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.
