6,900 68,137
Robert Half International, Inc.* 7,500 192,187
Rock-Tenn. Co., Cl. A 200 3,550
Sanifill, Inc.* 900 28,237
SCI Systems, Inc.* 15,400 385,000
SEI Corp. 6,600 148,500
Sequent Computer Systems, Inc.* 3,500 62,344
Sierra On-Line, Inc.* 2,700 67,500
Silicon Valley Group, Inc.* 2,200 79,750
Smith (A.O.) Corp. 2,700 63,450
Smith International, Inc.* 15,000 251,250
Smith's Food & Drug Centers, Inc., Cl. B 11,100 219,225
Smithfield Foods, Inc.* 600 12,788
Sonat Offshore Drilling Co. 14,900 428,375
Southwest Gas Corp. 10,200 145,350
Sovereign Bancorp, Inc. 3,400 32,725
Springs Industries, Inc., Cl. A 7,400 275,650
St. Paul Bancorp, Inc. 8,300 185,712
Sterling Software, Inc.* 2,300 88,550
Strawbridge & Clothier, Cl. A 6,300 126,000
Student Loan Corp. 1,600 43,000
SunGard Data Systems, Inc.* 1,700 88,825
Sunrise Medical, Inc.* 2,800 87,150
Surgical Care Affiliates, Inc. 2,800 53,550
Sybase, Inc.* 640 18,800<PAGE>
<PAGE>
EBI MultiFlex Fund SMALL CAPITALIZATION EQUITIES (continued)
Symbol Technologies, Inc.* 4,000 $ 153,500
Synopsys, Inc.* 7,600 475,950
Talbots, Inc. 1,600 63,600
TCF Financial Corp. 1,600 76,000
Tech Data Corp.* 3,500 40,031
Tejas Gas Corp.* 1,000 49,625
Teleflex, Inc. 2,100 90,300
Terra Industries, Inc. 2,600 31,525
Tetra Tech, Inc.* 4,375 77,656
Thermotrex Corp.* 25,400 869,950
Tiffany & Co. 3,100 105,400
Toro Co. 7,000 196,000
Total Petroleum of North America, Ltd 5,300 58,300
Tracor, Inc.* 5,000 68,125
Tredegar Industries, Inc. 21,400 532,325
True North Communications, Inc. 6,800 128,350
Union Corp. 17,500 277,813
Universal Health Services, Inc., Cl. B* 3,800 110,200
Vesta Insurance Group, Inc. 3,900 134,062
Vicor Corp.* 1,500 67,406
Vigoro Corp. 3,200 132,800
Vivra, Inc.* 1,800 48,825
Waban, Inc.* 7,400 110,075
Washington National Corp. 1,800 37,125
Watts Industries, Inc., Cl. A 4,600 115,287
Werner Enterprises, Inc. 2,500 50,000
West Co., Inc. 6,800 190,400
West America Bancorp. 2,800 103,600
Western Digital Corp.* 3,600 62,550
Westpoint Stevens, Inc.* 11,100 198,412
Wicor, Inc. 5,700 160,313
Williams Companies, Inc. 1,130 39,409
Williams-Sonoma, Inc.* 2,000 44,000
Wisconsin Central Transportation Corp.* 2,200 107,800
Wolverine Tube, Inc.* 5,200 167,050
Wonderware Corp.* 4,700 189,175
Worldcom, Inc.* 1,700 45,900
Zilog, Inc.* 4,400 219,450
31,301,371<PAGE>
<PAGE>
EBI MultiFlex Fund
INTERNATIONAL EQUITIES 19.70%
ABN-AMRO Hldgs N.V., ADR 7,700 $ 296,973
AEGON N.V., ADR 40,750 1,421,156
AKZO N.V., ADR 11,400 682,575
Amcor Ltd., ADR 11,000 330,000
Associated British Foods Ltd., ADR 20,000 211,270
Australia & New Zealand Bkg. Group Ltd.,
Sponsored ADR 6,100 110,563
Banco Central Hispanoamerican, ADR 16,700 177,437
Banco De Santander SA, ADR 20,900 822,938
BASF AG, ADR 4,000 170,736
Bass PLC, ADR 18,300 345,412
Bayer AG, ADR 27,400 680,980
British Gas PLC, ADR 800 36,800
British Telecommunications PLC, ADR 4,800 301,200
Ciba Geigy A.G., Sponsored ADR 33,500 1,227,045
Commerzbank A.G., ADR 2,400 114,718
Compagnie De Suez, ADR 2,800 77,949
Compagnie Cervecerias, ADR 5,100 135,788
CS Holding ADR 7,700 176,273
CSR Ltd., ADR 7,800 97,308
Empresa Nacional De Electricidad, ADR 9,100 448,175
Fuji Photo Film Co., Ltd., ADR 22,000 1,045,000
Gambro AB, ADR 60,100 848,912
Glaxo Holdings PLC, ADR 8,100 197,438
Goodman Fielder Ltd., ADR 57,900 192,072
Hafslund Nycomed A.S., Sponsored ADR 3,900 90,187
Heineken N.V., ADR 2,000 302,482
Hitachi Ltd., ADR 3,400 340,850
Hoechst A.G., ADR 2,200 237,464
Hong Kong Electric, ADR 41,400 140,719
Inchcape Berhad, ADR 282,200 920,790
James Hardie Industries Ltd 24,000 75,533
Kingfisher PLC, ADR 14,100 190,669
Kirin Brewery Co., Ltd., ADR 5,700 609,900
Konica Corp., ADR 4,400 268,975
Koninklijke Ahold N.V., ADR 27,300 969,150
Marui Ltd., ADR 15,600 496,113
Matsushita Electric Industrial Co. Ltd., ADR 4,000 620,000
Mayne Nickless Ltd., ADR 7,400 151,852
National Australia Bank, Ltd., ADR 19,800 792,000
National Power Final, ADR 5,250 155,531
Nestle SA, Sponsored ADR 17,400 905,404<PAGE>
<PAGE>
EBI MultiFlex Fund INTERNATIONAL EQUITIES (continued)
Novo-Nordisk A/S, ADR 27,300 $ 733,687
Pacific Dunlop Ltd., ADR 29,800 257,025
Petrofina SA, ADR 13,500 407,501
Pioneer International Ltd. ADR 51,000 126,526
PowerGen PLC, ADR 6,200 194,525
Sekisui Homes Ltd., ADR 6,600 816,254
Shell Transport & Trading Co. ADR 10,100 730,987
Shiseido Ltd., ADR 26,500 298,085
South China Morning Post., ADR 289,500 869,890
Southern Electric PLC, Sponsored ADR 9,000 183,844
TDK Corp., ADR 12,100 550,550
Telefonica de Espana, Sponsored ADR 7,400 286,750
Telefonos de Mexico, "L", Sponsored ADR 500 14,813
Tesco PLC, Sponsored ADR 17,600 81,199
Thomson-CSF, ADR* 3,000 67,500
Total, ADR 18,600 562,650
Toyota Motor Co., ADR 18,100 719,475
Unigate PLC, ADR 166,700 1,075,398
Unilever N.V. 6,700 871,838
United Biscuits Group, Sponsored ADR 13,800 70,472
United Overseas Bk. Ltd., Sponsored ADR 17,760 335,499
Vitro Sociedad Anonima, ADR 6,960 60,030
Willis Corroon Group PLC, ADR 20,200 242,400
Windsor Industrial Ltd. ADR 20,700 137,775
27,111,010
REAL ESTATE EQUITIES 24.87%
Agree Realty Corp. 37,000 $ 610,500
Bay Apartment Communities, Inc. 54,800 1,068,600
Beacon Properties, Inc. 38,000 755,250
CBL & Associates Prop 51,800 1,029,525
CenterPoint Properties Corp. 44,500 917,812
Colonial Properties Trust 29,600 680,800
Crown American Realty Trust 59,200 747,400
Developers Diversified Realty 12,000 345,000
Duke Realty Investments, Inc. 77,800 2,197,850
Evans Withycombe Residential 50,300 1,024,863
Excel Realty Trust, Inc. 29,000 576,375
Gables Residential Trust 42,000 861,000
General Growth Properties, Inc. 48,500 988,188
Glimcher Realty Trust 49,900 1,035,425
Health Care Reit, Inc. 26,800 552,750
Highwoods Properties, Inc. 37,000 943,500<PAGE>
<PAGE>
EBI MultiFlex Fund REAL ESTATE EQUITIES (continued)
Horizon Outlet Centers, Inc. 32,000 $ 744,000
JDN Realty Corp. 50,000 1,018,750
Kimco Realty Corp. 22,300 847,400
Koger Equity, Inc.* 107,300 938,875
McArthur/Glen Realty 13,000 190,125
Meditrust Inc. SBI 27,100 924,788
Merry Land & Investment Co., Inc. 58,200 1,185,825
MGI Properties 67,500 1,012,500
Nationwide Health Properties, Inc. 23,600 920,400
Oasis Residential, Inc. 43,000 935,250
Paragon Group, Inc. 65,900 1,227,388
Post Properties, Inc. 23,300 704,825
Regency Realty Corp. 35,800 608,600
ROC Communities, Inc. 11,900 263,287
Shurgard Storage Centers, Inc. 36,800 846,400
Simon Property Group, Inc. 7,200 180,900
Sizeler Property Investors, Inc. 48,800 463,600
Starwood Lodging Trust 34,500 810,750
Storage Equities, Inc. 62,200 1,018,525
Storage Trust Realty* 58,800 1,190,700
Summit Properties, Inc. 50,400 869,400
Tucker Properties Corp. 65,000 788,125
Weeks Corp.* 33,200 830,000
Wellsford Residential Property Trust 47,200 1,073,800
Western Investment Real Estate Trust 24,300 288,562
34,217,613
TOTAL COMMON STOCKS (Cost $106,146,326) . . . . . . . 116,660,203
FIXED INCOME SECURITIES 15.22%
U.S. GOVERNMENT OBLIGATIONS 6.14%
U.S. Treasury Notes
8.500%, 11/15/2000 700,000 778,968
8.000%, 05/15/2001 800,000 876,250
7.500%, 11/15/2001 475,000 509,586
6.250%, 02/15/2003 3,600,000 3,607,873
8.750%, 05/15/2017 2,175,000 2,682,725
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $7,880,163) . . . . . . . . . . . . . . . . . . 8,455,402
U.S. GOVERNMENT AGENCY OBLIGATIONS 2.09%
Federal National Mortgage Assn., 94-20PA
5.450%, 06/25/2000 317,622 315,179
Federal Home Loan Mortgage Corp., Pool
#190688 6.000%, 03/01/2009 753,190 728,237<PAGE>
<PAGE>
EBI MultiFlex Fund U.S. GOVERNMENT AGENCY OBLIGATIONS (continued)
Federal Home Loan Mortgage Corp., 93-31 LC
7.000%, 08/25/2016 700,000 $ 674,968
Federal Home Loan Mortgage Corp., PO, Strip
Series 1686 B
0.000%, 02/15/2024 492,389 236,347
Federal National Mortgage Assn.
6.000%, 06/19/2025, Pool #190723 980,100 918,231
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,698,583) . . . . . . . . . . . . . . . . . . 2,872,962
MORTGAGE SECURITIES 0.37%
The Money Store Home Equity Trust
7.100%, 11/15/2016, 1994-B Series A-3 500,000 504,460
TOTAL MORTGAGE SECURITIES (Cost $498,049) . . . . . . 504,460
CORPORATE BONDS 6.62%
Associates Corp. North America,
8.800%, 03/01/1996 849,000 863,435
Avco Financial Services Inc.,
7.500%, 11/15/1996 900,000 915,679
Bear Stearns Co., 5.875%, 01/15/1996 800,000 798,414
Commercial Credit Corp., 8.000%, 09/01/1996 700,000 714,049
Dean Witter Discover & Co.,
5.000%, 04/01/1996 500,000 496,036
General Motors Acceptance Corp.,
8.875%, 06/01/2010 600,000 704,229
GTE Corp., 10.250%, 11/01/2020 620,000 726,890
International Lease Finance Corp.,
6.625%, 06/01/1996 550,000 551,349
NationsBank Corp., 5.375%, 12/01/1995 500,000 498,585
NationsBank Corp., 4.750%, 08/15/1996 500,000 492,536
Norwest Corp., FRN, 6.928%, 02/24/1999 675,000 671,741
Province of Manitoba, 7.750%, 07/17/2016 480,000 504,499
Transamerica Finance Corp.,
8.550%, 06/15/1996 585,000 594,944
WMX Technologies, Inc., 6.220%, 04/30/2004 550,000 579,409
TOTAL COPORATE BONDS (Cost $9,001,870) . . . . . . . 9,111,795<PAGE>
<PAGE>
EBI MultiFlex Fund
TOTAL FIXED INCOME SECURITIES
(Cost $20,078,665) . . . . . . . . . . . . . . . . . 20,944,619
TOTAL INVESTMENTS
(100.00%) (Cost $126,224,991#) . . . . . . . . . $137,604,822
EBI International Value Fund
COMMON STOCKS 86.56%
INTERNATIONAL EQUITIES 86.56%
AEGON N.V., ADR 1,000 $ 34,875
Amcor Ltd., ADR 1,400 42,000
Associated British Foods Ltd., ADR 2,500 26,409
Banco De Santander SA, ADR 700 27,563
BASF AG, ADR 600 25,610
Bayer AG, ADR 1,000 24,853
British Airways PLC, ADR 400 26,900
British Telecommunications PLC, ADR 400 25,100
Canon Inc., ADR 300 24,525
Carlton Communications PLC, ADR 800 24,500
Ciba Geigy A.G., Sponsored ADR 800 29,303
Dai Nippon Printing Ltd., ADR 200 31,802
Elf Aquitaine, ADR 1,200 44,700
Elsevier N.V., Sponsored ADR 1,500 35,438
Fuji Photo Film Co., Ltd., ADR 1,000 47,500
Gambro AB, ADR 2,000 28,250
Groupe Danone, Sponsored ADR 800 26,933
Heineken N.V., ADR 200 30,248
Hitachi Ltd., ADR 500 50,125
HSBC Holdings PLC, ADR 200 25,654
International Nederlanden Groep, ADR 500 27,636
Kirin Brewery Co., Ltd., ADR 400 42,800
Koninklijke Ahold N.V., ADR 1,200 42,600
LVMH Moet Hennessy, ADR 1,200 43,500
Marui Ltd., ADR 1,600 50,883
National Australia Bank, Ltd., ADR 1,500 60,000
Nestle SA, Sponsored ADR 500 26,017
Novo-Nordisk A/S, ADR 1,000 26,875
PowerGen PLC, ADR 800 25,100
Repsol SA, ADR 1,400 44,275
Royal Dutch Petroleum Co., ADR 400 48,750
RWE Aktiengessellschaf SA, ADR 700 24,301
Sandoz AG, ADR 800 27,567
Sekisui Homes Ltd., ADR 350 43,286<PAGE>
<PAGE>
EBI International Value Fund COMMON STOCK (continued)
SmithKline Beecham PLC, ADR 700 $ 31,675
Societe Generale Paris, ADR 1,600 37,429
Stet Societa Finanziaria, ADR 1,000 27,642
Swire Pacific Ltd., ADR 7,000 53,376
Telefonica de Espana, Sponsored ADR 700 27,125
Unilever N.V. 200 26,025
TOTAL COMMON STOCKS (Cost $1,351,426) . . . . . . . . 1,369,150
SHORT TERM INVESTMENTS 13.44%
United Missouri Bank, Money Market Fiduciary ~
5.079% (Cost $212,607) 212,607 212,607
TOTAL SHORT TERM INVESTMENTS . . . . . . . . . . . . 212,607
TOTAL INVESTMENTS
(100.00%) (Cost $1,564,033#) . . . . . . . . . . . . $1,581,757
EBI Real Estate Fund
COMMON STOCKS 83.79%
REAL ESTATE EQUITIES 83.79%
Bay Apartment Communities, Inc. 1,000 $ 19,500
Beacon Properties, Inc. 500 9,937
CBL & Associates Prop. 500 9,937
CenterPoint Properties Corp. 1,000 20,625
Colonial Properties Trust 500 11,500
Crown American Realty Trust 1,000 12,625
Developers Diversified Realty 500 14,375
Duke Realty Investments, Inc. 1,500 42,375
Evans Withycombe Residential 1,000 20,375
Excel Realty Trust, Inc. 500 9,937
Gables Residential Trust 1,000 20,500
General Growth Properties, Inc. 1,000 20,375
Glimcher Realty Trust 1,000 20,750
Health Care Reit, Inc. 500 10,313
Highwoods Properties, Inc. 1,000 25,500
Horizon Outlet Centers, Inc. 500 11,625
JDN Realty Corp. 1,000 20,375
Kimco Realty Corp. 500 19,000
Koger Equity, Inc.* 2,500 21,875
Meditrust, Inc. SBI 500 17,063
Merry Land & Investment Co., Inc. 1,000 20,375
MGI Properties 1,500 22,500
Nationwide Health Properties, Inc. 500 19,500<PAGE>
<PAGE>
EBI Real Estate Fund REAL ESTATE EQUITIES (continued)
Oasis Residential, Inc. 800 $ 17,400
Paragon Group, Inc. 1,500 27,938
Post Properties, Inc. 500 15,125
Regency Realty Corp. 1,000 17,000
ROC Communities, Inc. 500 11,062
Shurgard Storage Centers, Inc. 500 11,500
Simon Property Group, Inc. 500 12,563
Sizeler Property Investors, Inc. 1,000 9,500
Starwood Lodging Trust 700 16,450
Storage Equities, Inc. 1,500 24,562
Storage Trust Realty* 1,000 20,250
Summit Properties, Inc. 500 8,625
Tucker Properties Corp. 1,000 12,125
Weeks Corp.* 800 20,000
Wellsford Residential Property Trust 1,000 22,750
TOTAL COMMON STOCKS (Cost $663,327) 667,787
SHORT TERM INVESTMENTS 16.21%
UNITED STATES TREASURY BILLS 3.76%
4.870%, 07/06/1995 30,000 29,980
OTHER SECURITIES 12.45%
United Missouri Bank, Money Market Fiduciary ~
5.079% . . . . . . . . . . . . . . . . . . 99,197 99,197
TOTAL SHORT TERM INVESTMENTS (Cost $129,177) . . . . 129,177
TOTAL INVESTMENTS
(100.00%) (Cost $792,504#) . . . . . . . . . . . . . $ 796,964
EBI Income Fund
FIXED INCOME SECURITIES 99.69%
U.S. GOVERNMENT OBLIGATIONS 75.88%
U.S. Treasury Notes
9.500%, 11/15/1995 1,000,000 $ 1,013,750
8.500%, 07/15/1997 2,000,000 2,101,874
8.000%, 08/15/1999 500,000 536,718
6.375%, 01/15/2000 500,000 507,656
7.500%, 11/15/2001 2,000,000 2,145,624
10.750%, 08/15/2005 2,000,000 2,656,250
9.250%, 02/15/2016 3,000,000 3,855,936
8.125%, 08/15/2019 2,500,000 2,916,405
7.250%, 08/15/2022 3,500,000 3,738,438
19,472,651
U.S. Treasury Strips PO
0.000%, 08/15/2014 4,000,000 1,081,400
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $18,945,483) 20,554,051
U.S. GOVERNMENT AGENCY OBLIGATIONS 10.69%
Federal Home Loan Mortgage
12.000%, 04/01/2000 12,261 12,943
Government National Mortgage Assn.
6.500%, 10/15/2008 Pool #354668 977,447 963,698
6.000%, 10/15/2008 Pool #360191 565,172 547,154
7.000%, 10/15/2008 Pool #366622 944,759 947,707
6.000%, 11/15/2008 Pool #370907 439,630 425,614
2,884,173
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS(Cost $3,021,375) 2,897,116
CORPORATE BONDS 13.12%
FINANCE 5.53%
Associates Corp., North America,
4.750%, 08/01/1996 1,000,000 $ 986,335
PHH Corp., Notes,
8.000%, 01/01/1997 500,000 513,139
1,499,474
INDUSTRIAL 7.59%
Ford Motor Co.,
7.500%, 11/15/1999 500,000 517,719
Limited, Inc.,
8.875%, 08/15/1999 500,000 538,969
Rockwell International, Inc.,
6.625%, 06/01/2005 500,000 496,831
Waste Management, Inc.,
6.375%, 07/01/1997 500,000 502,109
2,055,628
TOTAL CORPORATE BONDS (Cost $3,579,112) . . . . . . . 3,555,102
TOTAL FIXED INCOME SECURITIES (Cost $25,545,970) . . 27,006,269
SHORT TERM INVESTMENTS .31%
United Missouri Bank, Money Market Fiduciary ~
5.079% (Cost $83,000) 83,000 83,000
TOTAL INVESTMENTS (100.00%) (Cost $25,628,970#) . . . $27,089,269
EBI Relative Return Bond Fund
FIXED INCOME SECURITIES 85.74%
U.S.GOVERMENT OBLIGATIONS 56.40%
U.S. Treasury Notes
4.250%, 07/31/1995 175,000 $ 174,781
3.875%, 10/31/1995 40,000 39,775
4.250%, 11/30/1995 100,000 99,438
6.000%, 06/30/1996 40,000 40,100
6.000%, 12/31/1997 150,000 150,563
6.500%, 04/30/1999 115,000 117,085
8.000%, 05/15/2001 75,000 82,148
6.375%, 08/15/2002 50,000 50,547
6.250%, 02/15/2003 290,000 290,634
8.750%, 05/15/2017 435,000 536,545
7.875%, 02/15/2021 65,000 74,019
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $1,576,174) 1,655,635
U.S. GOVERNMENT AGENCY OBLIGATIONS 11.92%
Federal National Mortgage Assn. Super Pac
5.450%, 06/25/2000 42,350 42,024
Federal National Mortgage Assn. Pool #50973
6.000%, 01/01/2009 85,599 82,763
Federal Home Loan Mortgage Corp. Super Pac, P2
5.250%, 10/15/2000 50,000 49,524
Federal Home Loan Mortgage Corp. TMS Series A3
7.100%, 11/15/2016 50,000 50,446
Federal Home Loan Mortgage Corp. PO Strip
Series 1686 0.000%, 02/15/2024 67,760 32,525
Federal National Mortgage Assn. Pool #190723
6.000%, 04/01/2024 99,000 92,750
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $331,822) 350,032
EBI Relative Return Bond Fund
CORPORATE SECURITIES 17.42%
Associates Corp. North America,
8.375%, 06/01/1996 40,000 $ 40,791
Commercial Credit Corp., 8.000%, 09/01/1996 35,000 35,702
Dean Witter Discover & Co.,
5.000%, 04/01/1996 50,000 49,604
Ford Motor Credit Corp.,
9.250%, 06/15/1998 35,000 37,625
GTE Corp., 10.250%, 11/01/2020 100,000 117,240
International Lease Finance Corp.,
6.625%, 06/01/1996 40,000 40,098
NationsBank Corp., 4.750%, 08/15/1996 100,000 98,507
Norwest Corp., FRN, 6.928%, 02/24/1999 50,000 49,759
WMX Technologies, Inc., 6.220%, 04/30/2004 40,000 42,139
TOTAL CORPORATE SECURITIES (Cost $508,323) . . . . . 511,465
TOTAL FIXED INCOME SECURITIES (Cost $2,416,319) . . . 2,517,132
SHORT TERM INVESTMENTS 14.26%
United Missouri Bank, Money Market Fiduciary ~
5.079% (Cost $418,716) 418,716 418,716
TOTAL INVESTMENTS (100.00%) (Cost $2,835,035#) $2,935,848
_________________________________________________________________
Effective Shares or
Interest Principal
Description Rate % Amount Value
EBI Cash Management Fund
SHORT-TERM INVESTMENTS 100.00%
COMMERCIAL PAPER 99.50%
American General Finance Corp.,
07/05/1995. . . . . . . . . . . . 5.880 $700,000 $ 699,543
Gillette Co., 07/05/1995 . . . . 5.870 700,000 699,543
Dow Chemical Co., 07/06/1995 . . 5.960 700,000 699,421
Snap-On Tools Corp., 07/06/1995 . 5.930 700,000 699,423
Ciesco L.P., 07/10/1995 . . . . . 5.950 400,000 399,405
Idaho Power Corp., 07/10/1995 . . 5.900 700,000 698,967
Coca-Cola Co., 07/11/1995 . . . . 5.920 700,000 698,849
Toys "R" Us, Inc., 07/11/1995 . . 5.880 700,000 698,857
Ford Motor Credit Co., 07/12/1995 5.970 600,000 598,906
GTE Florida, Inc., 07/12/1995 . . 6.000 700,000 698,717
Alabama Power Co., 07/13/1995 . . 5.900 700,000 698,623
AT & T Corp., 07/14/1995 . . . . 5.950 700,000 698,496
Progress Capital Holdings Corp.,
07/14/1995 . . . . . . . . . . . 5.990 700,000 698,486
Raytheon Co., 07/14/1995 . . . . 5.950 700,000 698,496
General Electric Capital Corp.,
07/18/1995 . . . . . . . . . . . 5.940 700,000 698,037
Bell Atlantic Financial Corp.,
07/20/1995 . . . . . . . . . . . 5.930 700,000 697,809
Prudential Funding Corp.,
07/21/1995 . . . . . . . . . . . 5.930 750,000 747,529
Chevron Oil Finance Corp.,
07/24/1995 . . . . . . . . . . . 5.900 750,000 747,173
Ford Motor Credit Co., 07/25/1995 5.960 150,000 149,404
MetLife Funding, Inc., 07/28/1995 5.920 700,000 696,892
Xerox Corp., 08/04/1995 . . . . . 5.930 800,000 800,000
Fluor Corp., 08/08/1995 . . . . . 5.940 700,000 695,611
Cargill, Inc., 08/11/1995 . . . . 5.820 700,000 695,360
PepsiCo, Inc., 08/11/1995 . . . . 5.950 700,000 695,256
National Rural Utilities Co.,
08/21/1995 . . . . . . . . . . . 5.900 800,000 793,313
TOTAL COMMERCIAL PAPER (Cost $16,797,636) . . 16,797,636
OTHER SECURITIES 0.50%
United Missouri Bank,
Money Market Fiduciary ~
(Cost $84,000) . . . . . . . . . 5.079 84,000 84,000
TOTAL INVESTMENTS
(100.00%) (Cost $16,881,636#) . . . . . . . . $16,881,636
* Security is non-income producing.
~ Principal and interest are payable on demand.
# Also represents cost for income tax purposes.
See notes to financial statements.<PAGE>
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
June 30, 1995
(Unaudited)
EBI EBI
Equity Flex
Fund Fund
ASSETS
Investment securities:
At cost $80,461,258 $262,130,717
At value $98,807,669 $314,744,980
Cash 910 748
Receivables:
Fund shares sold 122,651 1,147,511
Dividends and interest 188,820 2,846,893
Investment securities sold 0 0
TOTAL ASSETS 99,120,050 318,740,132
LIABILITIES
Payables:
Distributions to shareholders 0 0
Investment securities purchased 0 0
Fund shares repurchased 823,362 55,506
Other 177,849 576,438
TOTAL LIABILITIES 1,001,211 631,944
NET ASSETS $98,118,839 $318,108,188
NET ASSETS
Paid-in capital $78,820,587 $264,629,176
Accumulated undistributed
(overdistributed) net
investment income (2,284) (3,848)
Accumulated net realized gain
(loss) on investments 954,125 868,597
Unrealized net appreciation
of investments 18,346,411 52,614,263
Net assets $98,118,839 $318,108,188
Shares outstanding 1,514,849 5,492,879
Net asset value per share $ 64.77 $ 57.91
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
June 30, 1995
EBI EBI
MultiFlex International
Fund Value Fund
ASSETS
Investment securities:
At cost $126,224,991 $ 1,564,033
At value $137,604,822 $ 1,581,757
Cash 0 0
Receivables:
Fund shares sold 402,283 75,933
Dividends and interest 850,143 4,728
Investment securities sold 1,689,092 0
TOTAL ASSETS 140,546,340 1,662,418
LIABILITIES
Payables:
Distributions to shareholders 0 0
Investment securities purchased 1,902,604 0
Fund shares repurchased 59,937 0
Other 447,687 2,733
TOTAL LIABILITIES 2,410,228 2,733
NET ASSETS $138,136,112 $1,659,685
NET ASSETS
Paid-in capital $128,143,988 $1,637,346
Accumulated undistributed
(overdistributed) net
investment income 396,422 4,634
Accumulated net realized gain
(loss) on investments (1,784,129) (19)
Unrealized net appreciation
of investments 11,379,831 17,724
Net assets $138,136,112 $1,659,685
Shares outstanding 3,216,903 40,618
Net asset value per share $ 42.94 $ 40.86
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
June 30, 1994
(Unaudited)
EBI Income EBI Relative
Fund Return Bond
Fund
ASSETS
Investment securities:
At cost $ 25,628,970 $ 2,835,035
At value $ 27,089,269 $ 2,935,848
Cash 231 0
Receivables:
Fund shares sold 11,243 0
Dividends and interest 591,186 29,956
Investment securities sold 0 0
TOTAL ASSETS 27,691,929 2,965,804
LIABILITIES
Payables:
Distributions to shareholders 0 0
Investment securities purchased 0 0
Fund shares repurchased 55,498 0
Other 51,828 3,614
TOTAL LIABILITIES 107,326 3,614
NET ASSETS $ 27,584,603 $ 2,962,190
NET ASSETS
Paid-in capital $ 28,066,797 $ 2,915,626
Accumulated undistributed
(overdistributed) net investment
income (44) (10)
Accumulated net realized gain
(loss) on investments (1,942,449) (54,239)
Unrealized net appreciation
of investments 1,460,299 100,813
Net assets $ 27,584,603 $ 2,962,190
Shares outstanding 551,410 74,220
Net asset value per share $ 50.03 $ 39.91
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
June 30, 1995
(Unaudited)
EBI Cash EBI
Management Real Estate
Fund Fund
ASSETS
Investment securities:
At cost $ 16,881,636 $792,504
At value $ 16,881,636 $796,964
Cash 296 0
Receivables:
Fund shares sold 0 0
Dividends and interest 2,101 4,807
Investment securities sold 0 0
TOTAL ASSETS 16,884,033 801,771
LIABILITIES
Payables:
Distributions to shareholders 21,773 0
Investment securities purchased 0 96,113
Fund shares repurchased 0 0
Other 14,093 983
TOTAL LIABILITIES 35,866 97,096
NET ASSETS $ 16,848,167 704,675
NET ASSETS
Paid-in capital $ 16,848,442 $695,940
Accumulated undistributed
(overdistributed) net investment
income 0 4,276
Accumulated net realized gain
(loss) on investments (275) (1)
Unrealized net appreciation
of investments 0 4,460
Net assets $ 16,848,167 704,675
Shares outstanding 16,848,442 17,281
Net asset value per share $ 1.00 40.78
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Operations
Six Months Ended June 30, 1995
(Unaudited)
EBI EBI EBI
Equity Flex MultiFlex
Fund Fund Fund
INVESTMENT INCOME
INCOME
Dividends $ 1,154,380 $ 2,765,147 $2,004,823
Interest 161,948 4,056,615 $1,031,540
TOTAL INCOME 1,316,328 6,821,762 3,036,363
EXPENSES
Investment advisory
fees (Note 2) 323,438 1,026,982 645,438
Distribution fees
(Note 2) 431,250 1,369,308 645,438
Operating services
fees (Note 2) 215,625 684,654 307,765
TOTAL EXPENSES 970,313 3,080,944 1,598,641
NET INVESTMENT INCOME 346,015 3,740,818 1,437,722
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENT SECURITIES
Net realized gain (loss)
on investments 924,507 1,040,611 3,583
Change in unrealized
net appreciation
of investments 11,850,194 36,410,947 11,939,352
NET GAIN (LOSS) ON
INVESTMENTS 12,774,701 37,451,558 11,942,935
Net increase
in net assets resulting
from operations $13,120,716 $41,192,376$13,380,657
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Operations
Six Months Ended June 30, 1995
(Unaudited)
EBI EBI Relative EBI Cash
Income Return Bond Management
Fund Fund Fund
INVESTMENT INCOME
INCOME
Dividends $ 0 $ 0 $ 0
Interest 974,589 97,833 463,993
TOTAL INCOME 974,589 97,833 463,993
EXPENSES
Investment advisory
fees (Note 2) 97,947 7,313 38,556
Distribution fees
(Note 2) 130,597 7,313 0
Operating services
fees (Note 2) 65,298 7,314 38,556
TOTAL EXPENSES 293,842 21,940 77,112
NET INVESTMENT INCOME 680,747 75,893 386,881
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENT SECURITIES
Net realized gain (loss)
on investments 60,372 923 (66)
Change in unrealized
net appreciation
of investments 2,522,875 203,408 0
NET GAIN (LOSS) ON
INVESTMENTS 2,583,247 204,331 (66)
Net increase
in net assets resulting
from operations $ 3,263,994 $ 280,224 $ 386,815
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Operations
Six Months Ended June 30, 1995
(Unaudited)
EBI EBI
International Real Estate
Value Fund(1) Fund(1)
INVESTMENT INCOME
INCOME
Dividends $ 4,900 $ 4,522
Interest 3,677 951
TOTAL INCOME 8,577 5,473
EXPENSES
Investment advisory
fees (Note 2) 1,577 449
Distribution fees
(Note 2) 1,577 499
Operating services
fees (Note 2) 789 249
TOTAL EXPENSES 3,943 1,197
NET INVESTMENT INCOME 4,634 4,276
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENT SECURITIES
Net realized gain (loss)
on investments (19) (1)
Change in unrealized
net appreciation
of investments 17,724 4,460
NET GAIN (LOSS) ON
INVESTMENTS 17,705 4,459
Net increase
in net assets resulting
from operations $ 22,339 $ 8,735
(1) For the period May 1, 1995 (commencement of
operations)
through June 30, 1995.
See notes to financial statements.<PAGE>
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
EBI Equity Fund
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
(unaudited)
OPERATIONS
Net investment income $ 346,015 $ 479,946
Net realized gain (loss)
on investments 924,507 6,360,957
Change in unrealized net appreciation
(depreciation) of investments 11,850,194 (4,712,275)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 13,120,716 2,128,628
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (354,051) (476,139)
Net realized gain on investments 0 (6,484,023)
TOTAL DISTRIBUTIONS (354,051) (6,960,162)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 13,469,673 15,904,991
Reinvestment of distributions 264,709 5,464,054
13,734,382 21,369,045
Amount paid for repurchase of shares
(6,310,895) (25,267,819)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 7,423,487 (3,898,774)
Total increase (decrease) in net assets
20,190,152 (8,730,308)
NET ASSETS
Beginning of period 77,928,687 86,658,995
End of period $98,118,839 $77,928,687
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ (2,284) $ 5,752
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 220,796 265,696
Shares issued from reinvestment
of distributions 4,225 96,921
225,021 362,617
Shares repurchased (105,888) (420,707)
Net increase (decrease) in
capital shares 119,133 (58,090)
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
EBI Flex Fund
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
(unaudited)
OPERATIONS
Net investment income $ 3,740,818 $ 5,889,876
Net realized gain (loss)
on investments 1,040,611 12,398,071
Change in unrealized net appreciation
(depreciation) of investments 36,410,947 (16,818,380)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 41,192,376 1,469,567
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (3,773,350) (5,854,696)
Net realized gain on investments 0 (12,579,717)
TOTAL DISTRIBUTIONS (3,773,350)(18,434,413)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 56,511,111 51,594,730
Reinvestment of distributions 3,179,849 15,701,393
59,690,960 67,296,123
Amount paid for repurchase of shares
(22,849,791)(80,831,906)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 36,841,169 (13,535,783)
Total increase (decrease) in net assets
74,260,195 (30,500,629)
NET ASSETS
Beginning of period 243,847,993 274,348,622
End of period $318,108,188 $243,847,993
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ (3,848) $ 36,710
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 1,027,062 964,467
Shares issued from reinvestment
of distributions 56,771 306,095
1,083,833 1,270,562
Shares repurchased (419,712) (1,507,311)
Net increase (decrease) in
capital shares 664,121 (236,749)
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
EBI MultiFlex Fund
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
(unaudited)
OPERATIONS
Net investment income $ 1,437,722 $1,639,535
Net realized gain (loss)
on investments 3,583 (1,785,609)
Change in unrealized net appreciation
(depreciation) of investments 11,939,352 (625,088)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 13,380,657 (771,162)
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (1,043,272) (1,638,474)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (1,043,272) (1,638,474)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 27,295,055 123,515,314
Reinvestment of distributions 923,724 1,424,166
28,218,779 124,939,480
Amount paid for
repurchase of shares (22,640,340)(14,550,357)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 5,578,439 110,389,123
Total increase (decrease) in net
assets 17,915,824 107,979,487
NET ASSETS
Beginning of period 120,220,288 12,240,801
End of period $138,136,112 $120,220,288
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 396,422 $ 804
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 676,008 3,102,568
Shares issued from reinvestment
of distributions 22,296 36,277
698,304 3,138,845
Shares repurchased (553,465) (371,608)
Net increase (decrease) in
capital shares 144,839 2,767,237
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
EBI Income Fund
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
(unaudited)
OPERATIONS
Net investment income $ 680,747 $1,638,133
Net realized gain (loss)
on investments 60,372 (1,092,593)
Change in unrealized net appreciation
(depreciation) of investments 2,522,875 (1,271,405)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 3,263,994 (725,865)
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (668,665) (1,627,655)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (668,665) (1,627,655)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 3,809,188 6,797,165
Reinvestment of distributions 540,272 1,262,826
4,349,460 8,059,991
Amount paid for repurchase of
shares (4,827,200)(23,111,481)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (477,740)(15,051,490)
Total increase (decrease) in net
assets (2,117,589)(17,405,010)
NET ASSETS
Beginning of period 25,467,014 42,872,024
End of period $27,584,603 $25,467,014
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ (44) $ (7,929)
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 79,284 145,083
Shares issued from reinvestment
of distributions 11,322 27,130
90,606 172,213
Shares repurchased (101,014) (492,542)
Net increase (decrease) in
capital shares (10,408) (320,329)
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
EBI Relative Return Bond Fund
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
(unaudited)
OPERATIONS
Net investment income $ 75,893 $ 110,889
Net realized gain (loss)
on investments 923 (54,981)
Change in unrealized net appreciation
(depreciation) of investments 203,408 (96,893)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 280,224 (40,985)
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (76,084) (110,981)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (76,084) (110,981)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 408,627 2,634,968
Reinvestment of distributions 73,354 105,960
481,981 2,740,928
Amount paid for repurchase of shares (891,807) (678,483)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (409,826) 2,062,445
Total increase (decrease) in net assets (205,686) 1,910,479
NET ASSETS
Beginning of period 3,167,876 1,257,397
End of period $ 2,962,190 $3,167,876
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ (10) $ 116
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 10,521 68,611
Shares issued from reinvestment
of distributions 1,911 2,795
12,432 71,406
Shares repurchased (23,366) (17,847)
Net increase (decrease) in
capital shares (10,934) 53,559
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
EBI Cash Management Fund
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
(unaudited)
OPERATIONS
Net investment income $ 386,881 $ 605,091
Net realized gain (loss)
on investments (66) (192)
Change in unrealized net appreciation
(depreciation) of investments 0 0
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 386,815 604,899
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (386,881) (605,091)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (386,881) (605,091)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 15,048,115 36,063,570
Reinvestment of distributions 232,568 393,345
15,280,683 36,456,915
Amount paid for repurchase of
shares (13,643,963) (35,072,549)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 1,636,720 1,384,366
Total increase (decrease) in net assets 1,636,654 1,384,174
NET ASSETS
Beginning of period 15,211,513 13,827,339
End of period $16,848,167 $15,211,513
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 0 $ 0
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 15,048,115 36,063,570
Shares issued from reinvestment
of distributions 232,568 393,345
15,280,683 34,456,915
Shares repurchased (13,643,963)(35,072,549)
Net increase (decrease) in
capital shares 1,636,720 1,384,366
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
EBI EBI
International Real Estate
Value Fund Fund
Period Period
Ended Ended
June 30, June 30,
1995* 1995*
(unaudited) (unaudited)
OPERATIONS
Net investment income $ 4,634 $ 4,276
Net realized gain (loss)
on investments (19) (1)
Change in unrealized net appreciation
(depreciation) of investments 17,724 4,460
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 22,339 8,735
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income 0 0
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS 0 0
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 1,637,413 701,822
Reinvestment of distributions 0 0
1,637,413 701,822
Amount paid for repurchase of
shares (67) (5,882)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 1,637,346 695,940
Total increase (decrease) in net
assets 1,659,685 704,675
NET ASSETS
Beginning of period 0 0
End of period $ 1,659,685 $ 704,675
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 4,634 $ 4,276
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 40,619 17,429
Shares issued from reinvestment
of distributions 0 0
40,619 17,429
Shares repurchased (1) (148)
Net increase (decrease) in
capital shares 48,618 17,281
* For the period from May 1,1995 (commencement of operations) through June 30,
1995.
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Notes to Financial Statements
(Unaudited)
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
eight
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"), EBI Cash Management Fund ("EBI
Cash"),
EBI Real Estate Fund ("EBI Real Estate") and EBI
International
Value Fund ("EBI International Value"). EBI Real Estate
and EBI
International Value commenced operations on May 1,
1995.
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 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, EBI
Relative Return, EBI Real Estate and the EBI
International
Value 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 accreted 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.
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.
D. DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS--For EBI
Equity, EBI Flex, EBI MultiFlex, EBI Income, EBI
Relative
Return, EBI Real Estate and EBI International
Value
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.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS.
INVESCO
Services, Inc. ("ISI"), serves as each 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, 0.90% of the
respective
average net assets of EBI Real Estate, 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
and EBI
International Value. ISI has entered into a
sub-advisory
agreement with INVESCO Capital Management, Inc.
("ICM"), with
respect to EBI Equity, EBI Flex, EBI Income, EBI Cash
and EBI
International Value 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 and for the EBI International Value, 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. 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, 0.35%
on the first $500 million of assets and 0.25% of assets
in excess
of $500 million; for EBI Relative Return, 0.10% of
total assets.
In addition, ISI has entered into a sub-advisory
agreement with
INVESCO Realty Advisors, Inc. ("IRA"), with respect to
EBI Real
Estate, whereby investment decisions for this
investment
portfolio are made by IRA. Fees for this sub-advisory
service are
paid by ISI to IRA based on annual rates equal to 0.35%
of
average net assets of EBI Real Estate on the first $100
million
of assets and 0.25% of average net assets on assets in
excess of
$100 million.
ISI is the principal underwriter for the Fund. All
of the
EBI portfolios (except EBI Cash) have entered into
distribution
plans (the "Plans") with ISI in accordance with Rule
12b-1 of the
Act. Under the Plans, ISI receives annual fees of 1.00%
of
average daily net assets for EBI Equity, EBI Flex, EBI
MultiFlex,
EBI Income, EBI Real Estate, EBI International, and
0.50% of
average daily net assets for EBI Relative Return. ISI
advised the
Fund that for the six months ended June 30, 1995, it
received
approximately $2,640, $11,294, $1,728, $901 and $443 in
contingent deferred sales charges ("CDSC") from certain
shareholder redemptions of EBI Equity, EBI Flex, EBI
Income, EBI
Cash Management and EBI MultiFlex Funds, respectively.
Certain
officers or directors of the Fund are officers or
directors of
ISI.
Each investment portfolio has also 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, 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, 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.
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 or EBI International Value 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. If in any calendar year, the average
net assets
of the EBI Real Estate 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%.
At June 30, 1995, 36.98% of the outstanding
capital
shares of EBI Cash were owned by affiliated parties.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES.
For the
six months ended June 30, 1995, the aggregate cost of
purchases
and proceeds from sales of U.S. Government Securities
were:
Purchases
Sales
EBI Flex. . . . . . . . . . . . $ 0
$8,459,922
EBI MultiFlex . . . . . . . . . 8,571,593
9,263,297
EBI Income. . . . . . . . . . . 1,054,688
1,740,977
EBI Relative Return . . . . . . 731,680
737,195
The aggregate cost of purchases and proceeds from sales
of all
other securities (excluding all short-term securities)
were:
Purchases
Sales
EBI Flex. . . . . . . . . . . . $33,038,715 $
0
EBI Equity. . . . . . . . . . . 13,536,752
6,686,241
EBI MultiFlex . . . . . . . . . 38,616,693
24,335,811
EBI International Value . . . . 1,351,426
0
EBI Real Estate . . . . . . . . 663,351
0
EBI Income. . . . . . . . . . . 500,910
0
EBI Relative Return . . . . . . 0
408,262
NOTE 4 -- UNREALIZED APPRECIATION AND DEPRECIATION. At
June 30,
1995, 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 Flex. . . $56,319,448 ($3,705,185)
$52,614,263
EBI Equity. . . 20,173,147 (1,826,736)
18,346,411
EBI Multiflex . 13,902,441 (2,522,610)
11,379,831
EBI International
Value . 131,578 (113,854)
17,724
EBI Real Estate 9,792 (5,332)
4,460
EBI Income. . . 1,706,488 (246,189)
1,460,299
EBI Relative Return . . 117,747 (16,934)
100,813
NOTE 5--CAPITAL SHARES. The authorized capital stock
of the Fund
consists of 10,070,000,000 shares of common stock
having a par
value of $0.001 per share. Of such shares, 10 million
have been
allocated to each of the EBI Equity, EBI Flex, EBI
MultiFlex, EBI
Income, EBI Relative Return, EBI Real Estate and EBI
International Value investment portfolios and 10
billion have
been allocated to EBI Cash.
<PAGE>
EBI Flex Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital
share
outstanding throughout each period presented.
Six Months
Ended
June 30, Year ended
December 31,
1995 1994
1993
Net asset value, beginning (unaudited)
of period $ 50.50 $ 54.16 $
51.04
INVESTMENT OPERATIONS
Net investment income 0.71 1.26
1.10
Net gain (loss) on securities
(both realized and
unrealized) 7.42 (0.91)
4.22
Total from investment
operations 8.13 0.35
5.32
DISTRIBUTIONS
Dividends (from net investment
income) (0.72) (1.25)
(1.09)
Distributions (from capital
gains) 0.00 (2.76)
(1.11)
Total distributions (0.72) (4.01)
(2.20)
Net asset value, end of period $ 57.91 $50.50
$54.16
TOTAL RETURN(1) 16.15% 0.64%
10.48%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $318,108 $243,848
$274,349
Ratio of expenses to average
net assets* 1.12% 2.25%
2.25%
Ratio of net investment income
to average net assets* 1.35% 2.32%
2.10%
Portfolio turnover rate 3% 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
$42.32
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)
(2.38)
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.
* 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 Equity Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital
share
outstanding throughout each period presented.
Six Months
Ended
June 30, Year ended
December 31,
1995 1994
1993
Net asset value, beginning (unaudited)
of period $ 55.83 $ 59.61
$ 63.27
INVESTMENT OPERATIONS
Net investment income 0.24 0.36
0.41
Net gain (loss) on securities
(both realized and
unrealized) 8.94 1.26
5.40
Total from investment
operations 9.18 1.62
5.81
DISTRIBUTIONS
Dividends (from net investment
income) (0.24) (0.36)
(0.41)
Distributions (from capital
gains) 0.00 (5.04)
(9.06)
Total distributions (0.24) (5.40)
(9.47)
Net asset value, end of period $ 64.77 $55.83
$59.61
TOTAL RETURN(1) 16.46% 2.69%
9.16%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 98,119 $ 77,929 $
86,659
Ratio of expenses to average
net assets* 1.12% 2.25%
2.25%
Ratio of net investment income
to average net assets* 0.40% 0.61%
0.62%
Portfolio turnover rate 8% 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
1990
Net asset value, beginning
of period $ 63.38 $ 54.70 $
62.01
INVESTMENT OPERATIONS
Net investment income 0.60 0.66
1.04
Net gain (loss) on securities
(both realized and
unrealized) 2.44 17.63
(3.40)
Total from investment
operations 3.04 18.29
(2.36)
DISTRIBUTIONS
Dividends (from net investment
income) (0.57) (0.69)
(1.21)
Distributions (from capital
gains) (2.58) (8.92)
(3.74)
Total distributions (3.15) (9.61)
(4.95)
Net asset value, end of period $ 63.27 $ 63.38
$54.70
TOTAL RETURN(1) 4.84% 33.59%
(3.75%)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 91,146 $ 81,732
$69,279
Ratio of expenses to average
net assets* 2.18% 2.22%
2.25%
Ratio of net investment income
to average net assets* 0.90% 1.04%
1.71%
Portfolio turnover rate 41% 47%
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 MultiFlex Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital
share
outstanding throughout each period presented.
For the
period
Six Months
Nov. 17,
Ended Year ended
1993(1) to
June 30, December 31,
Dec. 31,
1995 1994
1993
(unaudited)
Net asset value, beginning
of period $ 39.13 $ 40.16
$ 40.00
INVESTMENT OPERATIONS
Net investment income 0.45 0.62
0.02
Net gain (loss) on securities
(both realized and
unrealized) 3.69 (1.03)
0.16
Total from investment
operations 4.14 (0.41)
0.18
DISTRIBUTIONS
Dividends (from net investment
income) (0.33) (0.62)
(0.02)
Total distributions (0.33) (0.62)
(0.02)
Net asset value, end of period $ 42.94 $39.13
$40.16
TOTAL RETURN 10.60% (1.02%)
0.46%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $138,136 $120,220 $
12,241
Ratio of expenses to average
net assets 1.23% 2.49%
2.50%*
Ratio of net investment income
to average net assets 1.10% 2.01%
1.09%*
Portfolio turnover rate 28% 81%
0.53%
(1) Commencement of operations
* Annualized
See notes to financial statements.
<PAGE>
EBI International Value Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital
share
outstanding throughout each period presented.
For
the period
May
1, 1995(1)
to
June
30, 1995
(unaudited)
Net asset value, beginning
of period
$40.00
INVESTMENT OPERATIONS
Net investment income
0.11
Net gain on securities
(both realized and
unrealized)
0.75
Total from investment
operations
0.86
DISTRIBUTIONS
Dividends (from net investment
income)
0.00
Total distributions
0.00
Net asset value, end of period
$40.86
TOTAL RETURN
2.15%
Ratios/Supplemental Data
Net assets, end of period
(in 000's)
$1,660
Ratio of expenses to average
net assets
0.41%
Ratio of net investment income
to average net assets
0.48%
Portfolio turnover rate
0%
(1) Commencement of operations
See notes to financial statements.
<PAGE>
EBI Real Estate Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital
share
outstanding throughout each period presented.
For
the period
May
1, 1995(1)
to
June
30, 1995
(unaudited)
Net asset value, beginning
of period
$40.00
INVESTMENT OPERATIONS
Net investment income
0.25
Net gain on securities
(both realized and
unrealized)
0.53
Total from investment
operations
0.78
DISTRIBUTIONS
Dividends (from net investment
income)
0.00
Total distributions
0.00
Net asset value, end of period
$40.78
TOTAL RETURN
1.95%
Ratios/Supplemental Data
Net assets, end of period
(in 000's)
$ 705
Ratio of expenses to average
net assets
0.39%
Ratio of net investment income
to average net assets
1.41%
Portfolio turnover rate
0%
(1) Commencement of operations
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.
Six Months
Ended
June 30, Year ended
December 31,
1995 1994
1993
Net asset value, beginning (unaudited)
of period $ 45.33 $ 48.60
$ 47.41
INVESTMENT OPERATIONS
Net investment income 1.23 2.40
2.28
Net gain (loss) on securities
(both realized and
unrealized) 4.69 (3.27)
1.20
Total from investment
operations 5.92 (0.87)
3.48
DISTRIBUTIONS
Dividends (from net investment
income) (1.22) (2.40)
(2.29)
Total distributions (1.22) (2.40)
(2.29)
Net asset value, end of period $ 50.03 $45.33
$48.60
TOTAL RETURN(1) 13.21% (1.80)%
7.39%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 27,585 $ 25,467 $
42,872
Ratio of expenses to average
net assets* 1.12% 2.25%
2.25%
Ratio of net investment income
to average net assets* 2.58% 5.09%
4.56%
Portfolio turnover rate 6% 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 each period presented.
For the
period
Six Months
Nov. 15,
Ended Year ended
1993(1) to
June 30, December 31,
Dec. 31,
1995 1994
1993
(unaudited)
Net asset value, beginning
of period $ 37.20 $ 39.80
$ 40.00
INVESTMENT OPERATIONS
Net investment income 1.00 1.81
0.21
Net gain (loss) on securities
(both realized and
unrealized) 2.71 (2.60)
(0.21)
Total from investment
operations 3.71 (0.79)
0.00
DISTRIBUTIONS
Dividends (from net investment
income) (1.00) (1.81)
(0.20)
Total distributions (1.00) (1.81)
(0.20)
Net asset value, end of period $ 39.91 $37.20
$39.80
TOTAL RETURN 10.11% (1.99%)
0.01%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $ 2,962 $ 3,168 $
1,257
Ratio of expenses to average
net assets 0.74% 1.50%
1.50%*
Ratio of net investment income
to average net assets 2.57% 4.89%
4.61%*
Portfolio turnover rate 24% 47%
5%
(1) 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.
Six Months
Ended
June 30, Year ended
December 31,
1995 1994
1993
Net asset value, beginning (unaudited)
of period $ 1.00 $ 1.00 $
1.00
INVESTMENT OPERATIONS
Net investment income 0.03 0.03
0.02
DISTRIBUTIONS
Dividends (from net investment
income) (0.03) (0.03)
(0.02)
Net asset value, end of period $ 1.00 $ 1.00
$ 1.00
TOTAL RETURN(1) 2.49% 3.30%
2.20%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $16,848 $15,212
$13,827
Ratio of expenses to average
net assets* 0.50% 1.00%
0.95%
Ratio of net investment income
to average net assets* 2.49% 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 income to average net assets would have
been
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(1) 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 income to average net assets would have
been
2.09%, 2.75%, 4.92%, respectively.
See notes to financial statements.
<PAGE>
INVESCO SERVICES, INC.
Investment Advisor
Manager
Distributor
INVESCO CAPITAL MANAGEMENT, INC.
Sub-Advisor:
EBI Equity Fund
EBI Income Fund
EBI Flex Fund
EBI International Value Fund
EBI Cash Management Fund
INVESCO MANAGEMENT & RESEARCH, INC.
Sub-Advisor:
EBI Multiflex Fund
EBI Relative Return Bond Fund
INVESCO REALTY ADVISORS, INC.
Sub-Advisor:
EBI Real Estate Fund
FUND/PLAN SERVICES, INC.
Transfer Agent and Administrator
UNITED MISSOURI BANK OF KANSAS CITY, N.A.
Custodian
PRICE WATERHOUSE
Independent Accountants
EBI PORTFOLIO MANAGEMENT PROGRAM
Invesco Services, Inc.
1355 Peachtree Street, N.E.
Atlanta, Georgia 30309
(404) 892-0666
(800) 972-9030
<PAGE>
The EBI Funds, Inc.
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
The EBI Income Fund, Inc.
Pro Forma Statement of Assets and Liabilities
June 30, 1995
(Unaudited)
EBI EBI Relative Pro Forma
Income Return Bond Combined
Fund Fund (Note 1)
ASSETS
Investment securities:
At cost................ $25,628,970 $ 2,835,035 $28,464,005
At value............... $27,089,269 $ 2,935,848 $30,025,117
Cash...................... 231 - 231
Receivables:
Fund shares sold....... 11,243 - 11,243
Dividends and interest. 591,186 29,956 621,142
Investment securities sold - - -
TOTAL ASSETS.............. 27,691,929 2,965,804 30,657,733
LIABILITIES
Payables:
Distributions to
shareholders........... - - -
Investment securities purchased - - -
Fund shares repurchased 55,498 - 55,498
Other.................. 51,828 3,614 55,442
TOTAL LIABILITIES......... 107,326 3,614 110,940
NET ASSETS................ $27,584,603 $ 2,962,190 $30,546,793
NET ASSETS
Paid-in capital.......... $28,066,797 $ 2,915,626 $30,982,423
Accumulated undistributed
(overdistributed) net
investment income.... (44) (10) (54)
Accumulated net realized gain
(loss) on investments... (1,942,449) (54,239) (1,996,688)
Unrealized net appreciation
of investments....... 1,460,299 100,813 1,561,112
Net assets............... $27,584,603 $ 2,962,190 $30,546,793
Shares outstanding....... 551,410 74,220 610,618
Net asset value per share. $ 50.03 $ 39.91 $ 50.03
See notes to pro forma financial statements.<PAGE>
<PAGE>
The EBI Income Fund, Inc.
Pro Forma Statement of Operations
Twelve Months Ended June 30, 1995
(Unaudited)
EBI EBI Relative
Income Return Bond
Fund Fund
INVESTMENT INCOME
INCOME
Interest........................... $ 2,033,021 $ 186,278
TOTAL INCOME........................ 2,033,021 186,278
EXPENSES
Investment advisory fees (Note 4)... 204,366 13,871
Distribution fees (Note 4).......... 272,490 13,871
Operating services fees (Note 4).... 136,244 13,872
TOTAL EXPENSES BEFORE EXPENSE
REDUCTIONS........................ 613,100 41,614
Expense reductions (Note 4)......... - -
613,100 41,614
NET INVESTMENT INCOME............... 1,419,921 144,664
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net realized gain (loss)
on investments.................... (743,438) (30,825)
Change in unrealized net appreciation
of investments.................... 2,797,384 197,734
NET GAIN (LOSS) ON INVESTMENTS...... 2,053,946 166,909
Net increase in net assets resulting
from operations.................. $3,473,867 $ 311,573
See notes to pro forma financial statements.<PAGE>
<PAGE>
The EBI Income Fund, Inc.
Pro Forma Statement of Operations
Twelve Months Ended June 30, 1995
(Unaudited)
Adjustments EBI
to Pro Forma Income Fund
Combined Combined
INVESTMENT INCOME
INCOME
Interest........................... $ $2,219,299
TOTAL INCOME........................ 2,219,299
EXPENSES
Investment advisory fees (Note 4)... (23,142)(a) 195,095
Distribution fees (Note 4).......... (106,273)(b) 180,088
Operating services fees (Note 4).... - 150,116
TOTAL EXPENSES BEFORE EXPENSE
REDUCTIONS........................ (129,415) 525,299
Expense reductions (Note 4)......... (75,037)(c) (75,037)
(204,451) 450,263
NET INVESTMENT INCOME............... 204,451 1,769,036
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net realized gain (loss)
on investments.................... (774,263)
Change in unrealized net appreciation
of investments.................... 2,995,118
NET GAIN (LOSS) ON INVESTMENTS...... 2,220,855
Net increase in net assets resulting
from operations.................. $ $ 3,989,891
Explanation of Adjustments to Pro Forma
(a) Investment advisory fees for EBI Income Fund Combined are
based on combined net assets under management at
the contractual rate of 0.65% of average daily net assets.
(b) Distribution fees for EBI Income Fund Combined are based on
combined net assets under management at the
contractual rate of 0.60% of average daily net assets.
(c) Expense reductions based on combined net assets under
management at the contractual rates.
See notes to pro forma financial statements.<PAGE>
<PAGE>
The EBI Income Fund, Inc.
Pro Forma Statement of Investment Securities
June 30, 1995
(Unaudited)
Shares or
Principal
Description Amount Value
FIXED INCOME SECURITIES 98.29%
U.S. GOVERNMENT OBLIGATIONS 73.97%
U.S. Treasury Notes
4.250%, 07/31/1995................ 175,000 $ 174,781
3.875%, 10/31/1995................ 40,000 39,775
9.500%, 11/15/1995................ 1,000,000 1,013,750
4.250%, 11/30/1995................ 100,000 99,438
6.000%, 06/30/1996................ 40,000 40,100
8.500%, 07/15/1997................ 2,000,000 2,101,874
6.000%, 12/31/1997................ 150,000 150,563
6.500%, 04/30/1999................ 115,000 117,085
8.000%, 08/15/1999................ 500,000 536,718
6.375%, 01/15/2000................ 500,000 507,656
8.000%, 05/15/2001................ 75,000 82,148
7.500%, 11/15/2001................ 2,000,000 2,145,624
6.375%, 08/15/2002................ 50,000 50,547
6.250%, 02/15/2003................ 290,000 290,634
10.750%, 08/15/2005................ 2,000,000 2,656,250
9.250%, 02/15/2016................ 3,000,000 3,855,936
8.750%, 05/15/2017................ 435,000 536,545
8.125%, 08/15/2019................ 2,500,000 2,916,405
7.875%, 02/15/2021................ 65,000 74,019
7.250%, 08/15/2022................ 3,500,000 3,738,438
21,128,286
U.S. Treasury Strips PO
0.000%, 08/15/2014................ 4,000,000 1,081,400
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $20,521,657)................ 22,209,686
U.S. GOVERNMENT AGENCY OBLIGATIONS 10.81%
Federal Home Loan Mortgage
12.000%, 04/01/2000............... 12,261 12,943
Federal National Mortgage Assn. Super Pac
5.450%, 06/25/2000............... 42,350 42,024
Federal National Mortgage Assn. Pool
#50973, 6.000%, 01/01/2009.......... 85,599 82,763
Federal Home Loan Mortgage Corp. Super
Pac, P2, 5.250%, 10/15/2000....... 50,000 49,524
U.S. GOVERNMENT AGENCY OBLIGATIONS (Continued)
Federal Home Loan Mortgage Corp. TMS
Series A3, 7.100%, 11/15/2016...... 50,000 $ 50,446
Federal Home Loan Mortgage Corp. PO Strip
Series 1686, 0.000%, 02/15/2024..... 67,760 32,525
Federal National Mortgage Assn. Pool
#190723, 6.000%, 04/01/2024..... 99,000 92,750
350,032
Government National Mortgage Assn.
6.500%, 10/15/2008 Pool #354668.. 977,447 963,698
6.000%, 10/15/2008 Pool #360191.. 565,172 547,154
7.000%, 10/15/2008 Pool #366622.. 944,759 947,707
6.000%, 11/15/2008 Pool #370907.. 439,630 425,614
2,884,173
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $3,353,197)................ 3,247,148
CORPORATE BONDS 13.51%
FINANCE 6.17%
Associates Corp. North America,
8.375%, 06/01/1996............... 40,000 40,791
Associates Corp., North America,
4.750%, 08/01/1996............... 1,000,000 986,335
Commercial Credit Corp., 8.000%,
09/01/1996....................... 35,000 35,702
Dean Witter Discover & Co., 5.000%,
04/01/1996....................... 50,000 49,604
Ford Motor Credit Corp., 9.250%,
06/15/1998....................... 35,000 37,625
International Lease Finance Corp.,
6.625%, 06/01/1996............... 40,000 40,098
NationsBank Corp., 4.750%, 08/15/1996 100,000 98,507
Norwest Corp., FRN, 6.928%, 02/24/1999.. 50,000 49,759
PHH Corp., Notes, 8.000%, 01/01/1997.. 500,000 513,139
1,851,560
INDUSTRIAL 6.85%
Ford Motor Co., 7.500%, 11/15/1999.. 500,000 517,719
Limited, Inc., 8.875%, 08/15/1999.. 500,000 538,969
Rockwell International, Inc., 6.625%,
06/01/2005....................... 500,000 496,831
Waste Management, Inc., 6.375%,
07/01/1997....................... 500,000 502,109
2,055,628
MISCELLANEOUS 0.49%
GTE Corp., 10.250%, 11/01/2020... 100,000 117,240
WMX Technologies, Inc., 6.220%,
04/30/2004....................... 40,000 42,139
159,379
TOTAL CORPORATE BONDS (Cost $4,087,435)............. 4,066,567
TOTAL FIXED INCOME SECURITIES (Cost $27,962,289)..... 29,523,401
SHORT TERM INVESTMENTS 1.71%
United Missouri Bank, Money
Market Fiduciary ~
5.079% (Cost $501,716)........... 501,716 $ 501,716
TOTAL INVESTMENTS
(100.00%) (Cost $28,464,005#)..... $30,025,117
~Principal and interest are payable on demand.
#Also represents cost for income tax purposes.
See notes to pro forma financial statements.<PAGE>
<PAGE>
The EBI Income Fund, Inc.
Notes to Pro Forma Financial Statements
June 30, 1995
(Unaudited)
1. Basis of Combination
The Pro Forma Combining Portfolio of Investments, Statement
of Assets and Liabilities and Statement of Operations ("Pro Forma
Statements") reflect the accounts of the EBI Income Fund
("Income") and the Relative Return Bond Fund ("Relative Return"),
each is a separately managed portfolio of the EBI Funds, Inc.
("EBI") as of and for the period ended June 30, 1995.
The Pro Forma Statements give effect to the proposed
transfer of all assets and stated liabilities of Relative Return
in exchange for shares of Income. The acquisition will be taxed
as a tax-free business combination and accordingly will be
accounted for by a method of accounting for tax free mergers of
investment companies (sometimes referral to as the pooling
without restatement method). The Pro Forma Statements do not
reflect the expense of either Fund in carrying out its obligation
under the Agreement and Plan of Reorganization.
The Pro Forma Combining Statements should be read in
conjunction with the historical financial Statements of each Fund
included in their respective Statement of Additional Information.
2. Valuation
Bonds and other fixed-income securities are valued on the
basis of prices provided by a pricing service approved by the
Board of Directors. In the absence of market quotations,
investments are valued at fair value as determined in good faith
by or at the direction of the Board of Directors. Short-term
securities which mature in 60 days or less are valued at
amortized cost, if their term of maturity at purchase was 60 days
or less, or by amortizing their value on the 61st day prior to
maturity, if their original term to maturity at purchase price
exceeded 60 days.
3. Capital Shares
The pro forma net asset value per share assumes the issuance
of additional shares of Income which would have been issued at
June 30, 1995 in connection with the proposed reorganization.
The amount of additional shares assumed to be issued was
calculated based on the June 30, 1995 net assets of Relative
Return ($2,962,190) and the per share net asset value of Income
of $50.03.
The pro forma number of shares outstanding of 610,618
consist of 59,208 additional shares issued in the reorganization,
as calculated above, plus 551,410 shares of Income outstanding at
June 30, 1995.
4. Pro Forma Operating Expenses
The Pro Forma Combining Statement of Operations assumes
similar rates of gross investment income for the investments of
each Fund. Accordingly, the combined Fund's gross investment
income is equal to the sum of each Fund's gross investment
income.
Certain operating expenses have been adjusted to reflect the
expenses of the combined entity more closely. Pro forma
operating expenses include the actual expenses of the Funds and
the combined Fund, adjusted for certain items which are factually
supportable. Advisory, Distribution and Operating service fees
have been charged to the combined Fund based upon the proposed
contracts for Income upon the execution of the reorganization
based upon the average net assets of the combined Fund for the
period ended on June 30, 1995. INVESCO Services, Inc.
("ISI") is the portfolio's investment advisor and principal
underwriter. ISI will receive an investment advisory fee based
on the annual rate of 0.65% of the average daily net assets of
the combined Fund. ISI will receive a distribution fee, in
accordance with Rule 12b-1 of the Act, based on the annual rate
of 0.60% of the average daily net assets of the combined Fund.
ISI will receive operating service fee based on the annual rate
of 0.50% of the average daily net assets of the combined Fund.
The combined effect of the advisory agreement, distribution plan
and operating service agreement of the combined Fund is to place
a cap or ceiling on the total expenses of combined Fund, other
than brokerage commissions, interest, taxes, litigation,
directors' fees and expenses, and other extraordinary expenses.
In any calendar year, the expenses of the combined Fund may not
exceed 1.75% of average daily net assets.
ISI has agreed to reimburse Income for a three-year period,
beginning October 1, 1995, for investment advisory fees, such
that annual investment advisory fees shall not exceed 0.40% of
average daily net assets and total operating expenses shall not
exceed 1.50% of average daily net assets. ISI has agreed to
reimburse the combined Fund similarly from the execution of the
reorganization through September 30, 1998, such that the combined
Fund's annual operating expenses shall not exceed 1.50% of
average daily net assets. Pro forma operating expenses are
adjusted for this operating expense reduction.
<PAGE>
PART C
OTHER INFORMATION
Item 15. 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 16. Exhibits
(1) Amended and Restated Articles of Incorporation of
Registrant(1)
(2) By-laws of Registrant(1)
(3) Not applicable.
(4) Agreement and Plan of Reorganization.(2)
(5) Amended and Restated Articles of Incorporation of
Registrant; By-laws of Registrant(1)
----------------
(1) Previously filed with Registration Statement No. 2-87377 and
incorporated by reference herein.
(2) Form of filed herewith as Exhibit "A" to the Proxy
Statement/ Prospectus. Executed Plan to be filed by Amendment.
(3) To be filed by Amendment.
<PAGE>
(6) (a) Investment Advisory Agreement between INVESCO
Services, Inc. ("ISI") and Registrant dated
July 1, 1993, as amended April 19, 1995(1)
(b) Sub-Advisory Agreement between ISI and
INVESCO Capital Management, Inc. dated July
1, 1993, as amended April 19, 1995(1)
(7) Distribution Agreement between Registrant and ISI,
dated as of July 1, 1993, as amended April 19,
1995(1)
(8) Not applicable.
(9) Form of Custodian Agreement between Registrant and
United Missouri Bank(1)
(10) Plan and Agreement of Distribution pursuant to
Rule 12b-1 between Registrant and ISI dated as of
July 1, 1993, as amended April 19, 1995(1)
(11) Opinion of Kirkpatrick & Lockhart as to legality
of the securities being offered (including consent
of such firm) (3)
(12) Opinion of Dechert Price & Rhoads as to tax
consequences (including consent of such firm) (3)
(13) None
(14) Consent of Independent Accountants
(15) Not applicable.
(16) Powers of Attorney(1)
(17) Registrant's Declaration pursuant to Rule 24f-2(1)
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to
any public reoffering of the securities registered
through the use of a prospectus which is part of
this registration statement by any person or party
who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will
contain the information called for by the
applicable registration form for reofferings by
persons who may be deemed underwriters, in
addition to the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agrees that every
prospectus that is filed under paragraph (1) above
will be filed as part of an amendment to the
registration statement and will not be used until
the amendment is effective, and that, in
determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment
shall be deemed to be a new registration statement
for the securities offered therein, and the
offering of the securities at that time shall be
deemed to be the initial bona fide offering of
them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the registrant, in the
City of Atlanta, County of Fulton, in the State of Georgia, on
the 29th day of September, 1995.
THE EBI FUNDS, INC
(Registrant)
By: /s/Tony D. Green By: /s/Hubert L Harris, Jr.
Tony D. Green, Secretary Hubert L. Harris, Jr.
President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities indicated on the 29th day of September, 1995.
/s/Hubert L. Harris, Jr. /s/Frank M. Bishop
Hubert L. Harris, Jr., President Frank M. Bishop, Director*
(Chief Executive Officer and
Chief Financial and Accounting
Officer) and Director
/s/Tony D. Green /s/Lawrence H. Budner
Tony D. Green, Treasurer Lawrence H. Budner, Director*
/s/Victor L. Andrews /s/Daniel D. Chabris
Victor L. Andrews, Director* Daniel D. Chabris, Director*
/s/Bob R. Baker /s/Fred A. Deering
Bob R. Baker, Director* Fred A. Deering, Director*
/s/A.D. Frazier, Jr. /s/John W. McIntyre
A.D. Frazier, Jr., Director* John W. McIntyre, Director*
/s/Charles W. Brady /s/Kenneth T. King
Charles W. Brady, Director* Kenneth T. King, Director*
By: */s/Jeffrey L. Steele
Jeffrey L. Steele
as attorney-in-fact
* Pursuant to power of attorney filed with Post-Effective
Amendment No. 23 on February 14, 1995.
<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
EXHIBITS
TO
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
THE EBI FUNDS, INC.
on behalf of
INCOME PORTFOLIO
Registrant
<PAGE>
Index to Exhibits
The EBI Funds, Inc. on behalf of Income Portfolio
(14) Consent of Independent Accountants
EXHIBIT (14)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Information constituting part of this
registration statement on Form N-14 (the "Registration
Statement") of our report dated February 10, 1995, relating to
the financial statements and financial highlights appearing in
the December 31, 1994 Annual Report of The EBI Funds, Inc., which
is also incorporated by reference. We also consent to the
incorporation by reference of our report into the Proxy
Statement/Prospectus constituting part of the Registration
Statement, to the reference to us under the heading "Financial
Highlights" in the Prospectus and under the heading "Independent
Accountants" in the Statement of Additional Information.
Price Waterhouse LLP
Denver, Colorado
September 29, 1995
