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UAM FUNDS
ACADIAN PORTFOLIOS
INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 28, 1995 AS SUPPLEMENTED OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
PHILOSOPHY/STYLE:
Acadian's investment philosophy follows a rigorous, proven approach which
Acadian calls Enhanced Value Investing. Acadian believes that over the long
term, empirical evidence shows that value investing results in superior returns.
Acadian enhances the efficacy of time-proven fundamental value measures by
incorporating a number of growth-related factors, such as price momentum and
trends in analysts' earnings estimates, to target undervalued companies that
also have strong prospects for future outperformance. Acadian's approach is
implemented via a highly disciplined and structured process, which utilizes
proprietary sophisticated technology and a multi-factor model for investment
decision-making. Acadian maintains twenty-five years of proprietary data on
over 16,000 securities and 40 countries. From over a decade of detailed
statistical analysis of this data, Acadian has isolated the investment factors
it believes are most likely to lead to superior investment returns. In
Acadian's unique process, these factors are weighted and combined on a market-
by-market basis to identify the most attractive securities in each market.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- - USAir, Inc.
- - E.I. DuPont de Nemours Co., Inc.
- - Fluor Corporation
- - RJR Nabisco
- - SEI Investment Management
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
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PART B
THE REGIS FUND, INC.
ACADIAN PORTFOLIOS
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995
This Statement is not a Prospectus but should be read in conjunction with
The Regis Fund, Inc.'s Prospectus relating to the Acadian Portfolios'
Institutional Class Shares dated February 28, 1995. To obtain the Prospectus,
please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
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Investment Objectives and Policies . . . . . . . . . . . . . . . . . 1
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . 10
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 12
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . 12
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . 13
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 16
Appendix - Description of Securities and Ratings . . . . . . . . . . . A-1
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Acadian Portfolios as set forth in the Acadian Portfolios' Prospectus:
SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "Commission") thereunder, which currently require that
(a) the borrower pledge and maintain with the Portfolio collateral consisting of
cash, an irrevocable letter of credit issued by a domestic U.S. bank or
securities issued or guaranteed by the United States Government having a value
at all times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever
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the price of the securities loaned rises (i.e., the borrower "marks to the
market" on a daily basis), (c) the loan be made subject to termination by the
Portfolio at any time, and (d) the Portfolio receives reasonable interest on the
loan (which may include the Portfolio investing any cash collateral in interest
bearing short-term investments). All relevant facts and circumstances,
including the creditworthiness of the broker, dealer or institution, will be
considered in making decisions with respect to the lending of securities,
subject to review by the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Directors. The Portfolios will continue to retain
any voting rights with respect to the loaned securities. If a material event
occurs affecting an investment on a loan, the loan must be called and the
securities voted.
HEDGING STRATEGIES
Each Portfolio may engage in various portfolio strategies to hedge against
adverse movements in the equity, debt and currency markets. Each Portfolio has
authority to write (i.e., sell) covered put and call options on its portfolio
securities, purchase put and call options on securities and engage in
transactions in stock index options and stock index futures, and related options
on such futures. Each of these portfolio strategies is described below. Although
certain risks are involved in options and futures transactions, the Adviser
believes that, because the Portfolios will engage in options and futures
transactions only for hedging purposes, the options and futures portfolio
strategies of a Portfolio will not subject it to the risks frequently associated
with the speculative use of options and futures transactions. While each
Portfolio's use of hedging strategies is intended to reduce the volatility of
the net asset value of Portfolio shares, the Portfolios' net asset value will
fluctuate. There can be no assurance that a Portfolio's hedging transactions
will be effective. Also, the Portfolios may not necessarily be engaging in
hedging activities when movements in any particular equity, debt or currency
market occur.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the Portfolios may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Portfolios may incur costs in connection
with conversions between various currencies. The Portfolios will conduct their
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and
no commissions are charged at any stage for such trades.
The Portfolios may enter into forward foreign currency exchange contracts
in several circumstances. When a Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when a
Portfolio anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the Portfolio may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract
for a fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.
Additionally, when either of the Portfolios anticipates that the currency
of a particular foreign country may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract for a fixed amount of dollars,
to sell the amount of foreign currency approximating the value of some or all of
such Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. From time to time, each Portfolio may
enter into forward contracts to
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protect the value of portfolio securities and enhance Portfolio performance.
The Portfolios will not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate such Portfolio to deliver an amount of foreign currency in excess of
the value of such Portfolio securities or other assets denominated in that
currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the performance of each
Portfolio will thereby be served. Except when a Portfolio enters into a forward
contract for the purchase or sale of a security denominated in a foreign
currency, which requires no segregation, a forward contract which obligates the
Portfolio to buy or sell currency will generally require the Fund's Custodian to
hold an amount of that currency or liquid securities denominated in that
currency equal to the Portfolio's obligations, or to segregate liquid high grade
assets equal to the amount of the Portfolio's obligation. If the value of the
segregated assets declines, additional liquid high grade assets will be
segregated on a daily basis so that the value of the segregated assets will be
equal to the amount of such Portfolio's commitments with respect to such
contracts.
The Portfolios generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, a Portfolio
may either sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual obligation
to deliver the foreign currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date, the
same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for a Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that such Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, such Portfolio
will realize a gain to the extent that the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, such Portfolio would suffer a loss to the extent that
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
Each of the Portfolios' dealings in forward foreign currency exchange
contracts will be limited to the transactions described above. Of course, the
Portfolios are not required to enter into such transactions with regard to their
foreign currency- denominated securities. It also should be realized that this
method of protecting the value of portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities. It simply establishes a rate of exchange which one can achieve
at some future point in time. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result
should the value of such currency increase.
FUTURES CONTRACTS
Each Portfolio may enter into futures contracts for the purposes of
hedging, remaining fully invested and reducing transactions costs. Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agency.
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Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out an open futures position is done by taking an opposite position
("buying" a contract which has previously been "sold" or "selling" a contract
previously "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Portfolio expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates. The Portfolio intends to use futures contracts only for
hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non- hedging positions do not exceed five percent of the liquidation value
of each Portfolio. Each Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, each Portfolio expects that approximately 75%
of its futures contracts purchases will be "completed", that is, equivalent
amounts of related securities will have been purchased or are being purchased by
the Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the use
of futures contracts may be a more effective means of hedging this exposure.
While a Portfolio will incur commission expenses in both opening and closing out
future positions, these costs are lower than transaction costs incurred in the
purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolios will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. In addition,
the Portfolios will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolios will minimize the risk that they will be unable to close out
a futures position by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
each Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if a Portfolio has
insufficient cash, it may have to sell securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, a
Portfolio may be required to make delivery of the instruments underlying futures
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contracts it holds. The inability to close futures positions also could have an
adverse impact on a Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of
purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in excess of the
amount invested in the contract. However, because the futures strategies of the
Portfolios are engaged in only for hedging purposes, the Adviser does not
believe that a Portfolio is subject to the risks of loss frequently associated
with futures transactions. A Portfolio would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying the futures
contracts have different maturities than the Portfolio securities being hedged.
It is also possible that a Portfolio could lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss of margin deposits in the event of bankruptcy of a broker with whom
a Portfolio has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and, therefore, does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
OPTIONS
The Portfolios may purchase and sell put and call options on futures
contracts for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying security or contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract on which it is based or the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the underlying futures
contract or securities.
WRITING COVERED OPTIONS
The principal reason for writing call options is to attempt to realize,
through the receipt of premiums, a greater return than would be realized on the
securities alone. By writing covered call options, each Portfolio gives up the
opportunity, while the option is in effect, to profit from any price increase in
the underlying security above the option exercise price. In addition, each
Portfolio's ability to sell the underlying security will be limited while the
option is in effect unless the Portfolio effects a closing purchase transaction.
A closing purchase transaction cancels out the Portfolio's position as the
writer of an option by means of an offsetting purchase of an identical option
prior to the expiration of the option it has written. Covered call options serve
as a partial hedge against the price of the underlying security declining.
Each Portfolio writes only covered put options, which means that so long as
a Portfolio is obligated as the writer of the option it will, through its
custodian, have deposited and maintained cash, cash equivalents, U.S. Government
securities or other high grade liquid debt or equity securities denominated in
U.S. dollars or non-U.S. currencies with a securities
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depository with a value equal to or greater than the exercise price of the
underlying securities. By writing a put, a Portfolio will be obligated to
purchase the underlying security at a price that may be higher than the market
value of that security at the time of exercise for as long as the option is
outstanding. Each Portfolio may engage in closing transactions in order to
terminate put options that it has written.
PURCHASING OPTIONS
The amount of any appreciation in the value of the underlying security will
be partially offset by the amount of the premium paid for the put option and any
related transaction costs. Prior to its expiration, a put option may be sold in
a closing sale transaction and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the put
option plus the related transaction costs. A closing sale transaction cancels
out a Portfolio's position as the purchaser of an option by means of an
offsetting sale of an identical option prior to the expiration of the option it
has purchased. In certain circumstances, a Portfolio may purchase call options
on securities held in its investment portfolio on which it has written call
options or on securities which it intends to purchase.
OPTIONS ON FOREIGN CURRENCIES
The Portfolios may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio dollar
value of a foreign currency in which portfolio securities are denominated will
reduce the dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such diminution in the
value of portfolio securities, a Portfolio may purchase put options on the
foreign currency. If the value of the currency does decline, the Portfolio will
have the right to sell such currency for a fixed amount in dollars and will
thereby offset, in whole or in part, the adverse effect on its portfolio which
otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to a Portfolio deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, a Portfolio could sustain losses on transaction in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
Each Portfolio may write options on foreign currencies for the same types
of hedging purposes. For example, where a Portfolio anticipates a decline in
the dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline
occurs, the option will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the premium
received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, a Portfolio also may be
required to forego all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.
Each Portfolio intends to write covered call options on foreign currencies.
A call option written on a foreign currency by a Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the Custodian) upon conversion or exchange of other foreign currency
held in
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its portfolio. A call option is also covered if a Portfolio has a call on the
same foreign currency and in the same principal amount as the call written where
the exercise price of the call held (a) is equal to or less than the exercise
price of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Portfolio in cash, U.S.
Government securities or other high grade liquid debt securities in a segregated
account with the Custodian.
Each Portfolio also intends to write call options on foreign currencies
that are not covered for cross-hedging purposes. A call option on a foreign
currency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security which a
Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate.
In such circumstances, a Portfolio collateralized the option by maintaining in a
segregated account with the Custodian, cash or U.S. Government securities or
other high grade liquid debt securities in an amount not less than the value of
the underlying foreign currency in U.S. dollars marked to market daily.
RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES
Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to the regulation of the Commission. Similarly, options on currencies
may be traded over-the-counter. In an over-the-counter trading environment, many
of the protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchase of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Furthermore, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-counter
market, potentially permitting a Portfolio to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the- counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward
contracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decision, (iii) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
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FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS
Except for transactions the Portfolios have identified as hedging
transactions, each Portfolio is required for Federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses on
forward currency and regulated futures contracts as of the end of each taxable
year as well as those actually realized during the year. In most cases, any
such gain or loss recognized with respect to a regulated futures contract is
considered to be 60% long-term capital gain or loss and 40% short-term capital
gain or loss without regard to the holding period of the contract. Realized
gain or loss attributable to a foreign currency forward contract is treated as
100% ordinary income. Furthermore, foreign currency futures contracts which are
intended to hedge against a change in the value of securities held by a
Portfolio may affect the holding period of such securities and, consequently,
the nature of the gain or loss on such securities upon disposition.
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of each Portfolio's gross income for
a taxable year must be derived from certain qualifying income, i.e., dividends,
interest, income derived from loans of securities and gains from the sale or
other disposition of stock, securities or foreign currencies, or other related
income, including gains from options, futures and forward contracts, derived
with respect to its business investing in stock, securities or currencies. Any
net gain realized from the closing out of futures contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement.
Qualification as a regulated investment company also requires that less than 30%
of a Portfolio's gross income be derived from the sale or other disposition of
stock, securities, options, futures or forward contracts (including certain
foreign currencies not directly related to the Fund's business of investing in
stock or securities) held less than three months. In order to avoid realizing
excessive gains on securities held for less than three months, a Portfolio may
be required to defer the closing out of futures contracts beyond the time when
it would otherwise be advantageous to do so. It is anticipated that unrealized
gains on futures contracts which have been open for less than three months as of
the end of a Portfolio's taxable year, and which are recognized for tax
purposes, will not be considered gains on securities held for less than three
months for the purposes of the 30% test.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's taxable year) on futures
transactions. Such distribution will be combined with distributions of capital
gains realized on a Portfolio's other investments, and shareholders will be
advised on the nature of the payment.
INTEREST RATE SWAP TRANSACTIONS
Each Portfolio may enter into Swap Contracts. A swap is an agreement to
exchange the return generated by one instrument for the return generated by
another instrument. The payment streams are calculated by reference to a
specified index and agreed upon notional amount. The term "specified index"
includes fixed interest rates, total return on interest rate indices and fixed
income indices, (as well as amounts derived from arithmetic operations on these
indices). For example, a Portfolio may agree to swap the return generated by a
fixed-income index for the return generated by a second fixed-income index.
The Portfolios will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with a Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. A Portfolio's obligations under
a swap agreement will be accrued daily (offset against any 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. Since swaps will be entered into for good
faith hedging purposes, the Adviser and the Fund believe such obligations do not
constitute "senior securities" under the Investment Company Act of 1940 and,
accordingly, will not treat them as being subject to its borrowing restrictions.
Interest rate swaps do not involve the delivery of securities, other
underlying assets, or principal. Accordingly, the risk of loss with respect to
interest rate swaps is limited to the net amount of interest payments that a
Portfolio is contractually obligated to make. If the other party to an interest
rate swap defaults, a Portfolio's risk of loss consists of the
<PAGE>
net amount of interest payments that a Portfolio is contractually entitled to
receive. If there is a default by the counterparty, the Portfolios may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investment required for each Portfolio is $1,000,000 with certain
exceptions as may be determined from time to time by the officers of the Fund.
An order received in proper form prior to the 4:00 p.m. close of the New York
Stock Exchange (the "Exchange") will be executed at the price computed on the
date of receipt; and an order received not in proper form or after the 4:00 p.m.
close of the Exchange will be executed at the price computed on the next day the
Exchange is open after proper receipt. The Exchange will be closed on the
following days: Good Friday, April 14, 1995; Memorial Day, May 29, 1995;
Independence Day, July 4, 1995; Labor Day, September 4, 1995; Thanksgiving Day,
November 23, 1995; Christmas Day, December 25, 1995; New Year's Day, January 1,
1996; and Presidents' Day, February 19, 1996.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commission,
(2) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for a Portfolio
to dispose of securities owned by it or to fairly determine the value of its
assets, and (3) for such other periods as the Commission may permit. The Fund
has made an election with the Commission to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid, in whole or in part, in investment securities or in cash as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares", and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.
No charge is made by the Portfolios for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolios.
SIGNATURE GUARANTEES
To protect your account, the Fund and Mutual Funds Service Company (the
"Administrator") from fraud, signature guarantees are required for certain
redemptions. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) or
the registered address or (2) share transfer requests. The purpose of signature
guarantees is to verify the identity of the party who has authorized a
redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institution
is available from the Administrator. Broker- dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue
<PAGE>
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder
Services" in the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each Acadian Portfolio may be exchanged for
Institutional Class Shares of the other Acadian Portfolio. In addition,
Institutional Class Shares of each Acadian Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in The Regis Family of
Funds which is comprised of the Fund and The Regis Fund II. (See the list of
Portfolios of The Regis Family of Funds _ Institutional Class Shares at the end
of the Prospectus.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to The Regis Fund, Inc., The Regis Service
Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA 02208-2798.
The exchange privilege is only available with respect to Portfolios that are
registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling The
Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder, and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. Eastern time will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed
on the next business day. Neither the Fund nor the Administrator will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency and to other restrictions established by the Fund's Board of Directors
to assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange between
Portfolios. You may want to consult your tax adviser for further information in
this regard. The exchange privilege may be modified or terminated at any time.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall be determined
immediately after and as a result of the Portfolio's acquisition of such
security or other asset. Accordingly, any later increase or decrease resulting
from a change in values, net assets or other circumstances will not be
considered when determining whether the investment complies with the Portfolio's
investment limitations.
A Portfolio's fundamental investment limitations cannot be changed without
approval by a "majority of the outstanding shares" (as defined in the 1940 Act)
of the Portfolio. Except for the numbered investment limitations noted as
fundamental below, however, the limitations described below are not fundamental,
and may be changed without the consent of shareholders.
<PAGE>
AS A MATTER OF FUNDAMENTAL POLICY, EACH PORTFOLIO WILL NOT:
(1) invest in physical commodities or contracts on physical
commodities;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and policies, or entering into
repurchase agreements, subject to the limitation described in
(f) below and (ii) by lending its portfolio securities to banks,
brokers, dealers and other financial institutions so long as such
loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the Commission thereunder.
(4) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer (this
restriction is not applicable to the Acadian Emerging Markets
Portfolio);
(5) with respect to 75% of its assets, invest more than 5% of its
total assets at the time of purchase in securities of any single
issuer (other than obligations issued or guaranteed as to
principal and interest by the government of the U.S. or any
agency or instrumentality thereof) (this restriction is not
applicable to the Acadian Emerging Markets Portfolio);
(6) borrow money, except (i) from banks and as a temporary measure
for extraordinary or emergency purposes or (ii) except in
connection with reverse repurchase agreements provided that (i)
and (ii) in combination do not exceed 33 1/3% of the Portfolio's
total assets (including the amount borrowed) less liabilities
(exclusive of borrowings);
(7) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of a
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities or instruments issued by U.S. banks when a
Portfolio adopts a temporary defensive position; and
(8) underwrite the securities of other issuers.
AS A MATTER OF NON-FUNDAMENTAL POLICY, EACH PORTFOLIO WILL NOT:
(a) invest in stock or bond futures and/or options on futures unless
(i) not more than 5% of the Portfolio's assets are required as
deposit to secure obligations under such futures and/or options
on futures contracts provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-
money amount may be excluded in computing such 5% and (ii) not
more than 20% of the Portfolio's assets are invested in stock or
bond futures and options;
(b) purchase on margin or sell short except as specified in (a)
above;
(c) purchase additional securities when borrowings exceed 5% of total
gross assets;
(d) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;
(e) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
<PAGE>
(f) invest more than an aggregate of 15% of the assets of the
Portfolio, determined at the time of investment, in securities
subject to legal or contractual restrictions on resale or
securities for which there are no readily available markets,
including repurchase agreements having maturities of more than
seven days;
(g) invest for the purpose of exercising control over management of
any company;
(h) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) a
continuous operating history of less than 3 years;
(i) write or acquire options or interests in oil, gas or other
mineral exploration or development programs;
(j) (with respect to the Acadian Emerging Markets Portfolio) purchase
the securities of any issuer (other than obligations issued or
guaranteed by the U.S. government or its agencies or
instrumentalities) if, as a result, with respect to 50% of its
total assets, more than 5% of the value of its total assets would
be invested in the securities of any single issuer, or it would
hold more than 10% of the outstanding voting securities of such
issuer, or with respect to the remaining 50% of its total assets,
more than 25% of the value of its total assets would be invested
in the securities of any single issuer; and
(k) (with respect to the Acadian Emerging Markets Portfolio) invest
in warrants, valued at the lower of cost or market, exceeding
5.0% of the value of the Portfolio's net assets; included within
that amount, but not exceeding 2.0% of the value of the
Portfolio's net assets, may be warrants which are not listed on
the New York or American Stock Exchange. Warrants acquired by the
Portfolio in units or attached to securities may be deemed to be
without value.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and elect its officers. A list of the Directors and officers of the
Fund and a brief statement of their present positions and principal occupations
during the past 5 years is set forth in the Fund's Prospectus. As of January 31,
1995, the Directors and officers of the Fund owned less than 1% of the Fund's
outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all of the Directors and allocated
proportionately among the Portfolios of the Fund and The Regis Fund II as well
as the AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for
travel and other expenses incurred while attending Board meetings. Directors
who are also officers or affiliated persons receive no remuneration for their
service as Directors. The Fund's officers and employees are paid by either the
Adviser, United Asset Management Corporation ("UAM"), or the Administrator and
receive no compensation from the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations held of
record 5% or more of the shares of a Portfolio, as noted.
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO: Wachovia Bank of N.C., Trustee for US Air
Inc., Winston-Salem, NC, 37.6%;* Charles D. Ellis and Rodger F. Smith, Trustees,
Greenwich Associates LP, Profit Sharing Plan, Greenwich, CT, 30.2%*; Gary L.
Bergstrom, Belmont, MA, 16.2%; and Robert F. Johnston, Cohasset, MA, 8.2%.
ACADIAN INTERNATIONAL EQUITY PORTFOLIO: Barbara R. Jordan, New York, NY, 93.3%
and Charles Schwab & Co., Inc., San Francisco, CA, 6.1%.*
The persons or organizations listed above as owning 25% or more of the
outstanding shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or
organizations could have the ability to vote a majority of the shares of the
Portfolio on any matter requiring the approval of shareholders of such
Portfolio.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
<PAGE>
INVESTMENT ADVISER
CONTROL OF ADVISER
Acadian Asset Management, Inc. (the "Adviser") is a wholly-owned subsidiary
of UAM, a holding company incorporated in Delaware in December 1980 for the
purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 42 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each of
them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, the Portfolio pays the Adviser an annual fee, in monthly
installments, calculated by applying the following annual percentage rates to
the Portfolio's average net assets for the month:
Acadian Emerging Markets Portfolio . . . . . . . . . . . . . . . 1.00%
Acadian International Equity Portfolio . . . . . . . . . . . . . 0.75%
for the first $50 million in net assets, 0.65% for the next
$50 million, 0.50% for the next $100 million and 0.40% over
$200 million.
For the period from each Portfolios' commencement of operations to
October 31, 1993, neither Portfolio paid an advisory fee. During this period,
the Adviser voluntarily waived advisory fees of approximately $13,000 for the
Acadian Emerging Markets Portfolio and $8,000 for the Acadian International
Equity Portfolio. For the fiscal year ended October 31, 1994, neither Portfolio
paid an advisory fee. During this period, the Adviser voluntarily waived
advisory fees of $47,000 for the Acadian Emerging Markets Portfolio and $17,000
for the Acadian International Equity Portfolio.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, the Portfolios may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or principal business on the basis of sales of shares which may be made through
broker-dealer firms. However, the Adviser may place portfolio orders with
qualified broker-dealers who recommend the Fund's Portfolios or who act as
agents in the purchase of shares of the Portfolios for their clients. During the
fiscal years ended October 31, 1992, 1993 and 1994, the entire Fund paid
brokerage commissions of approximately $1,248,000, $1,592,000 and $2,402,000,
respectively.
Some securities considered for investment by the Portfolios may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Directors.
<PAGE>
ADMINISTRATIVE SERVICES
Mutual Funds Service Company, an affiliate of United States Trust Company
of New York (the "Administrator") provides administrative, fund accounting,
dividend disbursing and transfer agency services to the Fund under an
Administrative Agreement. During the fiscal year ended October 31, 1993,
administrative services fees paid to the Administrator by the Acadian Emerging
Markets Portfolio and the Acadian International Equity Portfolio totaled
approximately $6,000 and $12,000, respectively. The basis of the fees paid to
the Administrator was as follows: the Fund paid a monthly fee for its services
which on an annualized basis equaled 0.16 of 1% of the first $200 million of the
aggregate net assets of the Fund; plus 0.12 of 1% of the next $800 million of
the aggregate net assets of the Fund; plus 0.06 of 1% of the aggregate net
assets in excess of $1 billion. The fees were allocated among the Portfolios on
the basis of their relative assets and were subject to a graduated minimum fee
schedule per Portfolio, which rose from $1,000 per month upon inception of a
Portfolio to $50,000 annually after two years. During the fiscal year ended
October 31, 1994, administrative services fees paid to the Administrator by the
Acadian Emerging Markets and the Acadian International Equity Portfolios totaled
$41,000 and $53,000, respectively. The services provided by the Administrator
and the current fees payable to the Administrator are described in the
Portfolio's Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
Each Portfolio may from time to time quote various performance figures to
illustrate past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quotations
or, alternatively, that every non-standardized performance quotation furnished
by the Fund be accompanied by certain standardized performance information
computed as required by the Commission. An explanation of those and other
methods used to compute or express performance follows.
TOTAL RETURN
The average annual total return of the Portfolio is determined by finding
the average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis. The average annual total return for the
Acadian Emerging Markets and the Acadian International Equity Portfolios from
inception and for the 1 year period ended on the date of the Financial
Statements included herein are 28.17% and 23.97% and 16.28% and 8.02%,
respectively.
These figures were calculated according to the following formula:
n
P (1 + T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5, or 10 year periods (or fractional portion thereof).
<PAGE>
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices - an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation and finance stocks
listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices - represents the return
on the market value of all common equity securities for which daily pricing
is available. Comparisons of performance assume reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - measure total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestments of all distributions,
exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -
respectively, arithmetic, market value- weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400 securities
listed on the stock exchanges of these continents, including North America.
(g) NASDAQ Industrial Index - is composed of more than 3,000 industrial issues.
It is a value-weighted index calculated on price change only and does not
include income.
(h) Value Line - composed of over 1,600 stocks in the Value Line Investment
Survey.
(i) Russell 2000 - composed of the 2,000 smallest stocks in the Russell 3000, a
market value weighted index of the 3,000 largest U.S. publicly-traded
companies.
(j) The Salomon-Russell Broad Market Index (BMI) - measures the performance of
approximately 4,500 institutionally investable equity securities in 23
worldwide local markets whose combined total available market
capitalization exceeds $106 million. The BMI is split into two major
components. The Primary Market Index defines the large stock universe,
representing the top 80% of the available capital of the BMI in each
country. The Extended Market Index represents the remaining 20% of the
available capital that defines the small stock universe.
(k) International Finance Corporation Indices (IFC) - measure the performance
of 800 stocks in over 20 emerging equity markets.
(l) Morgan Stanley Capital International Emerging Market Indices - represent
the local industry composition in emerging market countries. The indices
aim to cover 60% of the available total market capitalization of each local
market and currently include returns on 13 emerging equity markets.
(m) The Morgan Stanley Capital International Europe 13 Index is an unmanaged
index composed of the securities listed on the stock exchanges of the
following countries: Australia, Belgium, Denmark, Finland, France, Germany,
Italy, the Netherlands, Norway, Spain, Sweden, Switzerland and the United
Kingdom.
<PAGE>
(n) CDA Mutual Fund Report published by CDA Investment Technologies, Inc. -
analyzes price, current yield, risk, total return and average rate of
return (average compounded growth rate) over specified time periods for the
mutual fund industry.
(o) Mutual Fund Source Book published by Morningstar, Inc. - analyzes price,
yield, risk and total return for equity funds.
(p) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Wall Street Journal and Weisenberger Investment Companies
Service - publications that rate fund performance over specified time
periods.
(q) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change over time in
the price of goods and services in major expenditure groups.
(r) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates -
historical measure of yield, price and total return for common and small
company stock, long-term government bonds, U.S. Treasury bills and
inflation.
(s) Savings and Loan Historical Interest Rates - as published by the U.S.
Savings & Loan League Fact Book.
(t) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill Lynch,
Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its performance. In addition, there can
be no assurance that the Fund will continue this performance as compared to such
other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." The Fund's Articles of Incorporation, as
amended, authorize the Directors to issue 3,000,000,000 shares of common stock,
$.001 par value. The Board of Directors has the power to designate one or more
series ("Portfolios") or classes of common stock and to classify or reclassify
any unissued shares with respect to such Portfolios, without further action by
shareholders. Currently, the Fund is offering shares of 29 Portfolios.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed income
and capital gains. (See discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectus.) The amounts of any income
dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of such Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes as set forth in the Prospectus.
<PAGE>
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of the Portfolios of the Fund at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to the
record date that either the Income Option (income dividends in cash and capital
gains distributions in additional shares at net asset value) or the Cash Option
(both income dividends and capital gains distributions in cash) has been
elected. An account statement is sent to shareholders whenever an income
dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for Federal income tax purposes) such gains against any
net capital losses of another Portfolio.
FEDERAL TAXES
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities, and gains from the
sale of securities or foreign currencies or other income derived with respect to
its business of investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less than three
months must be limited to less than 30% of the Portfolio's annual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
<PAGE>
FINANCIAL STATEMENTS
The Financial Statements for the Acadian Portfolios for the fiscal period
ended October 31, 1994 and the Financial Highlights for the respective periods
presented, which appear in the Portfolios' 1994 Annual Reports to Shareholders,
and the reports thereon of Price Waterhouse LLP, independent accountants, also
appearing therein, are incorporated by reference into this Statement of
Additional Information. An Annual Report may be obtained, without charge, by
writing the Fund or by calling the telephone number shown on the cover of the
Prospectus.
APPENDIX - DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF RATINGS FOR BOND AND PREFERRED SECURITIES
Excerpts from Moody's Investors Service ("Moody's") description of its
highest bond ratings: Aaa - judged to be the best quality; carry the smallest
degree of investment risk: Aa - judged to be of high quality by all standards;
A - possess many favorable investment attributes and are to be considered as
higher medium grade obligations; Baa - considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA - highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA - also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A - regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe;
BBB - regarded as borderline between definitely sound obligations and those
where the speculative element begins to predominate; this group is the lowest
which qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
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 or
instrumentality issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies
which are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association, are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed, to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and The Tennessee Valley Authority.
<PAGE>
III. DESCRIPTION OF COMMERCIAL PAPER
Each Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by S&P.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Portfolios'
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash flow
and other liquidity ratios of the issuer and the borrower's ability to pay
principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating 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 the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer 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 issuer of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may increase or decrease periodically.
Frequently, dealers selling variable rate certificates of deposit to the
Portfolio will agree to repurchase such instruments, at the Portfolio's option,
at par on or near the coupon dates. The dealers' obligations to repurchase
these instruments are subject to conditions imposed by various dealers. Such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolios are also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available
<PAGE>
about certain foreign companies than about domestic companies. Securities of
some foreign companies are generally less liquid and more volatile than
securities of comparable domestic companies. There is generally less government
supervision and regulation of stock exchanges, brokers and listed companies than
in the U.S. In addition, with respect to certain foreign countries, there is
the possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect U.S. investments in
those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.
<PAGE>
UAM FUNDS
C&B PORTFOLIOS
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 28, 1995 AS SUPPLEMENTED JULY 3, 1995 AND OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
C & B BALANCED PORTFOLIO
PHILOSOPHY/STYLE:
Cooke & Bieler bases their philosophy and process on selecting high quality,
risk averse stocks. An emphasis on value is designed to protect assets in down
markets. The stock selection process is geared towards finding companies with
high quality earnings which are sustainable in a wide range of economic
environments. Key criteria include companies with strong balance sheets, a
proven management team and low debt. On the fixed income side, Cooke & Bieler
is a conservative, quality-oriented bond manager.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- Knight Ridder
- Mayo Foundation
- Princeton University
- University of Notre Dame
- UST Inc.
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
C & B PORTFOLIOS
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995
This Statement is not a Prospectus but should be read in conjunction with
The Regis Fund, Inc.'s Prospectus relating to the C & B Portfolios'
Institutional Class Shares dated February 28, 1995. To obtain the Prospectus,
please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
Page
----
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . 1
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . 5
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 8
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . 8
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . 9
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 12
Appendix _ Description of Securities and Ratings. . . . . . . . . . . . A-1
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the C & B Equity and C & B Balanced Portfolios as set forth in the C & B
Portfolios' Prospectus:
SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. Both Portfolios may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the rules and regulations or interpretations of the Securities and
Exchange Commission (the "Commission") thereunder, which currently require that
(1) the borrower pledge and maintain with the Portfolio collateral consisting of
cash, an irrevocable letter of credit issued by a domestic U.S. bank, or
securities issued or guaranteed by the United States Government having a value
at all times not less than 100% of the value of the securities loaned, (2) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis),
<PAGE>
(3) the loan be made subject to termination by the Portfolio at any time, and
(4) the Portfolio receive reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments), any distribution on the loaned securities and any increase in
their market value. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Directors. The Portfolios will continue to
retain any voting rights with respect to the loaned securities. If a material
event occurs affecting an investment on loan, the loan must be called and the
securities voted.
FUTURES CONTRACTS
Both Portfolios may enter into futures contracts, options, and options on
futures contracts for the purpose of remaining fully invested and reducing
transactions costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC"),
a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures market primarily to offset unfavorable
changes in the value of securities otherwise held for investment purposes or
expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in
interest rates. Each Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the Fund's
commodity futures and option positions be for other purposes, to the extent that
the aggregate initial margins and premiums required to establish such
non-hedging positions do not exceed five percent of the liquidation value of a
Portfolio. A Portfolio will only sell futures contracts to protect securities it
owns against price declines or purchase contracts to protect against an increase
in the price of securities it intends to purchase. As evidence of this hedging
interest, each Portfolio expects that approximately 75% of its futures contract
purchases will be "completed;" that is, equivalent amounts of related securities
will have been purchased or are being purchased by the Portfolio upon sale of
open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the use
of futures contracts may be a more effective means of hedging this exposure.
<PAGE>
While a Portfolio will incur commission expenses in both opening and closing out
futures positions, these costs are lower than transaction costs incurred in the
purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
A Portfolio will not enter into futures contract transactions to the extent
that, immediately thereafter, the sum of its initial margin deposits on open
contracts exceeds 5% of the market value of its total assets. In addition, a
Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
A Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specified time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements, a
Portfolio would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if the Portfolio has insufficient cash,
it may have to sell Portfolio securities to meet daily margin requirements at a
time when it may be disadvantageous to do so. In addition, the Portfolio may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio are engaged in only for hedging purposes, the
Adviser does not believe that the Portfolios are subject to the risks of loss
frequently associated with futures transactions. A Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that the Portfolio could lose money on futures contracts and also
experience a decline in value of Portfolio securities. There is also the risk of
loss by the Portfolio of margin deposits in the event of bankruptcy of a broker
with whom the Portfolio has an open position in a futures contract or related
option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions a Portfolio has identified as hedging transactions,
the Portfolio is required for Federal income tax purposes to recognize as income
for each taxable year its net unrealized gains and losses on regulated futures
contracts as of the end of the year, as well as those actually realized during
the year. In most cases, any gain or loss recognized with respect to a futures
contract is considered to be 60% long-term capital gain or loss and 40%
short-term
<PAGE>
capital gain or loss, without regard to the holding period of the contract.
Furthermore, sales of futures contracts which are intended to hedge against a
change in the value of securities held by the Portfolio may affect the holding
period of such securities and, consequently, the nature of the gain or loss on
such securities upon disposition.
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income, for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must be
limited to less than 30% of a Portfolio's annual gross income. It is anticipated
that any net gain realized from the closing out of futures contracts will be
considered a gain from the sale of securities and therefore will be qualifying
income for purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities held for less than three months, a Portfolio may
be required to defer the closing out of futures contracts beyond the time when
it would otherwise be advantageous to do so. It is anticipated that unrealized
gains on futures contracts, which have been open for less than three months as
of the end of a Portfolio's fiscal year and which are recognized for tax
purposes, will not be considered gains on securities held for less than three
months for the purposes of the 30% test.
Both Portfolios will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.
PURCHASE OF SHARES
Shares of both C & B Portfolios may be purchased without a sales
commission, at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's
Custodian. The minimum initial investment required is $250,000 with certain
exceptions as may be determined from time to time by the officers of the Fund.
An order received in proper form prior to the close of the New York Stock
Exchange ("Exchange") will be executed at the price computed on the date of
receipt; and an order received not in proper form or after the close of the
Exchange will be executed at the price computed on the next day the Exchange is
open after proper receipt. The Exchange will be closed on the following days:
Good Friday, April 14, 1995; Memorial Day, May 29, 1995; Independence Day,
July 4, 1995; Labor Day, September 4, 1995; Thanksgiving Day, November 23, 1995;
Christmas Day, December 25, 1995; New Year's Day, January 1, 1996; and
Presidents' Day, February 19, 1996.
Both Portfolios reserve the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interest of the Fund, and (3) to reduce
or waive the minimum for initial and subsequent investment for certain fiduciary
accounts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Both Portfolios may suspend redemption privileges or postpone the day of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for a Portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares" and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.
<PAGE>
No charge is made by any Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES _ To protect your account, the Fund and the
Administrator from fraud, signature guarantees are required for certain
redemptions. The purpose of signature guarantees is to verify the identity of
the person who has authorized a redemption from your account. Signature
guarantees are required in connection with (1) all redemptions when the proceeds
are to be paid to someone other than the registered owner(s) and/or registered
address; and (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Administrator. Broker-dealers guaranteeing signatures must
be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the C & B Portfolios' Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each C & B Portfolio may be exchanged for
Institutional Class Shares of the other C & B Portfolio. In addition,
Institutional Class Shares of each C & B Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in The Regis Family of
Funds which is comprised of the Fund and The Regis Fund II. (See the list of
Portfolios of The Regis Family of Funds _ Institutional Class Shares in the
Prospectus.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to The Regis Fund, Inc., The Regis Service
Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA 02208-2798.
The exchange privilege is only available with respect to Portfolios that are
registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the C & B Portfolio to be purchased.
You may obtain a Prospectus for the Portfolio(s) you are interested in by
calling The Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Administrator will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
<PAGE>
TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another person
by making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificates or any
stock power must be guaranteed in the same manner as described under "Redemption
of Shares." As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
Both C & B Portfolios are subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) at least 67% of the voting securities of the Portfolio present at a
meeting if the holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Portfolio. Each Portfolio will not:
(1) invest in commodities except that each Portfolio may invest in
futures contracts and options to the extent that not more than 5%
of a Portfolio's assets are required as deposit to secure
obligations under futures contracts;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the
limitation described in (10) below) which are publicly
distributed, and (ii) by lending its portfolio securities to
banks, brokers, dealers and other financial institutions so long
as such loans are not inconsistent with the 1940 Act or the rules
and regulations or interpretations of the Commission thereunder;
(4) purchase on margin or sell short except as specified in (1)
above;
(5) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(6) with respect as to 75% of its assets, purchase securities of any
issuer (except obligations of the United States Government and
its instrumentalities) if as the result more than 5% of the
Portfolio's total assets, at the time of purchase, would be
invested in the securities of such issuer;
(7) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;
(8) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in
excess of 10% of the Portfolio's gross assets valued at the lower
of market or cost, and a Portfolio may not purchase additional
securities when borrowings exceed 5% of total gross assets;
(9) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(10) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the net assets of the Portfolio, determined
at the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;
(11) invest for the purpose of exercising control over management of
any company;
<PAGE>
(12) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) continuous
operations consisting of less than three years;
(13) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, or instruments issued by U.S. banks when such
Portfolio adopts a temporary defensive position; and
(14) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.
In addition, the C & B Equity Portfolio is subject to the following
limitations which are not fundamental policies and may be changed without
shareholder approval:
(1) The Portfolio may not purchase warrants if, by reason of such
purchase, more than 5% of the value of the Portfolio's net assets
(taken at market value) would be invested in warrants, valued at
the lower of cost or market. Included within this amount, but not
to exceed 2% of the value of the Portfolio's net assets, may be
warrants that are not listed on a recognized stock exchange.
(2) The Portfolio may not invest in real estate limited partnership
interests.
(3) The Portfolio may not invest in oil, gas or other mineral leases.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and choose its officers. A list of the Directors and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past 5 years is set forth in the C & B Portfolios'
Prospectus. As of January 31, 1995, the Directors and officers of the Fund owned
less than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all of the Directors and allocated
proportionately among the Portfolios of the Fund and The Regis Fund II as well
as the AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for
travel and other expenses incurred while attending Board meetings. Directors who
are also officers or affiliated persons receive no remuneration for their
service as Directors. The Fund's officers and employees are paid by either the
Adviser, United Asset Management Corporation ("UAM"), or the Administrator and
receive no compensation from the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations held of
record or beneficially 5% or more of the shares of a Portfolio, as noted.
C&B BALANCED PORTFOLIO: Newcomb Medical Center, Newcomb Medical Center Pension
Fund Plan No. 024, Vineland, NJ, 26.5%; UFCW Local 56 & Food Industry Employees
Money Purchase Pension Trust, Philadelphia, PA, 14.9%; U.S. Trust Company of New
York, Trustee for Charles J. Prizer, Money Purchase Pension Plan, Longboat Key,
FL, 7.9%*; Baptist Health System, Inc. D/B/A, Coosa Valley Baptist Medical
Center, Sylacauga, AL, 6.6%; and James T. Carson & Wayne M. Davidson, Trustees
for Carson-Pettit Inc. Retirement Plan, Devon, PA, 5.1%*.
<PAGE>
C&B EQUITY PORTFOLIO: State Street Bank and Trust Co. C/F Simplex Time
Recorder Co. Employees, Boston, MA, 9.8%*; and State Street Bank and Trust,
Trustee for New England UFCW Employee Pension Fund, Boston, MA, 7.7%*.
The persons or organizations listed above as owning 25% or more of the
outstanding shares of a Portfolio may be presumed to "control" (as that term is
defined in the 1940 Act) such Portfolio. As a result, those persons or
organizations could have the ability to vote a majority of the shares of the
Portfolio on any matter requiring the approval of shareholders of such
Portfolio.
_______
*Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Cooke & Bieler, Inc. (the "Adviser") is a wholly-owned subsidiary of UAM, a
holding company incorporated in Delaware in December 1980 for the purpose of
acquiring and owning firms engaged primarily in institutional investment
management. Since its first acquisition in August 1983, UAM has acquired or
organized approximately 42 such wholly-owned affiliated firms (the "UAM
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to retain
control over their investment advisory decisions is necessary to allow them to
continue to provide investment management services that are intended to meet the
particular needs of their respective clients. Accordingly, after acquisition by
UAM, UAM Affiliated Firms continue to operate under their own firm name, with
their own leadership and individual investment philosophy and approach. Each UAM
Affiliated Firm manages its own business independently on a day-to-day basis.
Investment strategies employed and securities selected by UAM Affiliated Firms
are separately chosen by each of them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, each C & B Portfolio pays the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to both the C & B Portfolios' average net assets for the month:
RATE
-----
C & B Equity Portfolio. . . . . . . . . . . . . . . 0.625%
C & B Balanced Portfolio. . . . . . . . . . . . . . 0.625%
For the periods ended October 31, 1992, 1993 and 1994, the C & B Equity
Portfolio paid advisory fees of approximately $573,000, $1,082,000 and
$1,285,000, respectively, to the Adviser.
For the periods ended October 31, 1992, 1993 and 1994, the C & B Balanced
Portfolio paid advisory fees of approximately $200,000, $257,000 and $220,000,
respectively, to the Adviser. During these periods, the Adviser voluntarily
waived advisory fees of approximately $0, $0 and $2,000, respectively.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Fund's C&B Portfolios and directs the Adviser to use its best
efforts to obtain the best execution with respect to all transactions for the
Portfolios. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services provided
by the broker effecting the transaction. It is not the Fund's practice to
allocate brokerage or principal business on the basis of sales of shares which
may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended, October 31,
<PAGE>
1992, 1993 and 1994, the entire Fund paid brokerage commissions of approximately
$1,248,000, $1,592,000 and $2,402,000, respectively.
Some securities considered for investment by the Portfolios may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
Mutual Funds Service Company, an affiliate of United States Trust Company
of New York, (the "Administrator") provides the Fund with administrative, fund
accounting, dividend disbursing and transfer agency services pursuant to a Fund
Administration Agreement dated as of December 16, 1991 and effective January 16,
1992 for the C & B Equity Portfolio and January 20, 1992 for the C & B Balanced
Portfolio. Prior to those dates, The Vanguard Group, ("Vanguard") provided the
Fund with administrative, dividend disbursing and transfer agency services
pursuant to a Service Agreement dated as of March 20, 1989, as amended
January 1, 1991. For its services, the Fund paid Vanguard a monthly fee which on
an annual basis equaled 0.20 of 1% of the first $200 million of the aggregate
net assets of the Fund; 0.12 of 1% of the next $800 million of the aggregate net
assets of the Fund; and .08% of 1% of the aggregate net assets of the Fund in
excess of $1 billion. This fee was allocated based on the relative net assets
of each Portfolio, provided, however, that the minimum annual fee equaled
$50,000 for each active Portfolio. During the fiscal year ended October 31,
1992, the C & B Equity and C & B Balanced Portfolios paid administrative
services fees of $16,780 and $10,686, respectively, to Vanguard and $102,740 and
$39,410, respectively, to the Administrator. During the fiscal year ended
October 31, 1993, the C & B Equity and C & B Balanced Portfolios paid
administrative services fees of $214,866 and $61,189, respectively, to the
Administrator. The basis of the fees paid to the Administrator for the 1992
and 1993 fiscal years was as follows: the Fund paid a monthly fee for its
services which on an annualized basis equaled 0.16 of 1% of the first $200
million of the aggregate net assets of the Fund; plus 0.12 of 1% of the next
$800 million of the aggregate net assets of the Fund; plus 0.06 of 1% of the
aggregate net assets in excess of $1 billion. The fees were allocated among the
Portfolios on the basis of their relative assets and were subject to a graduated
minimum fee schedule per Portfolio, which rose from $1,000 per month upon
inception of a Portfolio to $50,000 annually after two years. During the fiscal
year ended October 31, 1994, the C & B Equity and C & B Balanced Portfolios paid
administrative services fees of $242,000 and $69,000, respectively, to the
Administrator. The services provided by the Administrator and the current fees
payable to the Administrator are described in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to
illustrate the Fund's past performance.
Performance quotations by investment companies are subject to rules adopted
by the Securities and Exchange Commission ("SEC"), which require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Current yield and average annual compounded total return quotations used by the
Fund are based on the standardized methods of computing performance mandated by
the SEC. An explanation of those and other methods used by the Fund to compute
or express performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average annual
compounded rates of return over 1, 5 and 10 year periods that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period and the deduction of all applicable Fund expenses
on an annual basis.
<PAGE>
The average annual total rates of return for the C & B Equity and C & B
Balanced Portfolios from inception and for the 1 year period ended on the date
of the Financial Statements included herein are 9.96% and 4.67% and 8.99% and
0.74%, respectively.
These figures were calculated according to the following formula:
P (1 + T)n = ERV
where:
.P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the Fund
might satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated above)
to performance as reported by other investments, indices and averages. The
following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages _ an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices _ an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices _ unmanaged
indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index or its component indices _ represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper _ Mutual Fund Performance Analysis and Lipper _ Fixed Income
Fund Performance Analysis _ measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index _
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.
(g) Goldman Sachs 100 Convertible Bond Index _ currently includes 67 bonds
and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
<PAGE>
(h) Salomon Brothers GNMA Index _ includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index _ consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond _ is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency issues
and mortgage passthrough securities.
(k) Lehman Brothers Government/Corporate Index _ is a combination of the
Government and Corporate Bond Indices. The Government Index includes
public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The
Corporate Bond Index includes fixed-rate nonconvertible corporate
debt. Also included are Yankee Bonds and nonconvertible debt issued
by or guaranteed by foreign or international governments and agencies.
All issues are investment grade (BBB) or higher, with maturities of at
least one year and an outstanding par value of at least $100 million
for U.S. Government issues and $25 million for others. Any security
downgraded during the month is held in the index until month-end and
then removed. All returns are market value weighted inclusive of
accrued income.
(l) Lehman Brothers LONG-TERM Treasury Bond _ is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(m) NASDAQ Industrial Index _ is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line _ composed of over 1,600 stocks in the Value Line
Investment Survey.
(o) Russell 2000 _ composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest
U.S. publicly-traded companies.
(p) Composite Indices _ 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(q) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. _ analyzes price, current yield, risk, total return and average
rate of return (average annual compounded growth rate) over specified
time periods for the mutual fund industry.
(r) Mutual Fund Source Book, published by Morningstar, Inc. _ analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Investor's Daily, Lipper Analytical Services,
Inc., Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies Service _
publications that rate fund performance over specified time periods.
(t) Consumer Price Index (or cost of Living Index), published by the U.S.
Bureau of Labor Statistics _ a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates _
historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.
<PAGE>
(v) Savings and Loan Historical Interest Rates _ as published by the U.S.
Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill,
Lynch, Pierce, Fenner & Smith, Shearson Lehman and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its futures. In addition, there can be no
assurance that the Fund will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." The Fund's principal executive office is
located at 803 Cathedral Street, Baltimore, MD 21201; however, all investor
correspondence should be directed to the Fund at The Regis Fund Service Center,
c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA 02208-2798. The
Fund's Articles of Incorporation authorize the Directors to issue 3,000,000,000
shares of common stock, $.001 par value. The Board of Directors has the power to
designate one or more series (Portfolios) or classes of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. Currently, the Fund is offering shares
of 29 Portfolios.
The shares of each Portfolio of the Fund, when issued and paid for as
provided for in the Prospectus, will be fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other features
and have no preemptive rights. The shares of the Fund have noncumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Directors can elect 100% of the Directors if they choose to do
so. A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held), then standing in his or her
name on the books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the Federal excise tax on undistributed
income and capital gains (see discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectus). The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of that Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of that Portfolio at net asset value (as of the business
day following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for Federal income tax purposes) such gains against any
net capital losses of another Portfolio.
<PAGE>
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the C & B Portfolios and the Financial
Highlights for the respective periods presented, which appear in the C & B
Portfolios' 1994 Annual Reports to Shareholders, and the reports thereon of
Price Waterhouse LLP, independent accountants, also appearing therein, are
incorporated by reference into this Statement of Additional Information. An
Annual Report may be obtained, without charge, by writing to the Fund or by
calling The Regis Service Center at 1-800-638-7983.
<PAGE>
APPENDIX _ DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of
its highest bond ratings; Aaa _ judged to be the best quality; carry the
smallest degree of investment risk; Aa _ judged to be of high quality by all
standards; A _ possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa _ considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA _ highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA _ also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A _ regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
_ regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to investors such
as the C & B Balanced Portfolio. Most issuers or poolers provide guarantees of
payments, regardless of whether or not the mortgagor actually makes the payment.
The guarantees made by issuers or poolers are supported by various forms of
credit, collateral, guarantees or insurance, including individual loan, title,
pool and hazard insurance purchased by the issuer. There can be no assurance
that the private issuers can meet their obligations under the policies.
Mortgage-backed securities issued by private issuers, whether or not such
securities are subject to guarantees, may entail greater risk. If there is no
guarantee provided by the issuer, mortgage-backed securities purchased by the
C & B Balanced Portfolio will be rated investment grade by Moody's or S&P.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participations in loans. The
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, the C & B Balanced Portfolio may purchase pools of
variable rate mortgages (VRM), growing equity mortgages (GEM), graduated payment
mortgages (GPM) and other types where the principal and interest payment
procedures vary. VRM's are mortgages which reset the mortgage's interest rate on
pools of VRM's. GPM and GEM pools maintain constant interest with varying levels
of principal repayment over the life of the mortgage. These different interest
and principal payment procedures should not impact a Portfolio's net asset value
since the prices at which these securities are valued each day will reflect the
payment procedures.
All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit standards
and underwriting criteria for individual mortgages included in the pools. In
addition, many mortgages included in pools are insured through private mortgage
insurance companies.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayment is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to assume the
prepayments will
<PAGE>
result in a 12-year average life. Pools of mortgages with other maturities or
different characteristics will have varying assumptions for average life.
RETURNS ON MORTGAGE-BACKED SECURITIES
Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life
assumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yields of
the Portfolios. The compounding effect from reinvestment of monthly payments
received by a Portfolio will increase its yield to shareholders, compared to
bonds that pay interest semiannually.
ABOUT MORTGAGE-BACKED SECURITIES
Interests in pools of mortgage-backed 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
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by repayments resulting from the sale
of the underlying residential property, refinancing or foreclosure net of fees
or costs which may be incurred. Some mortgage-backed securities are described as
"modified pass-through." These securities entitle the holders to receive all
interest and principal payments owed on the mortgages in the pool, net of
certain fees, regardless of whether or not the mortgagors actually make the
payment.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal.
The Federal National Mortgage Association (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
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.
The principal Government guarantor of mortgage-backed securities is the
Government National Mortgage Association (GNMA). 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
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
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. 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 guarantees of payments in the former pools. However, timely payment
of interest and principal of these pools is supported by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance purchased by the issuer. The insurance and guarantees are issued by
Governmental entities, private insurers and mortgage poolers. There can be no
assurance that the private insurers can meet their obligations under the
policies. Mortgage-backed securities purchased for the C & B Balanced Portfolio
will, however, be rated of investment grade quality by Moody's or S&P.
The C & B Balanced Portfolio expects that Governmental or private entities
may create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is mortgage instruments whose principal
or interest payment may vary or whose terms to maturity may be shorter than
previously customary. As new types of mortgage-backed securities are developed
<PAGE>
and offered to investors, the Portfolios will, consistent with their investment
objective and policies, consider making investments in such new types of
securities.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
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 or
instrumentality 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 commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under Government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and The Tennessee Valley Authority.
IV. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financing reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable, the
non-recovered portion of foreign withholding taxes will reduce the income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.
<PAGE>
UAM FUNDS
DSI PORTFOLIOS
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 22, 1995, AS REVISED FEBRUARY 28, 1995 AND JUNE 15, 1995,
AND AS SUPPLEMENTED JULY 3, 1995, OCTOBER 6, 1995 AND OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
DSI DISCIPLINED VALUE PORTFOLIO - INSTITUTIONAL CLASS AND INSTITUTIONAL SERVICE
CLASS SHARES
PHILOSOPHY/STYLE:
DSI's equity portfolio management approach is "value-oriented" and makes use of
a proprietary screen to rank a universe of 1,000 stocks according to relative
attractiveness. The firm's philosophy is derived from DSI's belief that low
P/E, high yield portfolios will generate superior results over time. Portfolios
are built from the "bottom-up," stock-by-stock, subject to a disciplined
diversification process which is intended to avoid becoming overly concentrated
in any one segment of the market. The objective is to provide more consistent
and less volatile performance than other typical value managers.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- American Airlines
- Raytheon Corp.
- Bank of Boston
- Guy Gannett Publishing
- Reed & Barton
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
DSI LIMITED MATURITY BOND PORTFOLIO - INSTITUTIONAL CLASS SHARES
PHILOSOPHY/STYLE:
DSI's fixed income philosophy is based on the premise that investing for yield
will produce superior results over the long term. Therefore, the fixed income
portfolio is constructed primarily of corporate bonds, mortgage pass-throughs
and other high yielding sectors of the investment grade bond market. Modest
amounts of less than investment grade issues are used for yield and
diversification. The portfolio is built with an emphasis on: higher yield
relative to the benchmark in order to provide superior investment return;
investment grade securities to provide safety of principal and stability;
limited interest rate anticipation to control market risk; and broad
diversification by sector and subsector to control portfolio risk.
<PAGE>
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- American Airlines
- Raytheon Corp.
- Bank of Boston
- Guy Gannett Publishing
- Reed & Barton
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
DSI PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 22, 1995, AS REVISED FEBRUARY 28, 1995 AND JUNE 15, 1995
This Statement is not a Prospectus but should be read in
conjunction with The Regis Fund, Inc.'s Prospectus relating to the DSI
Portfolios' Institutional Class Shares dated February 22, 1995 as
revised February 28, 1995 and the Prospectus relating to the DSI
Disciplined Value Portfolio's Institutional Service Class Shares (the
"Service Class Shares") dated November 21, 1994. To obtain a
Prospectus, please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
----
Investment Objectives and Policies . . . . . . . . . . . . . . . 2
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . 5
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . 5
Investment Limitations . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . 7
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . 8
Service and Distribution Plans . . . . . . . . . . . . . . . . . 9
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . 10
Administrative Services. . . . . . . . . . . . . . . . . . . . . 11
Performance Calculations . . . . . . . . . . . . . . . . . . . . 11
General Information. . . . . . . . . . . . . . . . . . . . . . . 15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 16
Appendix - Description of Securities and Ratings . . . . . . . . A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies of the DSI Portfolios as set forth in the DSI Portfolios'
Prospectuses:
SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to
complete certain transactions, such as covering short sales, avoiding
failures to deliver securities or completing arbitrage operations. By
lending its investment securities, a Portfolio attempts to increase
its income through the receipt of interest on the loan. Any gain or
loss in the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Portfolio.
Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial
institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the Investment Company
Act of 1940 (the "1940 Act") or the rules and regulations or
interpretations of the Securities and Exchange Commission (the
"Commission") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting
of cash, an irrevocable letter of credit issued by a domestic
U.S. bank, or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value
of the securities loaned, (b) the borrower add to such collateral
whenever the price of the securities loaned rises (i.e., the borrower
"marks to the market" on a daily basis), (c) the loan be made subject
to termination by the Portfolio at any time, and (d) the Portfolio
receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments), any distribution on the loaned securities and any
increase in their market value. All relevant facts and circumstances,
including the creditworthiness of the broker, dealer or institution,
will be considered in making decisions with respect to the lending of
securities, subject to review by the Directors.
At the present time, the Staff of the Commission does not object
if an investment company pays reasonable negotiated fees in connection
with loaned securities, so long as such fees are set forth in a
written contract and approved by the investment company's Directors.
Each Portfolio will continue to retain any voting rights with respect
to the loaned securities. If a material event occurs affecting an
investment on a loan, the loan must be called and the securities
voted.
FUTURES CONTRACTS
Each Portfolio (except the DSI Money Market Portfolio) may enter
into futures contracts, options, and options on futures contracts for
the purpose of remaining fully invested and reducing transactions
costs. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security
at a specified future time and at a specified price. Futures contracts
which are standardized as to maturity date and underlying financial
instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"), a U.S. Government
agency.
Although futures contracts by their terms call for actual
delivery or acceptance of the underlying securities, in most cases the
contracts are closed out before the settlement date without the making
or taking of delivery. Closing out an open futures position is done by
taking an opposite position ("buying" a contract which has previously
been "sold" or "selling" a contract previously "purchased") in an
identical contract to terminate the position. Brokerage commissions
are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit
in cash or government securities with a broker or custodian to
initiate and maintain open positions in futures contracts. A margin
deposit is intended to assure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior
to the specified delivery date. Minimal initial margin requirements
are established by the futures exchange and may be changed. Brokers
may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on
margin that may range upward from less than 5% of the value of the
contract being traded. After a futures contract position is opened,
the value of the contract is marked to market daily. If the futures
contract price changes to the extent that the margin on deposit does
not satisfy margin requirements, payment of additional "variation"
margin will be required. Conversely, change in the contract value may
reduce the required margin, resulting in a repayment of excess margin
to the contract holder. Variation margin payments are made to and from
the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.
-2-
<PAGE>
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily
to offset unfavorable changes in the value of securities otherwise
held for investment purposes or expected to be acquired by them.
Speculators are less inclined to own the securities underlying the
futures contracts which they trade, and use futures contracts with the
expectation of realizing profits from a fluctuation in interest rates.
Each Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all
of the futures transactions constitute bonafide hedging transactions
or that the Fund's commodity futures and option positions be for other
purposes, to the extent that the aggregate initial margins and
premiums required to establish such non-hedging positions do not
exceed five percent of the liquidation value of a Portfolio. A
Portfolio will only sell futures contracts to protect securities it
owns against price declines or purchase contracts to protect against
an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, each Portfolio expects that
approximately 75% of its futures contract purchases will be
"completed;" that is, equivalent amounts of related securities will
have been purchased or are being purchased by the Portfolio upon sale
of open futures contracts.
Although techniques other than the sale and purchase of futures
contracts could be used to control a Portfolio's exposure to market
fluctuations, the use of futures contracts may be a more effective
means of hedging this exposure. While a Portfolio will incur
commission expenses in both opening and closing out futures positions,
these costs are lower than transaction costs incurred in the purchase
and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
A Portfolio will not enter into futures contract transactions to
the extent that, immediately thereafter, the sum of its initial margin
deposits on open contracts exceeds 5% of the market value of its total
assets. In addition, a Portfolio will not enter into futures contracts
to the extent that its outstanding obligations to purchase securities
under these contracts would exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
A Portfolio will minimize the risk that it will be unable to
close out a futures contract by only entering into futures which are
traded on national futures exchanges and for which there appears to be
a liquid secondary market. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract
at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, a Portfolio would
continue to be required to make daily cash payments to maintain its
required margin. In such situations, if the Portfolio has insufficient
cash, it may have to sell Portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In
addition, the Portfolio may be required to make delivery of the
instruments underlying futures contracts it holds. The inability to
close options and futures positions also could have an adverse impact
on the Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies
can be substantial, due both to the low margin deposits required, and
the extremely high degree of leverage involved in futures pricing. As
a result, a relatively small price movement in a futures contract may
result in immediate and substantial loss (as well as gain) to the
investor. For example, if at the time of purchase, 10% of the value of
the futures contract is deposited as margin, a subsequent 10% decrease
in the value of the futures contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if
the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were
closed out. Thus, a purchase or sale of a futures contract may result
in losses in excess of the amount invested in the contract. However,
because the futures strategies of each Portfolio are engaged in only
for hedging purposes, the Adviser does not believe that the Portfolios
are subject to the risks of loss frequently associated with futures
transactions. A Portfolio would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve
the risk of imperfect or no correlation where the securities
underlying futures contracts have different maturities than the
Portfolio securities being hedged. It is also possible that the
Portfolio could lose money on futures contracts and also experience a
decline in value of Portfolio securities. There is also the risk of
loss by the Portfolio of margin deposits in the event of bankruptcy of
a broker with whom the Portfolio has an open position in a futures
contract or related option.
-3-
<PAGE>
Most futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily
limit establishes the maximum amount that the price of a futures
contract may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been
reached in a particular type of contract, no trades may be made on
that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation
of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days, with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions a Portfolio has identified as hedging
transactions, the Portfolio is required for Federal income tax
purposes to recognize as income for each taxable year its net
unrealized gains and losses on regulated futures contracts as of the
end of the year, as well as those actually realized during the year.
In most cases, any gain or loss recognized with respect to a futures
contract is considered to be 60% long-term capital gain or loss and
40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which
are intended to hedge against a change in the value of securities held
by the Portfolio may affect the holding period of such securities and,
consequently, the nature of the gain or loss on such securities upon
disposition.
In order for a Portfolio to continue to qualify for Federal
income tax treatment as a regulated investment company under the
Internal Revenue Code of 1986 as amended (the "Code"), at least 90% of
its gross income for a taxable year must be derived from qualifying
income; i.e., dividends, interest, income derived from loans of
securities, and gains from the sale of securities or foreign
currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less
than three months must be limited to less than 30% of a Portfolio's
annual gross income. It is anticipated that any net gain realized from
the closing out of futures contracts will be considered a gain from
the sale of securities and therefore will be qualifying income for
purposes of the 90% requirement. In order to avoid realizing excessive
gains on securities held for less than three months, a Portfolio may
be required to defer the closing out of futures contracts beyond the
time when it would otherwise be advantageous to do so. It is
anticipated that unrealized gains on futures contracts, which have
been open for less than three months as of the end of a Portfolio's
fiscal year and which are recognized for tax purposes, will not be
considered gains on securities held for less than three months for the
purposes of the 30% test.
Each Portfolio will distribute to shareholders annually any net
capital gains which have been recognized for Federal income tax
purposes (including unrealized gains at the end of the Portfolio's
fiscal year) on futures transactions. Such distributions will be
combined with distributions of capital gains realized on the
Portfolio's other investments and shareholders will be advised on the
nature of the payments.
PURCHASE OF SHARES
Both classes of shares of the Portfolios may be purchased without
a sales commission at the net asset value per share next determined
after an order is received in proper form by the Fund and payment is
received by the Fund's Custodian. The minimum initial investment
required is $100,000 with certain exceptions as may be determined
from time to time by officers of the Fund. For each of the DSI
Portfolios (except the DSI Money Market Portfolio), an order received
in proper form prior to the 4:00 p.m. close of the New York Stock
Exchange ("Exchange") will be executed at the price computed on the
date of receipt; and an order received not in proper form or after the
4:00 p.m. close of the Exchange will be executed at the price computed
on the next day the Exchange is open after proper receipt. For the DSI
Money Market Portfolio, the net asset value is determined at 12:00
(Eastern Time). Therefore, shares purchased in the DSI Money Market
Portfolio before 12:00 noon (Eastern Time) begin earning dividends on
the same business day provided Federal funds are available to the Fund
before 12:00 noon (Eastern Time) that day. The Exchange will be closed
on the following days: Good Friday, April 14, 1995; Memorial Day, May
29, 1995; Independence Day, July 4, 1995; Labor Day, September 4,
1995; Thanksgiving Day, November 23, 1995; Christmas Day, December 25,
1995; New Year's Day, January 1, 1996; and Presidents' Day, February
19, 1996.
Each Portfolio reserves the right in its sole discretion (i) to
suspend the offering of its shares, (ii) to reject purchase orders
when in the judgement of management such rejection is in the best
interest of the Fund, and (iii) to reduce or waive
-4-
<PAGE>
the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under
circumstances where certain economies can be achieved in sales of a
Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the
date of payment (1) during any period that both the Exchange and
custodian bank are closed, or trading on the Exchange is restricted as
determined by the Commission, (2) during any period when an emergency
exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for a Portfolio to dispose of
securities owned by it, or to fairly determine the value of its
assets, and (3) for such other periods as the Commission may permit.
The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the net
assets of the Fund at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Commission. Redemptions
in excess of the above limits may be paid in whole or in part, in
investment securities or in cash, as the Directors may deem advisable;
however, payment will be made wholly in cash unless the Directors
believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If
redemptions are paid in investment securities, such securities will be
valued as set forth in the Prospectus under "Valuation of Shares" and
a redeeming shareholder would normally incur brokerage expenses if
these securities were converted to cash.
No charge is made by any Portfolio for redemptions. Any
redemption may be more or less than the shareholder's initial cost
depending on the market value of the securities held by the Portfolio.
SIGNATURE GUARANTEES - To protect your account, the Fund and the
Administrator from fraud, signature guarantees are required for
certain redemptions. The purpose of signature guarantees is to verify
the identity of the person who has authorized a redemption from your
account. Signature guarantees are required in connection with (1) all
redemptions when the proceeds are to be paid to someone other than the
registered owner(s) and/or registered address; or (2) share transfer
requests.
Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. Eligible guarantor institutions include banks, brokers,
dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations. A
complete definition of eligible guarantor institutions is available
from the Administrator. Broker-dealers guaranteeing signatures must be
a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee
program.
The signature guarantee must appear either: (1) on the written
request for redemption; (2) on a separate instrument for assignment
("stock power") which should specify the total number of shares to be
redeemed; or (3) on all stock certificates tendered for redemption
and, if shares held by the Fund are also being redeemed, on the letter
or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information
set forth in the DSI Portfolios' Prospectuses:
EXCHANGE PRIVILEGE
Institutional Class Shares of each DSI Portfolio may be exchanged
for Institutional Class Shares of the other DSI Portfolios. In
addition, Institutional Class Shares of each DSI Portfolio may be
exchanged for any other Institutional Class Shares of a Portfolio
included in The Regis Family of Funds which is comprised of the Fund
and The Regis Fund II. (See the list of Portfolios of The Regis Family
of Funds - Institutional Class Shares at the end of the DSI Portfolios
- - Institutional Class Shares Prospectus.) Service Class Shares of the
DSI Disciplined Value Portfolio may be exchanged for any other Service
Class Shares of a Portfolio included in The Regis Family of Funds
which is comprised of the Fund and The Regis Fund II. (See the list of
Portfolios of The Regis Family of Funds - Service Class Shares at the
end of the DSI Disciplined Value Portfolio - Service Class Shares
Prospectus.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to The Regis Fund, Inc., The Regis
Service Center, c/o Mutual Funds Service Company,
-5-
<PAGE>
P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is
only available with respect to Portfolios that are registered for
sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset
values of the shares involved. There is no sales commission or charge
of any kind. Before making an exchange into a Portfolio, a shareholder
should read its Prospectus and consider the investment objectives of
the Portfolio to be purchased. You may obtain a Prospectus for the
Portfolio(s) you are interested in by calling The Regis Service Center
at 1-800-638-7983.
Exchange requests may be made either by mail or telephone.
Telephone exchanges will be accepted only if the certificates for the
shares to be exchanged are held by the Fund for the account of the
shareholder and the registration of the two accounts will be
identical. Requests for exchanges received prior to 12:00 noon
(Eastern Time) for the DSI Money Market Portfolio, and 4:00 p.m.
(Eastern Time) for the other DSI Portfolios will be processed as of
the close of business on the same day. Requests received after these
times will be processed on the next business day. Neither the Fund nor
the Administrator will be responsible for the authenticity of the
exchange instructions received by telephone. Exchanges may also be
subject to limitations as to amounts or frequency and to other
restrictions established by the Board of Directors to assure that such
exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is
a taxable event, and, accordingly, a capital gain or loss may be
realized. In a revenue ruling relating to circumstances similar to the
Fund's, an exchange between series of a Fund was also deemed to be a
taxable event. It is likely, therefore, that a capital gain or loss
would be realized on an exchange between Portfolios; you may want to
consult your tax adviser for further information in this regard. The
exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares to another person by making a
written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the
signature of all registered owners and all stock certificates, if any,
which are subject to the transfer. The signature on the letter of
request, the stock certificate or any stock power must be guaranteed
in the same manner as described under "Redemption of Shares." As in
the case of redemptions, the written request must be received in good
order before any transfer can be made.
INVESTMENT LIMITATIONS
Each DSI Portfolio of the Fund is subject to the following
restrictions which are fundamental policies of the DSI Disciplined
Value Portfolio, DSI Limited Maturity Bond Portfolio and DSI Money
Market Portfolio and may not be changed without the approval of the
lesser of: (1) at least 67% of the voting securities of the Portfolio
present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Portfolio are present or
represented by proxy, or (2) more than 50% of the outstanding voting
securities of the Portfolio. Only investment limitations (1), (2), (3)
and (10) are classified as fundamental policies of the DSI Balanced
Portfolio. Each Portfolio will not:
(1) invest in commodities except that each Portfolio may
invest in futures contracts and options to the extent that
not more than 5% of a Portfolio's assets are required as
deposit to secure obligations under futures contracts;
(2) purchase or sell real estate, although it may purchase
and sell securities of companies which deal in real estate
and may purchase and sell securities which are secured by
interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures
or similar obligations (including repurchase agreements,
subject to the limitation described in (10) below) which are
publicly distributed, and (ii) by lending its portfolio
securities to banks, brokers, dealers and other financial
institutions so long as such loans are not inconsistent with
the 1940 Act or the rules and regulations or interpretations
of the Commission thereunder;
(4) purchase on margin or sell short except as specified in
(1) above;
(5) purchase more than 10% of the outstanding voting securities
of any issuer;
-6-
<PAGE>
(6) with respect as to 75% of its assets, purchase securities
of any issuer (except obligations of the United States
Government and its instrumentalities) if as the result more
than 5% of the Portfolio's total assets, at the time of
purchase, would be invested in the securities of such issuer;
(7) purchase or retain securities of an issuer if those Officers
and Directors of the Fund or its investment adviser owning
more than 1/2 of 1% of such securities together own more
than 5% of such securities;
(8) borrow money, except from banks and as a temporary measure
for extraordinary or emergency purposes and then, in no
event, in excess of 10% (33 1/3% for the DSI Balanced
Portfolio) of the Portfolio's gross assets valued at the
lower of market or cost, and a Portfolio may not purchase
additional securities when borrowings exceed 5% of total
gross assets;
(9) pledge, mortgage, or hypothecate any of its assets to
an extent greater than 10% (33 1/3% for the DSI Balanced
Portfolio) of its total assets at fair market value;
(10) underwrite the securities of other issuers or invest more
than an aggregate of 10% (33 1/3% for the DSI Balanced
Portfolio) of the assets of the Portfolio, determined at the
time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which
there are no readily available markets, including repurchase
agreements having maturities of more than seven days;
(11) invest for the purpose of exercising control over management
of any company;
(12) invest more than 5% of its assets at the time of purchase
in the securities of companies that have (with predecessors)
continuous operations consisting of less than three years;
(13) acquire any securities of companies within one industry
if, as a result of such acquisition, more than 25% of the
value of the Portfolio's total assets would be invested in
securities of companies within such industry; provided,
however, that there shall be no limitation on the purchase
of obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, or instruments issued by
U.S. banks when the Portfolio adopts a temporary defensive
position; and
(14) write or acquire options or interest in oil, gas or other
mineral exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of
Directors, manage the day-to-day operations of the Fund. The Directors
set broad policies for the Fund and choose its officers. A list of the
Directors and officers of the Fund and a brief statement of their
present positions and principal occupations during the past 5 years is
set forth in the DSI Portfolios' Prospectus. As of January 31, 1995,
the Directors and officers of the Fund owned less than 1% of the
Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or
affiliated person, a $150 quarterly retainer fee per active Portfolio
which currently amounts to $4,350 per quarter. In addition, each
unaffiliated Director receives a $2,000 meeting fee which is
aggregated for all of the Directors and allocated proportionately
among the Portfolios of the Fund and The Regis Fund II as well as the
AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for
travel and other expenses incurred while attending Board meetings.
Directors who are also officers or affiliated persons receive no
remuneration for their service as Directors. The Fund's officers and
employees are paid by either the Adviser, United Asset Management
Corporation ("UAM"), or the Administrator and receive no compensation
from the Fund.
-7-
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations
held of record or beneficially 5% or more of the shares of a
Portfolio, as noted.
DSI DISCIPLINED VALUE PORTFOLIO: Bank of Boston & Co., Boston,
MA, 84.1%*.
DSI LIMITED MATURITY BOND PORTFOLIO: Bank of Boston, Boston, MA,
86.1%*.
DSI MONEY MARKET PORTFOLIO: First National Bank of Boston,
Canton, MA, 99.7%*.
The persons or organizations listed above as owning 25% or more
of the outstanding shares of a Portfolio may be presumed to "control"
(as that term is defined in the 1940 Act) such Portfolio. As a result,
those persons or organizations could have the ability to vote a
majority of the shares of the Portfolio on any matter requiring the
approval of shareholders of such Portfolio.
__________
* Denotes share held by a trustee or other fiduciary for which
beneficial ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Dewey Square Investors Corporation (the "Adviser") is a
wholly-owned subsidiary of UAM, a holding company incorporated in
Delaware in December 1980 for the purpose of acquiring and owning
firms engaged primarily in institutional investment management. Since
its first acquisition in August 1983, UAM has acquired or organized
approximately 42 such wholly-owned affiliated firms (the "UAM
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms
to retain control over their investment advisory decisions is
necessary to allow them to continue to provide investment management
services that are intended to meet the particular needs of their
respective clients. Accordingly, after acquisition by UAM, UAM
Affiliated Firms continue to operate under their own firm name, with
their own leadership and individual investment philosophy and
approach. Each UAM Affiliated Firm manages its own business
independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen
by each of them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the
Investment Advisory Agreement, each DSI Portfolio pays the Adviser an
annual fee, in monthly installments, calculated by applying the
following annual percentage rates to each of the DSI Portfolio's
average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
DSI Balanced Portfolio . . . . . . . . . . .45% for the first 12 months
of operation
.55% for the next 12 months of
operations and .65% thereafter
DSI Disciplined Value Portfolio. . . . . . .750% of the first $500 million
.650% in excess of $500 million
DSI Limited Maturity Bond Portfolio. . . . .450% of the first $500 million
.400% of the next $500 million
.350% in excess of $1 billion
DSI Money Market Portfolio . . . . . . . . .400% of the first $500 million
.350% in excess of $500 million
</TABLE>
For the years ended October 31, 1992, 1993 and 1994, the DSI
Disciplined Value Portfolio paid advisory fees of approximately
$294,000, $293,000 and $328,000, respectively, to the Adviser.
-8-
<PAGE>
For the years ended October 31, 1992, 1993 and 1994, the DSI
Limited Maturity Bond Portfolio paid advisory fees of approximately
$153,000, $150,000 and $140,000, respectively, to the Adviser.
For the years ended October 31, 1992, 1993 and 1994, the DSI
Money Market Portfolio paid advisory fees of approximately $815,000,
$674,000 and $719,000, respectively, to the Adviser.
As of October 31, 1994, the DSI Balanced Portfolio had not yet
commenced operations.
SERVICE AND DISTRIBUTION PLANS
As stated in the DSI Disciplined Value Portfolio's Service Class
Shares Prospectus, RFI Distributors may enter into agreements with
broker-dealers and other financial institutions ("Service
Organizations"), pursuant to which they will provide administrative
support services to Service Class shareholders who are their customers
("Customers") in consideration of such Fund's payment of 0.25% (on an
annualized basis) of the average daily net asset value of the Service
Class Shares held by the Service Organization for the benefit of its
Customers. Such services include:
(a) acting as the sole shareholder of record and nominee for
beneficial owners;
(b) maintaining account record for such beneficial owners of the
Fund's shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from
shareholders about their accounts;
(e) processing shareholder orders to purchase, redeem and
exchange shares;
(f) handling the transmission of funds representing the purchase
price or redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares
by shareholders;
(h) distributing current copies of prospectuses, statements of
additional information and shareholder reports;
(i) assisting customers in completing application forms,
selecting dividend and other account options and opening any
necessary custody accounts;
(j) providing account maintenance and accounting support for all
transactions; and
(k) performing such additional shareholder services as may
be agreed upon by the Fund and the Service Organization,
provided that any such additional shareholder service must
constitute a permissible non-banking activity in accordance
with the then current regulations of, and interpretations
thereof by, the Board of Governors of the Federal Reserve
System, if applicable.
Each agreement with a Service Organization is governed by a
shareholder Service Plan (the "Service Plan") that has been adopted by
the Fund's Board of Directors. Pursuant to the Service Plan, the
Board of Directors reviews, at least quarterly, a written report of
the amounts expended under each agreement with Service Organizations
and the purposes for which the expenditures were made. In addition,
arrangements with Service Organizations must be approved annually by a
majority of the Fund's directors, including a majority of the
directors who are not "interested persons" of the company as defined
in the 1940 Act and have no direct or indirect financial interest in
such arrangements.
The Board of Directors has approved the arrangements with Service
Organizations based on information provided by the Fund's service
contractors that there is a reasonable likelihood that the
arrangements will benefit the Fund and its shareholders by affording
the Fund greater flexibility in connection with the servicing of the
accounts of the beneficial owners of its shares in an efficient
manner. Any material amendment to a Fund's arrangements with Service
Organizations must be approved by a majority of the Fund's Board of
Directors (including a majority of the disinterested directors). So
long as the arrangements with Service Organizations are in effect, the
selection and nomination of the members of the
-9-
<PAGE>
Fund's Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Company will be committed to the
discretion of such non-interested directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Distribution Plan for the Service Class Shares of the Fund (the
"Distribution Plan"). The Distribution Plan permits the Fund to pay
for certain distribution, promotional and related expenses involved in
the marketing of only the Service Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant
to the Distribution Agreement, to pay a monthly fee to the Distributor
for its services and expenses in distributing and promoting sales of
the Service Class Shares. These expenses include, among other things,
preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales
and marketing personnel, and paying distribution and maintenance fees
to securities brokers and dealers who enter into agreements with the
Distributor. In addition, the Service Class Shares may make payments
directly to other unaffiliated parties, who either aid in the
distribution of their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the
Service and Distribution Plans (the "Plans"), is 0.75% of the Service
Class Shares' average daily net assets for the year. The Fund's Board
of Directors may reduce this amount at any time. Although the maximum
fee payable under the 12b-1 Plan relating to the Service Class Shares
is 0.75% of average daily net assets of such class, the Board of
Directors has determined that the annual fee, payable on a monthly
basis, under the Plans relating to the Service Class Shares, currently
cannot exceed 0.50% of the average daily net assets represented by
Service Class. While the current fee which will be payable under the
Service Plan has been set at 0.25%, the Plan permits a full 0.75% on
all assets to be paid at any time following appropriate Board
approval.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid by the
Service Class Shares will be borne by such persons without any
reimbursement from such classes. Subject to seeking best price and
execution, the Fund may, from time to time, buy or sell portfolio
securities from or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in
providing administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's
and services agreements have all been approved by the Board of
Directors of the Fund, including a majority of the directors who are
not "interested persons" (as defined in the 1940 Act) of the Fund and
who have no direct or indirect financial interest in the Plan or any
related agreements, by vote cast in person at a meeting duly called
for the purpose of voting on the Plan and such Agreements.
Continuation of the Plan, the Distribution Agreement and the related
agreements must be approved annually by the Board of Directors in the
same manner, as specified above. No Service Class Shares have been
offered prior to the date of this Part B.
Each year the directors must determine whether continuation of
the Plans is in the best interest of the shareholders of Service Class
Shares and that there is a reasonable likelihood of the Plans
providing a benefit to the Class. The Plans, the Distribution
Agreement and the related agreements with any broker-dealer or others
relating to a Class may be terminated at any time without penalty by a
majority of those directors who are not "interested persons" or by a
majority vote of the outstanding voting securities of the Class. Any
amendment materially increasing the maximum percentage payable under
the Plans must likewise be approved by a majority vote of the relevant
Class' outstanding voting securities, as well as by a majority vote of
those directors who are not "interested persons." Also, any other
material amendment to the Plans must be approved by a majority vote of
the directors including a majority of the directors of the Fund having
no interest in the Plans. In addition, in order for the Plans to
remain effective, the selection and nomination of directors who are
not "interested persons" of the Fund must be effected by the directors
who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plans. Persons authorized to make
payments under the Plans must provide written reports at least
quarterly to the Board of Directors for their review. The NASD has
adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend
to operate in compliance with these rules.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to
select the brokers or dealers that will execute the purchases and
sales of investment securities for each of the Fund's DSI Portfolios
and directs the Adviser to use its best efforts to obtain the best
execution with respect to all transactions for the Portfolios. In
doing so, a Portfolio may pay higher
-10-
<PAGE>
commission rates than the lowest rate available when the Adviser
believes it is reasonable to do so in light of the value of the
research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to
allocate brokerage or effect principal transactions with dealers on
the basis of sales of shares which may be made through
broker-dealer firms. However, the Adviser may place portfolio
orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the
Portfolios for their clients. During the fiscal years ended October 31,
1992, 1993 and 1994, the entire Fund paid brokerage commissions
of approximately $1,248,000, $1,592,000 and $2,402,000,
respectively.
Some securities considered for investment by the Fund's DSI
Portfolios may also be appropriate for other clients served by the
Adviser. If purchases or sales of securities consistent with the
investment policies of a Portfolio and one or more of these other
clients served by the Adviser is considered at or about the same time,
transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and
the results of such allocations, are subject to periodic review by the
Fund's Directors.
ADMINISTRATIVE SERVICES
Effective January 20, 1992, Mutual Funds Service Company, an
affiliate of United States Trust Company of New York, (the
"Administrator") provides administrative, fund accounting, dividend
disbursing and transfer agency services to the Fund under an
Administration Agreement. Prior to January 20, 1992, administrative
services were provided to the fund by The Vanguard Group, ("Vanguard")
under a similar agreement. For its services, the Fund paid Vanguard a
monthly fee which on an annual basis equaled 0.20 of 1% of the first
$200,000,000 of the aggregate net assets of the Fund; 0.12 of 1% of
the next $800,000,000 of the aggregate net assets of the Fund; and .08
of 1% of the aggregate net assets of the Fund in excess of
$1,000,000,000. This fee was allocated based on the relative net
assets of each Portfolio, provided, however, that the minimum annual
fee equaled $50,000 for each active Portfolio. During the fiscal year
ended October 31, 1992, administrative services fees paid by the DSI
Disciplined Value Portfolio totaled $52,634 of which $14,659 was paid
to Vanguard and $37,975 was paid to the Administrator. During the
fiscal year ended October 31, 1992, administrative services fees paid
by the DSI Limited Maturity Bond Portfolio totaled $50,235 of which
$12,732 was paid to Vanguard and $37,503 was paid to the
Administrator. During the fiscal year ended October 31, 1992,
administrative services fees paid by the DSI Money Market Portfolio
totaled $270,383 of which $85,401 was paid to Vanguard and $184,982
was paid to the Administrator. During the fiscal year ended
October 31, 1993, administrative services fees paid to the
Administrator by the DSI Money Market, the DSI Disciplined Value and
the DSI Limited Maturity Bond Portfolios totaled $207,000, $58,000 and
$62,000, respectively. The basis of the fees paid the Administrator
for the 1992 and 1993 fiscal years was as follows: the Fund paid
monthly fee for its services which on an annualized basis equaled 0.16
of 1% of the first $200 million of the aggregate net assets of the
Fund; plus 0.12 of 1% of the next $800 million of the aggregate net
assets of the Fund; plus 0.06 of 1% of the aggregate net assets in
excess of $1 billion. The fees were allocated among the Portfolios on
the basis of their relative assets and were subject to a graduated
minimum fee schedule per Portfolio, which rose from $1,000 per month
upon inception of a Portfolio to $50,000 annually after two years.
During the fiscal year ended October 31, 1994, administrative services
fees paid to the Administrator by the DSI Disciplined Value, DSI
Limited Maturity Bond and DSI Money Market Portfolios totaled $69,000,
$69,000 and $204,000, respectively. As of October 31, 1994, the DSI
Balanced Portfolio had not yet commenced operations. The services
provided by the Administrator and the current fees payable to the
Administrator are described in the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures
to illustrate each class of the Fund's past performance.
Performance quotations by investment companies are subject to
rules adopted by the Commission, which require the use of standardized
performance quotations or, alternatively, that every non-standardized
performance quotation furnished by each class of the Fund be
accompanied by certain standardized performance information computed
as required by the SEC. Current yield and average annual compounded
total return quotations used by each class of the Fund are based on
the standardized methods of computing performance mandated by the SEC.
An explanation of those and other methods used by each class of the
Fund to compute or express performance follows.
-11-
<PAGE>
TOTAL RETURN
The average annual total return is determined by finding the
average annual compounded rates of return over 1, 5, and 10 year
periods that would equate an initial hypothetical $1,000 investment to
its ending redeemable value. The calculation assumes that all
dividends and distributions are reinvested when paid. The quotation
assumes the amount was completely redeemed at the end of each 1, 5 and
10 year period and the deduction of all applicable Fund expenses on an
annual basis. Since Service Class Shares of the DSI Disciplined Value
Portfolio bears additional service and distribution expenses, the
average annual total return of the Service Class Shares of a Portfolio
will generally be lower than that of the Institutional Class Shares of
the same Portfolio.
The average annual total rates of return for the Institutional
Class Shares of the DSI Portfolios from inception to October 31, 1994
and for the one-year period ended October 31, 1994, are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION ONE YEAR
THROUGH ENDED
OCTOBER 31, 1994 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
DSI Disciplined Value Portfolio . . . 7.92% 3.48%
DSI Limited Maturity Bond Portfolio . 6.54% -1.39%
DSI Money Market Portfolio. . . . . . 4.59% 3.30%
</TABLE>
These figures were calculated according to the following formula:
P (1 + T)(n) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year periods
(or fractional portion thereof).
Institutional Class Shares of the DSI Balanced Portfolio and
Service Class Shares of the DSI Disciplined Value Portfolio were not
offered as of October 31, 1994. Accordingly, no total return figures
are available.
YIELD
Current yield reflects the income per share earned by a
Portfolio's investments. Since Service Class Shares of the DSI
Disciplined Value Portfolio bears additional service and distribution
expenses, the yield of the Service Class Shares of a Portfolio will
generally be lower than that of the Institutional Class Shares of the
same Portfolio.
Current yield is determined by dividing the net investment income
per share earned during a 30-day base period by the maximum offering
price per share on the last day of the period and annualizing the
result. Expenses accrued for the period include any fees charged to
all shareholders during the base period. The yield for the
Institutional Class Shares of the DSI Limited Maturity Bond Portfolio
for the 30-day period ended on October 31, 1994 was 6.92%.
This figure was obtained using the following formula:
Yield = 2 [ (a - b + 1)(6) - 1]
-----
cd
-12-
<PAGE>
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the
period.
CALCULATION OF YIELD (DSI MONEY MARKET PORTFOLIO)
The current yield of the DSI Money Market Portfolio is calculated
daily on a base period return for a hypothetical account having a
beginning balance of one share for a particular period of time
(generally 7 days). The return is determined by dividing the net
change (exclusive of any capital changes in such account) by its
average net asset value for the period, and then multiplying it by
365/7 to determine the annualized current yield. The calculation of
net change reflects the value of additional shares purchased with the
dividends by the Portfolio, including dividends on both the original
share and on such additional shares. An effective yield, which
reflects the effects of compounding and represents an annualization of
the current yield with all dividends reinvested, may also be
calculated for each Portfolio by dividing the based period return by
7, adding 1 to the quotient, raising the sum to the 365th power, and
subtracting 1 from the result.
The current and effective yield calculations for the DSI Money
Market Portfolio Institutional Class Shares for the 7 day base period
ended October 31, 1994 were 4.48% and 4.58%, respectively.
COMPARISONS
To help investors better evaluate how an investment in a
Portfolio of the Fund might satisfy their investment objective,
advertisements regarding the Fund may discuss various measures of Fund
performance as reported by various financial publications.
Advertisements may also compare performance (as calculated above) to
performance as reported by other investments, indices and averages.
The following publications, indices and averages may be used:
(a) Donoghue's Money Fund Average - is an average of all
major money market fund yields, published weekly for 7 and
30-day yields.
(b) Dow Jones Composite Average or its component averages -
an unmanaged index composed of 30 blue-chip industrial
corporation stocks (Dow Jones Industrial Average), 15
utilities company stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
(c) Standard & Poor's 500 Stock Index or its component
indices - an unmanaged index composed of 400 industrial
stocks, 40 financial stocks, 40 utilities stocks and 20
transportation stocks. Comparisons of performance assume
reinvestment of dividend.
(d) The New York Stock Exchange composite or component
indices - unmanaged indices of all industrial, utilities,
transportation and finance stocks listed on the New York
Stock Exchange.
(e) Wilshire 5000 Equity Index or its component indices -
represents the return on the market value of all common
equity securities for which daily pricing is available.
Comparisons of performance assume reinvestment of dividends.
(f) Lipper - Mutual Fund Performance Analysis and Lipper -
Fixed Income Fund Performance Analysis - measures total
return and average current yield for the mutual fund
industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(g) Morgan Stanley Capital International EAFE Index and
World Index - respectively, arithmetic, market
value-weighted averages of the performance of over 900
securities listed on the stock exchanges of countries in
Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these
continents, including North America.
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<PAGE>
(h) Goldman Sachs 100 Convertible Bond Index - currently
includes 67 bonds and 33 preferred. The original list of
names was generated by screening for convertible issues of
100 million or greater in market capitalization. The index
is priced monthly.
(i) Salomon Brothers GNMA Index - includes pools of
mortgages originated by private lenders and guaranteed by
the mortgage pools of the Government National Mortgage
Association.
(j) Salomon Brothers High Grade Corporate Bond Index -
consists of publicly issued, non-convertible corporate bonds
rated AA or AAA. It is a value-weighted, total return index,
including approximately 800 issues with maturities of 12
years or greater.
(k) Salomon Brothers Broad Investment Grade Bond - is a
market-weighted index that contains approximately 4,700
individually priced investment grade corporate bonds rated
BBB or better. U.S. Treasury/agency issues and mortgage
passthrough securities.
(l) Lehman Brothers LONG-TERM Treasury Bond - is composed
of all bonds covered by the Lehman Brothers Treasury Bond
Index with maturities of 10 years or greater.
(m) Lehman Brothers Intermediate Government/Corporate
Index - is a combination of the Government and Corporate
Bond Indices. All issues are investment grade (BBB) or
higher, with maturities of one to ten years and an
outstanding par value of at least $100 million for
U.S. Government issues and $25 million for others. The
Government Index includes public obligations of the
U.S. Treasury, issues of Government agencies, and corporate
debt backed by the U.S. Government. The Corporate Bond Index
includes fixed-rate nonconvertible corporate debt. Also
included are Yankee Bonds and nonconvertible debt issued by
or guaranteed by foreign or international governments and
agencies. Any security downgraded during the month is held
in the index until month-end and then removed. All returns
are market value weighted inclusive of accrued income.
(n) NASDAQ Industrial Index - is composed of more than
3,000 industrial issues. It is a value-weighted index
calculated on price change only and does not include income.
(o) Value Line - composed of over 1,600 stocks in the Value
Line Investment Survey.
(p) Russell 2000 - composed of the 2,000 smallest stocks in
the Russell 3000, a market value weighted index of the 3,000
largest U.S. publicly-traded companies.
(q) Composite Indices - 70% Standard & Poor's 500 Stock
Index and 30% NASDAQ Industrial Index; 35% Standard & Poor's
500 Stock Index and 65% Salomon Brothers High Grade Bond
Index; all stocks on the NASDAQ system exclusive of those
traded on an exchange, and 65% Standard & Poor's 500 Stock
Index and 35% Salomon Brothers High Grade Bond Index.
(r) CDA Mutual Fund Report, published by CDA Investment
Technologies, Inc. - analyzes price, current yield, risk,
total return and average rate of return (average annual
compounded growth rate) over specified time periods for the
mutual fund industry.
(s) Mutual Fund Source Book, published by Morningstar,
Inc. - analyzes price, yield, risk and total return for
equity funds.
(t) Financial publications: Business Week, Changing Times,
Financial World, Forbes, Fortune, Money, Barron's,
Consumer's Digest, Financial Times, Global Investor,
Investor's Daily, Lipper Analytical Services, Inc.,
Morningstar, Inc., New York Times, Personal Investor, Wall
Street Journal and Weisenberger Investment Companies
Service - publications that rate fund performance over
specified time periods.
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<PAGE>
(u) Consumer Price Index (or Cost of Living Index),
published by the U.S. Bureau of Labor Statistics - a
statistical measure of change, over time in the price of
goods and services in major expenditure groups.
(v) Stocks, Bonds, Bills and Inflation, published by
Ibbotson Associates - historical measure of yield, price and
total return for common and small company stock, long-term
government bonds, U.S. Treasury bills and inflation.
(w) Savings and Loan Historical Interest Rates - as
published by the U.S. Savings and Loan League Fact Book.
(x) Historical data supplied by the research departments of
First Boston Corporation, the J.P. Morgan companies, Salomon
Brothers, Merrill Lynch, Pierce, Fenner & Smith, Lehman
Brothers and Bloomberg L.P.
In assessing such comparisons of performance, an investor should
keep in mind that the composition of the investments in the reported
indices and averages is not identical to the composition of
investments in the Fund's Portfolios, that the averages are generally
unmanaged, and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to
calculate its futures. In addition, there can be no assurance that the
Fund will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a
Maryland corporation on October 11, 1988. On January 18, 1989, the
name of the Fund was changed to "The Regis Fund, Inc." The Fund's
principal executive office is located at 803 Cathedral Street,
Baltimore, MD 21201; however, all investor correspondence should be
directed to the Fund at The Regis Fund Service Center, c/o Mutual
Funds Service Company, P.O. Box 2798, Boston, MA 02208- 2798. The
Fund's Articles of Incorporation authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of
Directors has the power to designate one or more series (Portfolios)
or classes of common stock and to classify or reclassify any unissued
shares with respect to such Portfolios, without further action by
shareholders. Currently, the Fund is offering shares of 29
Portfolios. The Directors of the Fund may create additional
Portfolios and classes of shares at a future date.
Both classes of shares of each Portfolio of the Fund, when
issued and paid for as provided for in the Prospectus, will be fully
paid and nonassessable, have no preference as to conversion, exchange,
dividends, retirement or other features and have no preemptive rights.
The shares of the Fund have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose
to do so. A shareholder is entitled to one vote for each full share
held (and a fractional vote for each fractional share held), then
standing in his or her name on the books of the Fund. Both
Institutional Class and Service Class Shares represent an interest in
the same assets of a Portfolio and are identical in all respects
except that the Service Class Shares bear certain expenses related to
shareholder servicing and the distribution of such shares, and have
exclusive voting rights with respect to matters relating to such
distribution expenditures.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the
Portfolios' net investment income, if any, together with any net
realized capital gains in the amount and at the times that will avoid
both income (including capital gains) taxes on it and the imposition
of the Federal excise tax on undistributed income and capital gains
(see discussion under "Dividends, Capital Gains Distributions and
Taxes" in the Prospectus). The amounts of any income dividends or
capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of
shares of a Portfolio by an investor may have the effect of reducing
the per share net asset value of that Portfolio by the per share
amount of the dividend or distribution. Furthermore, such dividends or
distributions, although in effect a return of capital, are subject to
income taxes as set forth in the Prospectus.
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<PAGE>
As set forth in the Prospectus, unless the shareholder elects
otherwise in writing, all dividend and capital gain distributions are
automatically received in additional shares of the Portfolios at net
asset value (as of the business day following the record date). This
will remain in effect until the Fund is notified by the shareholders
in writing at least three days prior to the record date that either
the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash
Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders
whenever an income dividend or capital gains distribution is paid.
Each Portfolio will be treated as a separate entity (and hence as
a separate "regulated investment company") for Federal tax purposes.
Any net capital gains recognized by a Portfolio will be distributed to
its investors without need to offset (for Federal income tax purposes)
such gains against any capital losses of another Portfolio.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a
certain extent personal transactions by access persons of the Fund and
imposes certain disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Institutional Class Shares of the
DSI Disciplined Value, Limited Maturity Bond and Money Market
Portfolios and the Financial Highlights for the respective periods
presented which appear in the DSI Portfolios' 1994 Annual Report to
Shareholders, and the reports thereon of Price Waterhouse LLP,
independent accountants, also appearing therein, are incorporated by
reference into this Statement of Additional Information. An Annual
Report may be obtained, without charge, by writing to the Fund or by
calling The Regis Service Center at 1-800-638-7983.
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<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's")
description of its highest bond ratings: Aaa - judged to be the best
quality; carry the smallest degree of investment risk; Aa - judged to
be of high quality by all standards; A - possess many favorable
investment attributes and are to be considered as higher medium grade
obligations; Baa - considered as lower medium grade obligations, i.e.,
they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description
of its highest bond ratings: AAA - highest grade obligations; possess
the ultimate degree of protection as to principal and interest; AA -
also qualify as high grade obligations, and in the majority of
instances differs from AAA issues only in small degree; A - regarded
as upper medium grade; have considerable investment strength but are
not entirely free from adverse effects of changes in economic and
trade conditions. Interest and principal are regarded as safe; BBB -
regarded as borderline between definitely sound obligations and those
where the speculative element begins to predominate; this group is the
lowest which qualifies for commercial bank investment.
II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a
pool of residential mortgage loans. These securities are designed to
provide monthly payments of interest and principal to the investor.
The mortgagor's monthly payments to his/her lending institution are
"passed-through" to investors. Most issuers or poolers provide
guarantees of payments, regardless of whether or not the mortgagor
actually makes the payment. The guarantees made by issuers or poolers
are supported by various forms of credit, collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance
purchased by the issuer. There can be no assurance that the private
issuers can meet their obligations under the policies. Mortgage-backed
securities issued by private issuers, whether or not such securities
are subject to guarantees, may entail greater risk. If there is no
guarantee provided by the issuer, mortgage-backed securities purchased
will be rated investment grade by Moody's or S&P.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participations in loans.
The majority of these loans are made to purchasers of 1-4 family
homes. The terms and characteristics of the mortgage instruments are
generally uniform within a pool but may vary among pools. For example,
in addition to fixed-rate, fixed-term mortgages, the DSI Portfolios
authorized to purchase mortgage-backed securities may purchase pools
of variable rate mortgages (VRM), growing equity mortgages (GEM),
graduated payment mortgages (GPM) and other types where the principal
and interest payment procedures vary. VRM's are mortgages which reset
the mortgage's interest rate on pools of VRM's. GPM and GEM pools
maintain constant interest rates, with varying levels of principal
repayment over the life of the mortgage. These different interest and
principal payment procedures should not impact a Portfolio's net asset
value since the prices at which these securities are valued each day
will reflect the payment procedure.
All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also
establish credit standards and underwriting criteria for individual
mortgages included in the pools. In addition, many mortgages included
in pools are insured through private mortgage insurance companies.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities
of the underlying mortgage instruments. In addition, a pool's term may
be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. The occurrence of mortgage
prepayment is affected by factors including the level of interest
rates, general economic conditions, the location and age of the
mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not
possible to accurately predict the average life of a particular pool.
For pools of fixed-rate 30-year mortgages, common industry practice is
to assume that prepayments will
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<PAGE>
result in a 12-year average life. Pools of mortgages with other
maturities of different characteristics will have varying assumptions
for average life.
RETURNS ON MORTGAGE-BACKED SECURITIES
Yields on mortgage-backed pass-through securities are typically
quoted on the maturity of the underlying instruments and the
associated average life assumption. Actual prepayment experience may
cause the yield to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest
rates than the original investment, thus affecting the yields of the
Portfolios. The compounding effect from reinvestment of monthly
payments received by a Portfolio will increase its yield to
shareholders, compared to bonds that pay interest semiannually.
ABOUT MORTGAGE-BACKED SECURITIES
Interests in pools of mortgage-backed 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
mortgage loans, net of any fees paid to the issuer or guarantor of
such securities. Additional payments are caused by repayments
resulting from the sale of the underlying residential property,
refinancing or foreclosure net of fees or costs which may be incurred.
Some mortgage-backed securities are described as "modified
pass-through." These securities entitle the holders to receive all
interest and principal payments owed on the mortgages in the pool, net
of certain fees, regardless of whether or not the mortgagors actually
make the payment.
Residential mortgage loans are pooled by the Federal Home Loan
Mortgage Corporation (FHLMC). FHLMC is a corporate instrumentality of
the U.S. Government and was created by Congress in 1970 for the
purpose of increasing the availability of mortgage credit for
residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PC's") which
represent interests in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate
collection of principal.
The Federal National Mortgage Association (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 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.
The principal Government guarantor of mortgage-backed securities
is the Government National Mortgage Association (GNMA). 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 approved
institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
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. 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 guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan,
title, pool and hazard insurance purchased by the issuer. The
insurance and guarantees are issued by Governmental entities, private
insurers and the mortgage poolers. There can be no assurance that the
private insurers can meet their obligations under the policies.
Mortgage-backed securities purchased for the DSI Total Return
Portfolio, and the DSI Limited Maturity Bond Portfolio will, however,
be rated of investment grade quality by Moody's or S&P.
The DSI Limited Maturity Bond Portfolio expects that Governmental
or private entities may create mortgage loan pools offering
pass-through investments in addition to those described above. The
mortgages underlying these securities may be alternative mortgage
instruments, that is mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than
previously customary. As new types of mortgage-backed securities are
developed and
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<PAGE>
offered to investors, the Portfolio will, consistent with its
investment objective and policies, consider making investments in such
new types of securities.
III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of
securities which are issued or guaranteed by the United States
Government, and by various instrumentalities which have been
established or sponsored by the United States Government.
U.S. Treasury securities are backed by the "full faith and
credit" of the United States. Securities issued or guaranteed by
Federal agencies and U.S. Government sponsored instrumentalities may
or may not be backed by the full faith and credit of the United
States.
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
or instrumentality 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 commitment. Agencies which are backed by the full faith and credit
of the United States include the Export-Import Bank, Farmers Home
Administration, Federal Financing Bank, and others. Certain agencies
and instrumentalities, such as the Government National Mortgage
Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to
service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal
National Mortgage Association, is not guaranteed by the United States,
but those institutions are protected by the discretionary authority of
the U.S. Treasury to purchase certain amounts of their securities to
assist the institution in meetings its debt obligations. Finally,
other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt
securities are backed only by the credit worthiness of those
institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States,
Farmers Home Administration, Federal Housing Administration, Maritime
Administration, Small Business Administration, and The Tennessee
Valley Authority.
IV. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies
involves certain special considerations which are not typically
associated with investing in U.S. companies. Since the securities of
foreign companies are frequently denominated in foreign currencies,
the Fund's Portfolios may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may
incur costs in connection with conversions between various currencies.
As foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards and they may
have policies that are not comparable to those of domestic companies,
there may be less information available about certain foreign
companies than about domestic companies. Securities of some foreign
companies are generally less liquid and more volatile than securities
of comparable domestic companies. There is generally less government
supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable
execution costs in its Portfolio transactions, fixed commissions on
many foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend
and interest income. Although in some countries a portion of these
taxes are recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from the companies
comprising the Fund's Portfolios. However, these foreign withholding
taxes are not expected to have a significant impact.
A-3
<PAGE>
UAM FUNDS
ICM PORTFOLIOS
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 28, 1995 AS SUPPLEMENTED OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
ICM EQUITY PORTFOLIO
PHILOSOPHY/STYLE:
ICM employs an investment strategy and approach which can best be characterized
as bottom up and value oriented. In selecting stocks for purchase, ICM looks
for companies which have strong financial and operating characteristics and
whose shares are selling at valuations below that of the market in general, and
below the average of the companies' own historic valuation ranges. The primary
indicator of value to ICM is a low price to earnings ratio both on trailing
twelve month earnings and one year forward earnings estimates. Other indicators
of value include low price to book value, low price to cash flow, and low price
to revenue per share. In addition to analyzing company financial statements and
talking to management, ICM's research includes analysis of suppliers and
competitors as well as consulting with outside research sources.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- State of Maryland
- Johns Hopkins (Hospital)
- State of Kentucky
- NYNEX
- TRW Corp.
- Major League Baseball Players
- Wisconsin Power & Light
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
ICM SMALL COMPANY PORTFOLIO
ICM EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
February 28, 1995
This Statement is not a Prospectus but should be read in conjunction
with The Regis Fund, Inc.'s Prospectus relating to the ICM Small Company
and ICM Equity Portfolios' Institutional Class Shares dated February 28,
1995. To obtain the Prospectus, please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . 1
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 8
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . 9
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . 9
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . 10
General Information . . . . . . . . . . . . . . . . . . . . . . . . . 13
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 14
Appendix -- Description of Securities and Ratings . . . . . . . . . . 14
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment policies of the
Portfolios as set forth in the Prospectus:
SECURITIES LENDING
The Portfolios may lend their investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to
deliver securities or completing arbitrage operations. By lending their
investment securities, the Portfolios attempt to increase their income
through the receipt of interest on the loan. Any gain or loss in the market
price of the securities loaned that might occur during the term of the loan
would be for the account of the Portfolios. The Portfolios may lend their
investment securities to qualified brokers, dealers, domestic and foreign
banks or other financial institutions, so long as the terms, the structure
and the aggregate amount of such loans are not inconsistent with the
Investment Company Act of 1940, as amended, (the "1940 Act") or the rules
and regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder, which currently require that
(a) the borrower pledge and maintain with the Portfolio collateral
consisting of cash, an irrevocable letter of credit issued by a domestic
U.S. bank, or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of
the securities loaned, (b) the borrower add to such collateral whenever the
price of the securities loaned rises (i.e., the borrower "marks to the
market" on a daily basis), (c) the loan be made subject to termination by
the Portfolios at any time, and (d) the Portfolios receive
<PAGE>
reasonable interest on the loan (which may include the Portfolios investing any
cash collateral in interest bearing short-term investments), any distribution
on the loaned securities and any increase in their market value. All relevant
facts and circumstances, including the creditworthiness of the broker,
dealer or institution, will be considered in making decisions with respect
to the lending of securities, subject to review by the Fund's Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with
loaned securities, so long as such fees are set forth in a written contract
and are approved by the investment company's Directors. The Portfolios will
continue to retain any voting rights with respect to the loaned securities.
If a material event occurs affecting an investment on loan, the loan must
be called and the securities voted.
FUTURES CONTRACTS
The Portfolios may enter into futures contracts, options, and options
on futures contracts for the purposes of remaining fully invested and
reducing transactions costs. Futures contracts provide for the future sale
by one party and purchase by another party of a specified amount of a
specific security at a specified future time and at a specified price.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are
closed out before the settlement date without the making or taking of
delivery. Closing out an open futures position is done by taking an
opposite position ("buying" a contract which has previously been "sold" or
"selling" a contract previously "purchased") in an identical contract to
terminate the position. Brokerage commissions are incurred when a futures
contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended
to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified
delivery date. Minimal initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish deposit
requirements which are higher than the exchange minimums. Futures contracts
are customarily purchased and sold on margin that may range upward from
less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements,
payment of additional "variation" margin will be required. Conversely,
change in the contract value may reduce the required margin, resulting in a
repayment of excess margin to the contract holder. Variation margin
payments are made to and from the futures broker for as long as the
contract remains open. The Fund expects to earn interest income on its
margin deposits.
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators". Hedgers use the futures markets primarily to
offset unfavorable changes in the value of securities otherwise held for
investment purposes or expected to be acquired by them. Speculators are
less inclined to own the securities underlying the futures contracts which
they trade, and use futures contracts with the expectation of realizing
profits from a fluctuation in interest rates. The Portfolios intend to use
futures contracts only for hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to
establish such non-hedging positions do not exceed five percent of the
liquidation value of a Portfolio. A Portfolio will only sell futures
contracts to protect securities it owns against price declines or purchase
contracts to protect against an increase in the price of securities it
intends to purchase. As evidence of this hedging interest, the Portfolio
expects that approximately 75% of its futures contracts purchases will be
"completed"; that is, equivalent amounts of related securities will have
been purchased or are being purchased by the Portfolio upon sale of open
futures contracts.
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<PAGE>
Although techniques other than the sale and purchase of futures
contracts could be used to control the Portfolios' exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Portfolios will incur commission expenses
in both opening and closing out futures positions, these costs are lower
than transaction costs incurred in the purchase and sale of the underlying
securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolios will not enter into futures contract transactions to
the extent that, immediately thereafter, the sum of their initial margin
deposits on open contracts exceeds 5% of the market value of its total
assets. In addition, the Portfolios will not enter into futures contracts
to the extent that their outstanding obligations to purchase securities
under these contracts would exceed 20% of their total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close
out a futures contract by only entering into futures which are traded on
national futures exchanges and for which there appears to be a liquid
secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular futures contract at any
specific time. Thus, it may not be possible to close a futures position. In
the event of adverse price movements, the Portfolios would continue to be
required to make daily cash payments to maintain their required margin. In
such situations, if the Portfolios have insufficient cash, they may have to
sell portfolio securities to meet daily margin requirements at a time when
it may be disadvantageous to do so. In addition, the Portfolios may be
required to make delivery of the instruments underlying futures contracts
it holds. The inability to close options and futures positions also could
have an adverse impact on the Portfolios' ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a result,
a relatively small price movement in a futures contract may result in
immediate and substantial loss (as well as gain) to the investor. For
example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of
the futures contracts would result in a total loss of the margin deposit,
before any deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit if the contract were closed out. Thus, a purchase
or sale of a futures contract may result in excess of the amount invested
in the contract. However, because the futures strategies of the Portfolio
is engaged in only for hedging purposes, the Adviser does not believe that
the Portfolios are subject to the risks of loss frequently associated with
futures transactions. The Portfolios would presumably have sustained
comparable losses if, instead of the futures contract, they had invested in
the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Portfolios does involve the
risk of imperfect or no correlation where the securities underlying a
futures contract have different maturities than the portfolio securities
being hedged. It is also possible that the Portfolios could lose money on
futures contracts and also experience a decline in value of portfolio
securities. There is also the risk of loss by the Portfolios of margin
deposits in the event of bankruptcy of a broker with whom the Portfolios
have an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may
vary either up or down from the previous day's settlement price at the end
of a trading session. Once the daily limit has been reached in a particular
type of contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular
trading day and therefore does not limit potential losses, because the
limit may prevent the liquidation of unfavorable positions. Futures
contract prices have occasionally moved to the daily limit for several
consecutive trading days, with little or no trading, thereby preventing
prompt liquidation of futures positions and subjecting some futures traders
to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the Portfolios have identified as hedging
transactions, the Portfolios are required for Federal income tax purposes
to recognize as income for each taxable year its net unrealized gains and
losses on regulated
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<PAGE>
futures contracts as of the end of the year as well as those actually realized
during the year. In most cases, any gain or loss recognized with respect to
a futures contract is considered to be 60% long-term capital gain or loss and
40% short-term capital gain or loss, without regard to the holding period of
the contract. Furthermore, sales of futures contracts which are intended to
hedge against a change in the value of securities held by the Portfolios may
affect the holding period of such securities and, consequently, the nature of
the gain or loss on such securities upon disposition.
In order for the Portfolios to continue to qualify for Federal income
tax treatment as a regulated investment company, at least 90% of their
gross income for a taxable year must be derived from qualifying income:
i.e., dividends, interest, income derived from loans of securities, and
gains from the sale of securities or foreign currencies, or other income
derived with respect to its business of investing in such securities or
currencies. In addition, gains realized on the sale or other disposition of
securities held for less than three months must be limited to less than 30%
of the Portfolios' annual gross income. It is anticipated that any net gain
realized from the closing out of futures contracts will be considered a
gain from the sale of securities and therefore will be qualifying income
for purposes of the 90% requirement. In order to avoid realizing excessive
gains on securities held for less than three months, the Portfolio may be
required to defer the closing out of futures contracts beyond the time when
it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on futures contracts, which have been open for less than
three months as of the end of the Portfolios' fiscal year and which are
recognized for tax purposes, will not be considered gains on securities
held for less than three months for the purposes of the 30% test.
The Portfolios will distribute to shareholders annually any net
capital gains which have been recognized for Federal income tax purposes
(including unrealized gains at the end of the Portfolios' fiscal year) on
futures transactions. Such distributions will be combined with
distributions of capital gains realized on the Portfolios' other
investments and shareholders will be advised on the nature of the payments.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission,
at the net asset value per share next determined after an order is received
in proper form by the Fund, and payment is received by the Fund's
Custodian. The minimum initial investment required is $100,000 with certain
exceptions as may be determined from time to time by the officers of the
Fund. An order received in proper form prior to the close of the New York
Stock Exchange ("Exchange") will be executed at the price computed on the
date of receipt; and an order received not in proper form or after the
close of the Exchange will be executed at the price computed on the next
day the Exchange is open after proper receipt. The Exchange will be closed
on the following days: Good Friday, April 14, 1995; Memorial Day, May 29,
1995; Independence Day, July 4, 1995; Labor Day, September 4, 1995;
Thanksgiving Day, November 23, 1995; Christmas Day, December 25, 1995; New
Year's Day, January 1, 1996; and Presidents' Day, February 19, 1996.
Each Portfolio reserves the right in its sole discretion (1) to
suspend the offering of its shares, (2) to reject purchase orders when in
the judgement of management such rejection is in the best interest of the
Fund, and (3) to reduce or waive the minimum for initial and subsequent
investment for certain fiduciary accounts such as employee benefit plans or
under circumstances where certain economies can be achieved in sales of the
Portfolio's shares.
REDEMPTION OF SHARES
REDEMPTIONS
Each Portfolio may suspend redemption privileges or postpone the date
of payment (i) during any period that both the Exchange and custodian bank
are closed, or trading on the Exchange is restricted as determined by the
Commission, (ii) during any period when an emergency exists as defined by
the rules of the Commission as a result of which it is not reasonably
practicable for a Portfolio to dispose of securities owned by it, or to
fairly determine the value of its assets, and (iii) for such other periods
as the Commission may permit. The Fund has made an election with the
Commission to pay in cash all redemptions requested by any shareholder of
record limited in amount during any 90-day period to the lesser of $250,000
or 1% of the net assets of the Fund at the beginning of such period. Such
commitment is irrevocable without the prior approval of the Commission.
Redemptions in excess of the above limits may be paid in whole or in part,
in investment securities or in cash, as the Directors may deem advisable;
however, payment will be made wholly in cash unless the Directors believe
that economic or market conditions exist which would make such a
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<PAGE>
practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth
in the Prospectus under "Valuation of Shares" and a redeeming shareholder
would normally incur brokerage expenses if these securities were converted
to cash.
No charge is made by a Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by a Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Mutual Funds Service Company
("the Administrator") from fraud, signature guarantees are required for
certain redemptions. The purpose of signature guarantees is to verify the
identity of the person who has authorized a redemption from your account.
Signature guarantees are required in connection with (1) all redemptions
when the proceeds are to be paid to someone other than the registered
owner(s) and/or registered address; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934.
Eligible guarantor institutions include banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. A complete definition of
eligible guarantor institutions is available from the Administrator.
Broker-dealers guaranteeing signatures must be a member of a clearing
corporation or maintain net capital of at least $100,000. Credit unions
must be authorized to issue signature guarantees. Signature guarantees will
be accepted from any eligible guarantor institution which participates in a
signature guarantee program.
The signature guarantee must appear either: (1) on the written request
for redemption; (2) on a separate instrument for assignment ("stock power")
which should specify the total number of shares to be redeemed; or (3) on
all stock certificates tendered for redemption and, if shares held by the
Fund are also being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set
forth in the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each ICM Portfolio may be exchanged for
Institutional Class Shares of the other ICM Portfolios. In addition,
Institutional Class Shares of each ICM Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in The Regis
Family of Funds which is comprised of the Fund and The Regis Fund II. (See
the list of Portfolios of The Regis Family of Funds -- Institutional Class
Shares in the Prospectus.) Exchange requests should be made by calling the
Fund (1-800-638-7983) or by writing to The Regis Fund, Inc., The Regis Fund
Service Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA
02208-2798. The exchange privilege is only available with respect to
Portfolios that are registered for sale in a shareholder's state of
residence.
Any such exchange will be based on the respective net asset values of
the shares involved. There is no sales commission or charge of any kind.
Before making an exchange into a Portfolio, a shareholder should read its
Prospectus and consider the investment objectives of the Portfolio to be
purchased. You may obtain a Prospectus for the Portfolio(s) you are
interested in by calling The Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the
close of business on the same day. Requests received after 4:00 p.m. will
be processed on the next business day. Neither the Fund nor the
Administrator, the Fund's transfer agent, will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges
may also be subject to limitations as to amounts or frequency, and to other
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<PAGE>
restrictions established by the Board of Directors to assure that such
exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is
likely, therefore that a capital gain or loss would be realized on an
exchange between Portfolios; you may want to consult your tax adviser for
further information in this regard. The exchange privilege may be modified
or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another
person or entity by making a written request to the Fund. The request
should clearly identify the account and number of shares to be transferred,
and include the signature of all registered owners and all stock
certificates, if any, which are subject to the transfer. The signature on
the letter of request, the stock certificate or any stock power must be
guaranteed in the same manner as described under "Redemption of Shares". As
in the case of redemptions, the written request must be received in good
order before any transfer can be made.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following restrictions which are
fundamental policies and in the case of the ICM Small Company Portfolio may
not be changed without the approval of the lesser of: (1) at least 67% of
the voting securities of the Portfolio present at a meeting if the holders
of more than 50% of the outstanding voting securities of the Portfolio are
present or represented by proxy, or (2) more than 50% of the outstanding
voting securities of the Portfolio. A Portfolio will not:
(1) invest in commodities except that the Portfolio may invest
in futures contracts and options to the extent that not more
than 5% of a Portfolio's assets are required as deposit to
secure obligations under futures contracts;
(2) purchase or sell real estate, although it may purchase and
sell securities of companies which deal in real estate and
may purchase and sell securities which are secured by
interests in real estate;
(3) make loans except (i) by purchasing bonds, debentures or
similar obligations (including repurchase agreements, subject
to the limitation described in (10) below) which are publicly
distributed, and (ii) by lending its portfolio securities to
banks, brokers, dealers and other financial institutions so
long as such loans are not inconsistent with the 1940 Act or
the rules and regulations or interpretations of the Commission
thereunder;
(4) purchase on margin or sell short except as specified in (1)
above;*
(5) with respect to 75% of its assets, purchase more than 10% of
any class of the outstanding voting securities of any issuer;
(6) with respect as to 75% of its assets, purchase securities of any
issuer (except obligations of the United States Government and
its instrumentalities) if as the result more than 5% of the
Portfolio's total assets, at the time of purchase, would be
invested in the securities of such issuer;
(7) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than
12 of 1% of such securities together own more than 5% of such
securities;*
(8) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in
excess of 10% of the ICM Small Company Portfolio's gross assets
(33-1/3% for the ICM Equity Portfolio) valued at the lower of
market or cost, and the
6
<PAGE>
Portfolio may not purchase additional securities when
borrowings exceed 5% of total gross assets;
(9) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;*
(10) underwrite the securities of other issuers;
(11) invest more than an aggregate of 10% of the assets of the ICM
Small Company Portfolio (15% of the assets of the ICM Equity
Portfolio*), determined at the time of investment, in securities
subject to legal or contractual restrictions on resale or
securities for which there are no readily available markets,
including repurchase agreements having maturities of more than
seven days;
(12) invest for the purpose of exercising control over management of
any company;*
(13) invest its assets in securities of any investment company,
except in connection with merger, acquisition of assets or
consolidation;*
(14) invest more than 5% of its assets at the time of purchase in
the securities of companies that have (with predecessors)
continuous operations consisting of less than three years;*
(15) acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities, or instruments issued by U.S. banks when
the Portfolio adopts a temporary defensive position; and
(16) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.*
------------------
* This restriction is a non-fundamental policy of the ICM Equity
Portfolio. Therefore, it may be changed by the Fund's Board of
Directors upon a reasonable notice to investors.
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<PAGE>
In addition, both the ICM Small Company and ICM Equity Portfolios are
subject to the following limitations which are not fundamental policies and
may be changed without shareholder approval:
(1) The Portfolio may not purchase warrants if, by reason of such
purchase, more than 5% of the value of the Portfolio's net
assets (taken at market value) would be invested in warrants,
valued at the lower of cost or market. Included within this
amount, but not to exceed 2% of the value of the Portfolio's net
assets, may be warrants that are not listed on a recognized
stock exchange.
(2) The Portfolio may not invest in real estate limited partnership
interests.
(3) The Portfolio may not invest in oil, gas or other mineral
leases.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad
policies for the Fund and choose its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past 5 years is set forth in the
Portfolio's Prospectus. As of January 31, 1995, the Directors and officers
of the Fund owned less than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director
receives a $2,000 meeting fee which is aggregated for all of the Directors
and allocated proportionately among the Portfolios of the Fund and The
Regis Fund II as well as the AEW Commercial Mortgage Securities Fund, Inc.
and reimbursement for travel and other expenses incurred while attending
Board meetings. Directors who are also officers or affiliated persons
receive no remuneration for their services as Directors. The Fund's
officers and employees are paid by either the Adviser, United Asset
Management Corporation ("UAM"), or the Administrator and receive no
compensation from the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations held of
record or beneficially 5% or more of the shares of the ICM Portfolios, as
noted.
ICM SMALL COMPANY PORTFOLIO: Major League Baseball Players Benefit Plan,
Baltimore, MD, 18.9%; Jas & Co., St. Cloud, MN, 5.7%; and North Carolina
Trust Company, Greensboro, NC, 5.4%.
ICM EQUITY PORTFOLIO: ICM/United Asset Management Corporation Profit
Sharing & 401(k) Plan, Baltimore, MD, 57.7%; U.S. Trust Company of New
York, Trustee, Cor-Box, Inc. Profit Sharing & 401(k) Plan, New York, NY,
20.7%*; and Garrison Forest School, Baltimore, MD, 6.8%.
The persons or organizations listed above as owning 25% or more of the
outstanding shares of a Portfolio may be presumed to "control" (as that
term is defined in the 1940 Act) such Portfolio. As a result, those persons
or organizations could have the ability to vote a majority of the shares of
the Portfolio on any matter requiring the approval of shareholders of such
Portfolio.
- ----------------------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
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CONTROL OF ADVISER
Investment Counselors of Maryland, Inc. (the "Adviser") is a
wholly-owned subsidiary of UAM, a holding company incorporated in Delaware
in December, 1980 for the purpose of acquiring and owning firms engaged
primarily in institutional investment management. Since its first
acquisition in August, 1983, UAM has acquired or organized approximately 42
such wholly-owned affiliated firms (the "UAM Affiliated Firms"). UAM
believes that permitting UAM Affiliated Firms to retain control over their
investment advisory decisions is necessary to allow them to continue to
provide investment management services that are intended to meet the
particular needs of their respective clients. Accordingly, after
acquisition by UAM, UAM Affiliated Firms continue to operate under their
own firm name, with their own leadership and individual investment
philosophy and approach. Each UAM Affiliated Firm manages its own business
independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each
of them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the
Investment Advisory Agreement, the Portfolios pay the Adviser an annual
fee, in monthly installments, calculated by applying the following annual
percentage rates to the Portfolios' average net assets for the month:
<TABLE>
<CAPTION>
Rate
------
<S> <C>
ICM Small Company Portfolio . . . . . . . . . . . . . . 0.700%
ICM Equity Portfolio . . . . . . . . . . . . . . . . . 0.625%
</TABLE>
For the fiscal years ended October 31, 1992, 1993 and 1994 the ICM
Small Company Portfolio paid advisory fees of approximately $361,000,
$487,000, and $701,000, respectively, to the Adviser. Advisory fees of
approximately $1,000 and $16,000 were incurred by the ICM Equity Portfolio
and reimbursed by the Adviser for the fiscal years ended October 31, 1993
and 1994.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for each Portfolio and directs the Adviser to use its best
efforts to obtain the best execution with respect to all transactions for
the Portfolio. In doing so, a Portfolio may pay higher commission rates
than the lowest rate available when the Adviser believes it is reasonable
to do so in light of the value of the research, statistical, and pricing
services provided by the broker effecting the transaction. It is not the
Fund's practice to allocate brokerage or principal business on the basis of
sales of shares which may be made through broker-dealer firms. However, the
Adviser may place portfolio orders with qualified broker-dealers who
recommend the Fund's Portfolios or who act as agents in the purchase of
shares of the Portfolios for their clients. During the fiscal years ended,
October 31, 1992, 1993, and 1994, the entire Fund paid brokerage
commissions of approximately $1,248,000, $1,592,000, and $2,402,000,
respectively.
Some securities considered for investment by a Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales
of securities consistent with the investment policies of a Portfolio and
one or more of these other clients served by the Adviser is considered at
or about the same time, transactions in such securities will be allocated
among the Portfolio and clients in a manner deemed fair and reasonable by
the Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Fund's
Directors.
ADMINISTRATIVE SERVICES
Effective February 1, 1992, the Administrator, an affiliate of United
States Trust Company of New York, provides administrative, fund accounting,
dividend disbursing and transfer agency services to the Fund under an
Administration Agreement. Prior to February 1, 1992, administrative
services were provided to the ICM Small Company Portfolio by The Vanguard
Group, ("Vanguard") under a similar agreement. For its services, the
Portfolio paid Vanguard
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<PAGE>
a monthly fee which on an annual basis equaled 0.20 of 1% of the first
$200 million of the aggregate net assets of the Fund; 0.12 of 1% of the next
$800 million of the aggregate net assets of the Fund; and .08 of 1% of the
aggregate net assets of the Fund in excess of $1 billion. This fee was
allocated based on the relative net assets of each Portfolio, provided,
however, that the minimum annual fee equaled $50,000 for each active
Portfolio. For the year ended October 31, 1992, administrative services fees
paid by the ICM Small Company Portfolio totaled $68,000, of which $16,081 was
paid to Vanguard and $51,919 was paid to the Administrator. During the fiscal
year ended October 31, 1993, administrative services fees paid to the
Administrator by the ICM Small Company and ICM Equity Portfolios totaled
$94,000 and $1,000, respectively. The basis of the fees paid to the
Administrator for the 1992 and 1993 fiscal years was as follows: the Fund
paid a monthly fee for its services which on an annualized basis equaled 0.16
of 1% of the first $200 million of the aggregate net assets of the Fund; plus
0.12 of 1% of the next $800 million of the aggregate net assets of the Fund;
plus 0.06 of 1% of the aggregate net assets in excess of $1 billion. The fees
were allocated among the Portfolios on the basis of their relative assets and
were subject to a graduated minimum fee schedule per Portfolio, which rose from
$1,000 per month upon inception of a Portfolio to $50,000 annually after two
years. During the fiscal year ended October 31, 1994, administrative services
fees paid by the ICM Small Company and ICM Equity Portfolios totaled $125,000
and $28,000, respectively. The services provided by the Administrator and
the current fees payable to the Administrator are described in the
Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to
illustrate the Fund's past performance.
Performance quotations by investment companies are subject to rules
adopted by the Commission, which require the use of standardized
performance quotations or, alternatively, that every non-standardized
performance quotation furnished by the Fund be accompanied by certain
standardized performance information computed as required by the
Commission. Current yield and average annual compounded total return
quotations used by the Fund are based on the standardized methods of
computing performance mandated by the Commission. An explanation of those
and other methods used by the Fund to compute or express performance
follows.
TOTAL RETURN
The average annual total return is determined by finding the average
annual compounded rates of return over 1, 5, and 10 year periods that would
equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely
redeemed at the end of each 1, 5 and 10 year period and the deduction of
all applicable Fund expenses on an annual basis.
The average annual total return for the ICM Small Company Portfolio
from inception and for the one and five year periods ended on the date of
the Financial Statements included herein are 16.11%, 4.59% and 18.02%,
respectively. The average annual total return for the ICM Equity Portfolio
from inception and for the one year period ended on the date of the
Financial Statements included herein are 5.52% and 6.63%, respectively.
These figures were calculated according to the following formula:
P (1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
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YIELD
Current yield reflects the income per share earned by a Portfolio's
investment.
Current yield is determined by dividing the net investment income per
share earned during a 30-day base period by the maximum offering price per
share on the last day of the period and annualizing the result. Expenses
accrued for the period include any fees charged to all shareholders during
the base period.
This figure was obtained using the following formula:
Yield = 2 [(a - b + 1)6 - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the
period.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of
the Fund might satisfy their investment objective, advertisements regarding
the Fund may discuss various measures of Fund performance as reported by
various financial publications. Advertisements may also compare performance
(as calculated above) to performance as reported by other investments,
indices and averages. The following publications, indices and averages may
be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -- unmanaged
indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.
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(g) Goldman Sachs 100 Convertible Bond Index -- currently includes 67 bonds
and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage pass-through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) The Lehman Brothers Intermediate Government/Corporate Index is an
unmanaged index composed of a combination of the Government and
Corporate Bond Indices. All issues are investment grade (BBB) or
higher, with maturities of one to ten years and an outstanding par
value of at least $100 million for U.S. Government issues and $25
million for others. The Government Index includes public obligations
of the U.S. Treasury, issues of Government agencies, and corporate
debt backed by the U.S. Government. The Corporate Bond Index includes
fixed-rate nonconvertible corporate debt. Also included are Yankee
Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. Any security downgraded during
the month is held in the index until month-end and then removed. All
returns are market value weighted inclusive of accrued income.
(m) The Lehman Brothers Aggregate Index is a fixed income market
value-weighted index that combines the Lehman Brothers
Government/Corporate Index and the Lehman Brothers Mortgage-Backed
Securities Index. It includes fixed rate issues of investment grade
(BBB) or higher, with maturities of at least one year and outstanding
par values of at least $100 million for U.S. Government issues and $25
million for others.
(n) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(o) Value Line -- composed of over 1,600 stocks in the Value Line
Investment Survey.
(p) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest
U.S. publicly-traded companies.
(q) Composite Indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(r) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
-- analyzes price, current yield, risk, total return and average rate
of return (average annual compounded growth rate) over specified time
periods for the mutual fund industry.
(s) Mutual Fund Source Book, published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(t) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Investor's Daily, Lipper Analytical Services, Inc.,
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<PAGE>
Morningstar, Inc., New York Times, Personal Investor, Wall Street Journal
and Weisenberger Investment Companies Service -- publications that rate
fund performance over specified time periods.
(u) Consumer Price Index (or cost of Living Index), published by the
U.S. Bureau of Labor Statistics -- a statistical measure of change,
over time in the price of goods and services in major expenditure
groups.
(v) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates --
historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.
(w) Savings and Loan Historical Interest Rates -- as published in the
U.S. Savings & Loan League Fact Book.
(x) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its performance. In addition, there
can be no assurance that the Fund will continue this performance as
compared to such other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund
was changed to "The Regis Fund, Inc." The Fund's principal executive office
is located at 803 Cathedral Street, Baltimore, MD 21201; however, all
investor correspondence should be addressed to the Fund at The Regis
Service Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA
02208-2798. The Fund's Articles of Incorporation, as amended, authorize the
Directors to issue 3,000,000,000 shares of common stock, $.001 par value.
The Board of Directors has the power to designate one or more series
(Portfolios) or classes of common stock and to classify or reclassify any
unissued shares with respect to such Portfolios. Currently, the Fund is
offering shares of 29 Portfolios.
The shares of each Portfolio of the Fund, when issued and paid for as
provided for in its Prospectuses, will be fully paid and nonassessable, and
have no preference as to conversion, exchange, dividends, retirement or
other features. The shares of each Portfolio of the Fund have no preemptive
rights. The shares of the Fund have noncumulative voting rights, which
means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do
so. A shareholder is entitled to one vote for each full share held (and a
fractional vote for each fractional share held), then standing in his or
her name on the books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the
Portfolios' net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes on it and the imposition of the Federal
excise tax on undistributed income and capital gains (see discussion under
"Dividends, Capital Gains Distributions and Taxes" in the Portfolios'
Prospectus). The amounts of any income dividends or capital gains
distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of a Portfolio by an investor may have the effect of reducing the per share
net asset value of that Portfolio by the per share amount of the dividend
or distribution. Furthermore, such dividends or distributions, although in
effect a return of capital, are subject to income taxes as set forth in the
Portfolios' Prospectus.
As set forth in the Portfolios' Prospectus, unless the shareholder
elects otherwise in writing, all dividend and capital gains distributions
are automatically received in additional shares of the Portfolio at net
asset value (as of the
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<PAGE>
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an
income dividend or capital gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and
hence as a separate "regulated investment company") for Federal tax
purposes. Any net capital gains recognized by a Portfolio will be
distributed to its investors without need to offset (for Federal income tax
purposes) such gains against any net capital losses of another Portfolio.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain
extent personal transactions by access persons of the Fund and imposes
certain disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the ICM Small Company Portfolio and the
ICM Equity Portfolio for the fiscal period ended October 31, 1994 and the
Financial Highlights for the respective periods presented which appear in
the Portfolios' 1994 Annual Reports to Shareholders and the report thereon
of Price Waterhouse LLP, the Fund's independent accountants, also appearing
therein, are incorporated by reference into this Statement of Additional
Information. Annual Reports may be obtained, without charge, by writing to
the Fund or by calling The Regis Service Center at 1-800-638-7983.
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description
of its highest bond ratings: Aaa -- judged to be the best quality; carry the
smallest degree of investment risk: Aa -- judged to be of high quality by
all standards; A -- possess many favorable investment attributes and are to
be considered as higher medium grade obligations; Baa -- considered as lower
medium grade obligations, i.e., they are neither highly protected nor
poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA -- highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA -- also qualify as
high grade obligations, and in the majority of instances differs from AAA
issues only in small degree; A -- regarded as upper medium grade; have
considerable investment strength but are not entirely free from adverse
effects of changes in economic and trade conditions. Interest and principal
are regarded as safe; BBB -- regarded as borderline between definitely sound
obligations and those where the speculative element begins to predominate;
this group is the lowest which qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of
securities which are issued or guaranteed by the United States Government,
and by various instrumentalities which have been established or sponsored
by the United States Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by Federal agencies and
U.S. Government sponsored instrumentalities may or may not be backed by the
full faith and credit of the United States.
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 or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assess a claim against the United States
itself in the event the agency or instrumentality does not meet its
commitment. Agencies which are backed by the full faith and credit of the
United States include the Export-Import Bank,
14
<PAGE>
Farmers Home Administration, Federal Financing Bank, and others. Certain
agencies and instrumentalities, such as the GNMA are, in effect, backed by
the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the U.S.
Treasury, if needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and FNMA, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit
System and the FHLMC, are federally chartered institutions under Government
supervision, but their debt securities are backed only by the credit
worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers
Home Administration, Federal Housing Administration, Maritime
Administration, Small Business Administration, and the Tennessee Valley
Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
The Portfolios may invest in commercial paper (including variable
amount master demand notes) rated A-1 or better by S&P or Prime-1 by
Moody's or by S&P. Commercial paper refers to short-term, unsecured
promissory notes issued by corporations to finance short-term credit needs.
Commercial paper is usually sold on a discount basis and has a maturity at
the time of issuance not exceeding nine months. Variable amount master
demand notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to
arrangement between the issuer and a commercial bank acting as agent for
the payees of such notes whereby both parties have the right to vary the
amount of the outstanding indebtedness on the notes. As variable amount
master demand notes are direct lending arrangements between a lender and a
borrower, it is not generally contemplated that such instruments will be
traded, and there is no secondary market for these notes, although they are
redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least
two additional channels of borrowing; (4) basic earnings and cash flow have
an upward trend with allowance made for unusual circumstances;
(5) typically, the issuer's industry is well established, and the issuer
has a strong position within the industry; and (6) the reliability and
quality of management are unquestioned. Relative strength or weakness of
the above factors determine whether the issuer's commercial paper is A-1,
A-2 or A-3. The rating Prime-1 is the highest commercial paper rating
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 the
appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to completion and
customer 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 issuer of obligations
which may be present or may arise as a result of public interest questions
and preparations to meet such obligations.
IV. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated
maturity based upon a specified market rate. As a result of these
adjustments, the interest rate on these obligations may increase or
decrease periodically. Frequently, dealers selling variable rate
certificates of deposit to the Portfolio will agree to repurchase such
instruments, at the Portfolio's option, at par on or near the coupon dates.
The dealers' obligations to repurchase these instruments are subject to
conditions imposed by various dealers. Such conditions typically are the
continued credit standing of the issuer and the existence of reasonably
orderly market conditions. The Portfolio is also able to sell variable rate
certificates of deposit in the secondary market. Variable rate certificates
of deposit normally carry a higher interest rate than comparable fixed rate
certificates of deposit. A banker's acceptance is a time draft drawn on a
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<PAGE>
commercial bank by a borrower usually in connection with an international
commercial transaction to finance the import, export, transfer or storage
of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the
maturity date. Most acceptances have maturities of six months or less and
are traded in the secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies
involves certain special considerations which are not typically associated
with investing in U.S. companies. Since the securities of foreign companies
are frequently denominated in foreign currencies, a Portfolio may be
affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and may incur costs in connection with
conversions between various currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that
are not comparable to those of domestic companies, there may be less
information available about certain foreign companies than about domestic
companies. Securities of some foreign companies are generally less liquid
and more volatile than securities of comparable domestic companies. There
is generally less government supervision and regulation of stock exchanges,
brokers and listed companies than in the U.S. In addition, with respect to
certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable
execution costs in its portfolio transactions, fixed commissions on many
foreign stock exchanges are generally higher than negotiated commissions on
U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recoverable portion of foreign withholding taxes will
reduce the income received from the companies comprising the Fund's
Portfolios. However, these foreign withholding taxes are not expected to
have a significant impact.
16
<PAGE>
UAM FUNDS
MCKEE PORTFOLIOS
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 28, 1995 AS AMENDED AUGUST 23, 1995
AND AS SUPPLEMENTED OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
MCKEE INTERNATIONAL EQUITY PORTFOLIO
PHILOSOPHY/STYLE:
C.S. McKee's philosophical approach to all asset classes is to be opportunistic
while controlling risk. This approach captures opportunity, when available, to
provide capital growth, consistent with the Fund's pursuit of total return while
quantifying and controlling risk to protect capital. The purpose of this
approach is to generate favorable results through a high quality, low risk
portfolio. C.S. McKee's approach is to look for companies which are
statistically inexpensive yet have improving fundamentals. A number of
statistical measures are used to rank the initial pool of over 2,000 stocks.
The top-ranking stocks are then subjected to fundamental analytical screens
prior to investment.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- Blue Cross of Western Pennsylvania
- City of Pittsburgh
- Dickinson's School of Law
- Edgewater Steel Corporation
- ServiStar Incorporated
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
MCKEE U.S. GOVERNMENT PORTFOLIO
MCKEE DOMESTIC EQUITY PORTFOLIO
MCKEE INTERNATIONAL EQUITY PORTFOLIO
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995
(AS AMENDED AUGUST 23, 1995)
This Statement is not a Prospectus but should be read in conjunction with
The Regis Fund, Inc.'s Prospectus relating to the McKee U.S. Government, McKee
Domestic Equity and McKee International Equity Portfolios' Institutional Class
Shares dated February 28, 1995 (as supplemented August 23, 1995). To obtain the
Prospectus, please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
Investment Objectives and Policies. . . . . . . . . . 2
Purchase of Shares. . . . . . . . . . . . . . . . . . 4
Redemption of Shares. . . . . . . . . . . . . . . . . 5
Shareholder Services. . . . . . . . . . . . . . . . . 5
Investment Limitations. . . . . . . . . . . . . . . . 6
Management of the Fund. . . . . . . . . . . . . . . . 7
Investment Adviser. . . . . . . . . . . . . . . . . . 7
Portfolio Transactions. . . . . . . . . . . . . . . . 8
Administration Services . . . . . . . . . . . . . . . 8
Performance Calculations. . . . . . . . . . . . . . . 8
General Information . . . . . . . . . . . . . . . . . 11
Financial Statements. . . . . . . . . . . . . . . . . 12
Appendix-Description of Securities and Ratings. . . . A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the McKee Portfolios as set forth in the Prospectus for the McKee Portfolios:
SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "Commission") thereunder, which currently require that
(a) the borrower pledge and maintain with the Portfolio collateral consisting of
cash, an irrevocable letter of credit issued by a domestic U.S. bank or
securities issued or guaranteed by the United States Government having a value
at all times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Directors. The Portfolio will continue to retain
any voting rights with respect to the loaned securities. If a material event
occurs affecting an investment on a loan, the loan must be called and the
securities voted.
INVESTMENTS IN FOREIGN SECURITIES
Investors in the McKee International Equity Portfolio should recognize that
investing in foreign companies involves certain special considerations which are
not typically associated with investing in U.S. companies. Since the securities
of foreign companies are frequently denominated in foreign currencies, the
Portfolio may be affected favorably or unfavorably by changes in currency rates
and in exchange control regulations, and may incur costs in connection with
conversions between various currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the McKee International Equity Portfolio will endeavor to achieve
the most favorable execution costs in its portfolio transactions, fixed
commissions on many foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recoverable portion of foreign withholding taxes will reduce the income
received from the companies comprising the Portfolio's investments. However,
these foreign withholding taxes are not expected to have a significant impact.
2
<PAGE>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the McKee International Equity
Portfolio may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the Portfolio may
incur costs in connection with conversions between various currencies. The
Portfolio will conduct their foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward foreign currency exchange
contracts ("forward contracts") to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for such trades.
The McKee International Equity Portfolio may enter into forward contracts
in several circumstances. When the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividends or interest
payments on a security which it holds, the Portfolio may desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract
for a fixed amount of dollars, for the purchase or sale of the amount of foreign
currency involved in the underlying transactions, the Portfolio will be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.
Additionally, when the Portfolio anticipates that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars, to
sell the amount of foreign currency approximating the value of some or all of
the Portfolio's securities denominated in such foreign currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of securities in
foreign currencies will change as a consequence of market movements in the value
of these securities between the date on which the forward contract is entered
into and the date it matures. The projection of short-term currency market
movement is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The Portfolio does not intend to enter
into such forward contracts to protect the value of portfolio securities on a
regular or continuous basis. The Portfolio will not enter into such forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio securities or other assets
denominated in that currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the performance of the
Portfolio will thereby be served. The Fund's Custodian will place cash, U.S.
government securities, or high-grade debt securities into a segregated account
of the Portfolio in an amount equal to the value of the Portfolio's total assets
committed to the consummation of forward contracts. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will be equal to the amount of the Portfolio's commitments with
respect to such contracts.
The Portfolio generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, the Portfolio
may either sell the security and make delivery of the foreign currency, or it
may retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly,
it may be necessary for the Portfolio to purchase additional foreign currency on
the spot market (and bear the expense of such purchase) if the market value of
the security is less than the amount of foreign currency that the Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.
If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or loss (as described
below) to the extent that there has been movement in forward contract prices.
Should forward prices
3
<PAGE>
decline during the period between the Portfolio entering into a forward contract
for the sale of a foreign currency and the date it enters into an offsetting
contract for the purchase of the foreign currency, the Portfolio will realize a
gain to the extent that the price of the currency it has agreed to sell exceeds
the price of the currency it has agreed to purchase. Should forward prices
increase, the Portfolio would suffer a loss to the extent that the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The Portfolio's dealings in forward contracts will be limited to the
transactions described above. Of course, the Portfolio is not required to enter
into such transactions with regard to their foreign currency-denominated
securities. It also should be realized that this method of protecting the value
of portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
FEDERAL TAX TREATMENT OF FORWARD CONTRACTS
In order for the McKee International Equity Portfolio to continue to
qualify for Federal income tax treatment as a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code"), at least 90% of its
gross income for a taxable year must be derived from certain qualifying income,
i.e., dividends, interest, income derived from loans of securities and gains
from the sale or other disposition of stock, securities or foreign currencies,
or other related income, including gains from forward contracts, derived with
respect to its business investing in stock, securities or currencies. Any net
gain realized from the closing out of forward contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement.
Qualification as a regulated investment company also requires that less than 30%
of the Portfolio's gross income be derived from the sale or other disposition of
stock, securities or forward contracts (including certain foreign currencies not
directly related to the Fund's business of investing in stock or securities)
held less than three months. In order to avoid realizing excessive gains on
securities held for less than three months, the McKee International Equity
Portfolio may be required to defer the closing out of contracts beyond the time
when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on contracts which have been open for less than three months as
of the end of the Portfolio's taxable year, and which are recognized for tax
purposes, will not be considered gains on securities held for less than three
months for the purposes of the 30% test.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's taxable year) on regulated
futures transactions. Such distribution will be combined with distributions of
capital gains realized on the Portfolio's other investments, and shareholders
will be advised on the nature of the payment.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund and payment is received by the Fund's custodian. The minimum
initial investment required for the Portfolio is $100,000 with certain
exceptions as may be determined from time to time by the officers of the Fund.
An order received in proper form prior to the 4:00 p.m. close of the New York
Stock Exchange ("Exchange") will be executed at the price computed on the date
of receipt; and an order received not in proper form or after the 4:00 p.m.
close of the Exchange will be executed at the price computed on the next day the
Exchange is open after proper receipt. The Exchange will be closed on the
following days: Good Friday, April 14, 1995; Memorial Day, May 29, 1995;
Independence Day, July 4, 1995; Labor Day, September 4, 1995; Thanksgiving Day,
November 23, 1995; Christmas Day, December 25, 1995; New Year's Day, January 1,
1996; and Presidents' Day, February 19, 1996.
The Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
4
<PAGE>
REDEMPTION OF SHARES
The Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commission,
(2) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for the
Portfolio to dispose of securities owned by it or to fairly determine the value
of its assets, and (3) for such other periods as the Commission may permit. The
Fund has made an election with the Commission to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid, in whole or in part, in investment securities or in cash as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares" and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.
No charge is made by the Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Mutual Funds Service Company (the
"Administrator") from fraud, signature guarantees are required for certain
redemptions. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) or
the registered address or (2) share transfer requests. The purpose of signature
guarantees is to verify the identity of the party who has authorized a
redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institution
is available from the Administrator. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signatures guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the McKee Portfolio's Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each McKee Portfolio may be exchanged for
Institutional Class Shares of the other McKee Portfolios. In addition,
Institutional Class Shares of each McKee Portfolio may be exchanged for any
other Institutional Class Shares of a Portfolio included in The Regis Family of
Funds which is comprised of the Fund and The Regis Fund II. (See the list of
Portfolios of The Regis Family of Funds - Institutional Class Shares at the end
of the Prospectus.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to The Regis Fund, Inc., The Regis Service
Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA 02208-2798.
The exchange privilege is only available with respect to Portfolios that are
registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling The
Regis Service Center at 1-800-638-7983.
5
<PAGE>
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Administrator will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall be determined
immediately after and as a result of the Portfolio's acquisition of such
security or other asset. Accordingly, any later increase or decrease resulting
from a change in values, net assets or other circumstances will not be
considered when determining whether the investment complies with the Portfolio's
investment limitations. The Portfolio's fundamental investment limitations
cannot be changed without approval by a "majority of the outstanding shares" (as
defined in the 1940 Act) of the Portfolio. The Portfolio will not:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which deal in
real estate and may purchase and sell securities which are secured by
interests in real estate;
(3) make loans except (i) by purchasing debt securities in accordance with
its investment objectives and (ii) by lending its portfolio securities to
banks, brokers, dealers and other financial institutions so long as such
loans are not inconsistent with the 1940 Act or the rules and regulations
or interpretations of the Commission thereunder;
(4) underwrite the securities of other issuers;
(5) invest in stock or bond futures and/or options on futures unless (i) not
more than 5% of the Portfolio's assets are required as deposit to secure
obligations under such futures and/or options on futures contracts
provided, however, that in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded in
computing such 5% and (ii) not more than 20% of the Portfolio's assets
are invested in stock or bond futures and options;
(6) purchase on margin or sell short except as specified in (5) above;
(7) purchase or retain securities of an issuer if those officers and
directors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(8) invest more than an aggregate of 15% of the assets of the Portfolio,
determined at the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there are no
readily available markets;
(9) invest for the purpose of exercising control over management of any
company; and
(10) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
6
<PAGE>
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and elect its officers. A list of the Directors and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past 5 years is set forth in the Fund's Prospectus. As of
July 31, 1995, the Directors and officers of the Fund owned less than 1% of the
Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all of the Directors and allocated
proportionately among the Portfolios of the Fund and The Regis Fund II as well
as the AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for
travel and other expenses incurred while attending Board meetings. Directors
who are also officers or affiliated persons receive no remuneration for their
service as Directors. The Fund's officers and employees are paid by either the
Adviser, United Asset Management Corporation ("UAM"), or the Administrator and
receive no compensation from the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 1995, the following persons or organizations held of record
or beneficially 5% or more of the shares of the Portfolio, as noted.
MCKEE U.S. GOVERNMENT PORTFOLIO: The Franciscans & Vice Province of the
Holy Savior, Pittsburgh, PA, 25.3%; Local #485 Entemanns Sales Persons Annuity
Trust Fund Teamsters #485, Pittsburgh, PA, 24.6%; Hartnat & Co., Boston, MA,
18.9%; Economy Borough Employees Fund, Baden, PA, 15.8%; and Norton H. Reamer,
John F. McNamara, William H. Park, Trustees for C.S. McKee Profit Sharing and
401(k) Plan, Pittsburgh, PA, 7.5%*.
MCKEE DOMESTIC EQUITY PORTFOLIO: Hartnat & Co., Boston, MA, 37.2%; The
Franciscans & Vice Province of the Holy Savior, Pittsburgh, PA, 27.2%; Economy
Borough Employees Fund, Baden, PA, 18.5%; and Norton H. Reamer, John F.
McNamara, William H. Park, Trustees for C.S. McKee Profit Sharing and 401(k)
Plan, Pittsburgh, PA, 14.8%*.
MCKEE INTERNATIONAL EQUITY PORTFOLIO: Saxon & Co., Trustee for Westmoreland
County Employees' Retirement Fund, Philadelphia, PA, 20.6%*; Lehigh County
Employees' Retirement Fund, Allentown, PA, 12.3%; USBANCO Trust Company for
Cambria Co., Johnstown, PA, 8.9%*; Saxon & Co., Trustee for Cumberland County
Employees' Retirement Fund, Phildelphia, PA, 7.6%; Delaware County Employees'
Retirement Fund, Media, PA, 7.1%; Keystone Financial Inc., Altoona, PA, 6.1%*;
Lancaster County Employees' Retirement Fund, Lancaster, PA, 5.5%; and Saxon &
Co., Trustee for Butler City Retirement Fund, Philadelphia, PA, 5.5%*.
The persons or organizations owning 25% or more of the outstanding shares
of a Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have the
ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
____________
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
C.S. McKee & Company (the "Adviser") is a wholly-owned subsidiary of UAM, a
holding company incorporated in Delaware in December 1980 for the purpose of
acquiring and owning firms engaged primarily in institutional investment
management. Since its first acquisition in August 1983, UAM has acquired or
organized approximately 44 such
7
<PAGE>
wholly-owned affiliated firms (the "UAM Affiliated Firms"). UAM believes that
permitting UAM Affiliated Firms to retain control over their investment advisory
decisions is necessary to allow them to continue to provide investment
management services that are intended to meet the particular needs of their
respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each of
them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, the Portfolio pays the Adviser an annual fee in monthly
installments, calculated by applying the following annual percentage rates to
each Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
<S> <C>
McKee U.S. Government Portfolio . . . 0.45%
McKee Domestic Equity Portfolio . . . 0.65%
McKee International Equity Portfolio. 0.70%
</TABLE>
For the period from May 26, 1994 (commencement of operations) to October
31, 1994, McKee International Equity Portfolio paid advisory fees of
approximately $93,000.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and direct the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or effect principal transactions with dealers on the basis of sales of shares
which may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended, October 31, 1992, 1993 and 1994,
the entire Fund paid brokerage commissions of approximately $1,248,000,
$1,592,000 and $2,402,000, respectively.
Some securities considered for investment by the Portfolios may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
For the period from May 26, 1994 (commencement of operations) to October 31,
1994, administrative services fees paid to the Administrator by the McKee
International Equity Portfolio totaled $21,000. The services provided by the
Administrator and the current fees payable to the Administrator are described in
the Portfolios' Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may from time to time quote various performance figures to
illustrate past performance. Performance quotations by investment companies are
subject to rules adopted by the Commission, which require the use of
standardized performance quotations or, alternatively, that every non-
standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the
Commission. An explanation of those and other methods used to compute or
express performance follows.
8
<PAGE>
YIELD
Current yield reflects the income per share earned by the Portfolio's
investment. The current yield of the McKee U.S. Government Portfolio is
determined by dividing the net investment income per share earned during a 30-
day base period by the maximum offering price per share on the last day of the
period and annualizing the result. Expenses accrued for the period include any
fees charged to all shareholders during the base period. The yield for the
McKee U.S. Government Portfolio for the 30-day period ended on July 31, 1995 was
5.56%.
This figure was obtained using the following formula:
6
Yield = 2[( a-b + 1 ) - 1]
---
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
TOTAL RETURN
The average annual total return of a Portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis.
The cumulative total return for the McKee International Equity Portfolio
from inception on May 26, 1994 to April 30, 1995, the date of the Financial
Statements incorporated herein, is -1.30%.
The cumulative total return for the McKee U.S. Government and McKee
Domestic Equity Portfolios from inception, on March 2, 1995 to July 31, 1995,
the date of the financial statements included herein are 5.90% and 14.63%,
respectively.
Average annual total return is calculated according to the following
formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10
year periods (or fractional portion thereof).
COMPARISONS
To help investors better evaluate how an investment in the Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of dividends.
9
<PAGE>
(b) Standard & Poor's 500 Stock Index or its component indices - an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation and finance stocks
listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices - represents the return
on the market value of all common equity securities for which daily pricing
is available. Comparisons of performance assume reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - measure total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions,
exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -
respectively, arithmetic, market value-weighted averages of the performance
of over 900 securities listed on the stock exchanges of countries in
Europe, Australia and the Far East, and over 1,400 securities listed on the
stock exchanges of these continents, including North America.
(g) Goldman Sachs 100 Convertible Bond Index - currently includes 67 bonds and
33 preferred. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The
index is priced monthly.
(h) Salomon Brothers GNMA Index - includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index - consists of publicly
issued, non-convertible corporate bonds rated AA or AAA. It is a value-
weighted, total return index, including approximately 800 issues with
maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond - is a market-weighted index
that contains approximately 4,700 individually priced investment grade
corporate bonds rated BBB or better, U.S. Treasury/agency issues and
mortgage pass through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond - is composed of all bonds covered
by the Lehman Brothers Treasury Bond Index with maturities of 10 years or
greater.
(l) NASDAQ Industrial Index - is composed of more than 3,000 industrial issues.
It is a value-weighted index calculated on price change only and does not
include income.
(m) Value Line - composed of over 1,600 stocks in the Value Line Investment
Survey.
(n) Russell 2000 - composed of the 2,000 smallest stocks in the Russell 3000, a
market value weighted index of the 3,000 largest U.S. publicly-traded
companies.
(o) Composite indices - 70% Standard & Poor's 500 Stock Index and 30% NASDAQ
Industrial Index; 35% Standard & Poor's 500 Stock Index and 65% Salomon
Brothers High Grade Bond Index; all stocks on the NASDAQ system exclusive
of those traded on an exchange, and 65% Standard & Poor's 500 Stock Index
and 35% Salomon Brothers High Grade Bond Index.
(p) CDA Mutual Fund Report published by CDA Investment Technologies, Inc. -
analyzes price, current yield, risk, total return and average rate of
return (average compounded growth rate) over specified time periods for the
mutual fund industry.
(q) Mutual Fund Source Book published by Morningstar, Inc. - analyzes price,
yield, risk and total return for equity funds.
10
<PAGE>
(r) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Wall Street Journal and Weisenberger Investment Companies
Service - publications that rate fund performance over specified time
periods.
(s) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change over time in
the price of goods and services in major expenditure groups.
(t) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates -
historical measure of yield, price and total return for common and small
company stock, long-term government bonds, U.S. Treasury bills and
inflation.
(u) Savings and Loan Historical Interest Rates - as published by the U.S.
Savings & Loan League Fact Book.
(v) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill Lynch,
Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Portfolio,
that the averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Portfolio to calculate its performance. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." The Fund's Articles of Incorporation, as
amended, authorize the Directors to issue 3,000,000,000 shares of common stock,
$.001 par value. The Board of Directors has the power to designate one or more
series ("Portfolios") or classes of common stock and to classify or reclassify
any unissued shares with respect to such Portfolios, without further action by
shareholders. Currently, the Fund is offering shares of 29 Portfolios.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed income
and capital gains. (See discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectus.) The amounts of any income
dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of
the Portfolio by an investor may have the effect of reducing the per share net
asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of the Portfolio at net asset value (as of the business day
following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.
The Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital gains
recognized by the Portfolio will be distributed to its investors without need to
offset (for Federal income tax purposes) such gains against any net capital
losses of another Portfolio.
11
<PAGE>
FEDERAL TAXES
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities, and gains from the
sale of securities or foreign currencies or other income derived with respect to
its business of investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less than three
months must be limited to less than 30% of the Portfolio's annual gross income.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the McKee International Equity Portfolio and
the Financial Highlights for the respective period presented, which appear in
the Portfolio's 1994 Annual Report to Shareholders, and the reports thereon of
Price Waterhouse LLP, independent accountants, also appearing therein, and the
Financial Statements of the McKee U.S. Government, Domestic Equity and
International Equity Portfolios and the Financial Highlights for the respective
periods presented, which appear in the Portfolios' 1995 Semi-Annual Report to
Shareholders, are incorporated by reference into this Statement of Additional
Information. An Annual Report and Semi-Annual Report may be obtained, without
charge, by writing to the Fund or by calling The Regis Service Center at
1-800-638-7983. The unaudited Financial Statements of the McKee U.S. Government
and Domestic Equity Portfolios from inception on March 2, 1995 to July 31, 1995
and the Financial Highlights relating to the same period are contained in this
Statement of Additional Information.
12
<PAGE>
McKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
JULY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Face
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (11.3%)
- ---------------------------------------------------------------------------------------
Banks (0.2%)
NationsBank Corp 5.125%, 9/15/98. . . . . . . . . . . $ 5 $ 5
- ---------------------------------------------------------------------------------------
Financial Services (1.1%)
Dean Witter Discover & Co. 6.00%, 3/1/98. . . . . . . 15 15
Lehman Brothers Holdings 7.625%, 6/15/97. . . . . . . 15 15
-----------
30
- ---------------------------------------------------------------------------------------
Insurance (0.5%)
Travelers Inc. 5.75%, 4/15/98 . . . . . . . . . . . . 15 15
- ---------------------------------------------------------------------------------------
Retail (1.1%)
J.C. Penny & Co. 5.375%, 11/15/98 . . . . . . . . . . 15 15
Walmart Stores 5.50%, 9/15/97 . . . . . . . . . . . . 15 15
-----------
30
- ---------------------------------------------------------------------------------------
Utilities (8.4%)
Pacific Bell Telephone 6.25%, 3/1/05. . . . . . . . . 130 123
Pacific Gas & Electric 5.875%, 10/1/05. . . . . . . . 130 118
-----------
241
- ---------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost $324) 321
- ---------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES (20.2%)
- ---------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
7.225%, 5/17/05 . . . . . . . . . . . . . . . . . 15 15
7.50%, 7/1/25 . . . . . . . . . . . . . . . . . . 235 235
7.65%, 5/10/05. . . . . . . . . . . . . . . . . . 10 10
7.974%, 4/20/05 . . . . . . . . . . . . . . . . . 60 61
-----------
321
- ---------------------------------------------------------------------------------------
Federal National Mortgage Association
6.75%, 6/25/20. . . . . . . . . . . . . . . . . . 125 122
7.92%, 3/30/05. . . . . . . . . . . . . . . . . . 30 31
8.00%, 4/13/05. . . . . . . . . . . . . . . . . . 70 72
8.01%, 4/1/05 . . . . . . . . . . . . . . . . . . 30 31
-----------
256
- ---------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (Cost $568) 577
- ---------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (2.9%)
U.S. Government Agencies (1.0%)
Federal National Mortgage Association
Series 93-87 H 6.50%, 10/25/21. . . . . . . . . . 13 12
Series 93-136 PD, PAC 6.25%, 11/25/21 . . . . . . 10 9
Series 93-139 H, PAC 6.75%, 12/25/21. . . . . . . 9 9
-----------
30
- ---------------------------------------------------------------------------------------
Financial Services (1.9%)
Advanta Mortgage Loan Trust 1994-1 A1
6.30%, 7/25/25. . . . . . . . . . . . . . . . . . 56 53
- ---------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $83) 83
- ---------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (63.5%)
U.S. Treasury Bonds
7.875%, 2/15/21 . . . . . . . . . . . . . . . . . 287 318
- ---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Face
Amount Value
(000) (000)+
- ---------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Notes
6.125%, 7/31/96 . . . . . . . . . . . . . . . . . $ 125 $ 125
6.25%, 2/15/03. . . . . . . . . . . . . . . . . . 555 550
6.75%, 6/30/99. . . . . . . . . . . . . . . . . . 25 26
7.125%, 9/30/99 . . . . . . . . . . . . . . . . . 328 339
7.25%, 8/15/04. . . . . . . . . . . . . . . . . . 105 110
7.50%, 1/31/96. . . . . . . . . . . . . . . . . . 50 51
7.50%, 2/15/05. . . . . . . . . . . . . . . . . . 275 295
-----------
1,496
- ---------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (Cost $1,795) 1,814
- ---------------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.9%) (Cost $2,770) . . . . . . . . . . 2,795
- ---------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.1%)
- ---------------------------------------------------------------------------------------
Cash. . . . . . . . . . . . . . . . . . . . . . . . . 11
Interest Receivable . . . . . . . . . . . . . . . . . 61
Receivable due from Investment Adviser. . . . . . . . 9
Payable for Investment Advisory Fees. . . . . . . . . (1)
Payable for Administrative Fees . . . . . . . . . . . (3)
Payable for Directors' Fees . . . . . . . . . . . . . (1)
Other Liabilities . . . . . . . . . . . . . . . . . . (15)
-----------
61
- ---------------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 272,883 outstanding $.001 par value shares
Institutional Class shares. . . . . . . . . . . . . $ 2,856
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEPTION PRICE PER SHARE . . $10.47
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
+ See Note A to Financial Statements
PAC - Planned Amortization Class
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 2,
1995* TO
JULY 31, 1995
(IN THOUSANDS) (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $58
- --------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . 58
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees - Note B
Basic Fees . . . . . . . . . . . . . . . . . . . . . . $4
Less: Fees Waived. . . . . . . . . . . . . . . . . . . (4)
-----
Administrative Fees - Note C . . . . . . . . . . . . . . . 12
Custodian Fees . . . . . . . . . . . . . . . . . . . . . . 3
Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . 8
Directors' Fees - Note F . . . . . . . . . . . . . . . . . 1
Registration and Filing Fees . . . . . . . . . . . . . . . 2
Printing Fees. . . . . . . . . . . . . . . . . . . . . . . 4
Other Expenses . . . . . . . . . . . . . . . . . . . . . . 1
Fees Reimbursed by Adviser - Note B. . . . . . . . . . . . (23)
- --------------------------------------------------------------------------------
Net Expenses. . . . . . . . . . . . . . . . . . . . . . 8
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . 50
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS . . . . . . . . . . . . . . 46
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
ON INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . 25
- --------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN AND NET CHANGE IN
UNREALIZED APPRECIATION. . . . . . . . . . . . . . . . . . 71
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. . . . . . . . . . . . . . . . . $121
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Commencement of Operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MARCH 2, 1995
1995* TO
JULY, 31 1995
(IN THOUSANDS) (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income. . . . . . . . . . . . . . . . . . . $50
Net Realized Gain. . . . . . . . . . . . . . . . . . . . . 46
Net Change in Unrealized Appreciation. . . . . . . . . . . 25
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations . . 121
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income. . . . . . . . . . . . . . . . . . . (32)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:(1)
Issued - Regular . . . . . . . . . . . . . . . . . . . . . 3,002
- In Lieu of Cash Distributions . . . . . . . . . . 31
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . (266)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions . . . . . . 2,767
- --------------------------------------------------------------------------------
Total Increase . . . . . . . . . . . . . . . . . . . . . . 2,856
Net Assets:
Beginning of Period. . . . . . . . . . . . . . . . . . . . -
- --------------------------------------------------------------------------------
End of Period (2). . . . . . . . . . . . . . . . . . . . . $2,856
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued . . . . . . . . . . . . . . . . . . . . . . 295
In Lieu of Cash Distributions . . . . . . . . . . . . . . 3
Shares Redeemed . . . . . . . . . . . . . . . . . . . . . (25)
- --------------------------------------------------------------------------------
273
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital . . . . . . . . . . . . . . . . . . . . . $2,767
Undistributed Net Investment Income . . . . . . . . . . . 18
Accumulated Net Realized Gain . . . . . . . . . . . . . . 46
Unrealized Appreciation . . . . . . . . . . . . . . . . . 25
-----------
$2,856
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Commencement of Operations
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
MARCH 2,
1995** TO
JULY 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . 0.19 +
Net Unrealized Gain on Investments. . . . . . . . . . . 0.40
- --------------------------------------------------------------------------------
Total From Investment Operations . . . . . . . . . . 0.59
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income . . . . . . . . . . . . . . . . . (0.12)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . $10.47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . 5.90%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands). . . . . . . . . . . . $2,856
Ratio of Net Expenses to Average Net Assets. . . . . . . . . 0.88 %*
Ratio of Net Investment Income to Average Net Assets . . . . 5.53 %*
Portfolio Turnover Rate. . . . . . . . . . . . . . . . . . . 107 %
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntary waived fees and reimbursed expenses of $0.10 per
share for the period ended July 31, 1995.
++ Total return would have been lower had certain fees not been
waived and reimbursed by the Adviser during the period.
The accompanying notes are an integral part of the financial statements.
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
JULY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.9%)
- -------------------------------------------------------------------------------
Apparel & Textiles (0.7)
Delta Woodside Industries, Inc. ................ 3,100 $ 27
- -------------------------------------------------------------------------------
Automotive (2.5%)
General Motors Corp. ........................... 2,100 102
- -------------------------------------------------------------------------------
Banks (5.3%)
Bank of Boston Corp. ........................... 1,100 48
First Commerce Corp. ........................... 1,300 39
First Union Corp. .............................. 1,600 78
Mellon Bank Corp. .............................. 1,400 56
-----------
221
- -------------------------------------------------------------------------------
Beverages, Tobacco, & Household Products (2.3%)
Philip Morris Cos., Inc. ....................... 1,350 97
- -------------------------------------------------------------------------------
Building Materials (1.5%)
Owens-Corning Fiberglass Corp. ................. 1,600 63
- -------------------------------------------------------------------------------
Chemicals (2.4%)
Akzo N.V., ADR ................................. 1,500 99
- -------------------------------------------------------------------------------
Computer Services (9.5%)
3D Systems Corp. ............................... 1,300 25
Adaptec, Inc. .................................. 1,800 76
Advanced Micro Devices, Inc. ................... 1,700 55
Cheyenne Software, Inc. ........................ 2,200 41
Conner Peripherals, Inc. ....................... 2,900 39
Quantum Corp. .................................. 1,300 33
Reynolds & Reynolds Co., Class A ............... 1,300 41
Systems & Software Associates, Inc. ............ 1,900 42
Sterling Software, Inc. ........................ 1,100 45
-----------
397
- -------------------------------------------------------------------------------
Conglomerates (9.8%)
GATX Corp. ..................................... 1,900 96
ITT Corp. ...................................... 750 90
Loews Corp. .................................... 500 60
Textron, Inc. .................................. 1,200 80
Whitman Corp. .................................. 4,100 80
-----------
406
- -------------------------------------------------------------------------------
Containers - Packaging (1.4%)
Shorewood Packaging Corp. ...................... 3,500 60
- -------------------------------------------------------------------------------
Drug Retail (1.4%)
Becton, Dickinson & Co. ........................ 1,000 59
- -------------------------------------------------------------------------------
Electronics (2.0%)
IMO Industries, Inc. ........................... 4,600 41
Planar Systems, Inc. ........................... 2,000 41
-----------
82
- -------------------------------------------------------------------------------
Energy (1.6%)
Mitchell Energy & Development Corp. ............ 4,000 68
- -------------------------------------------------------------------------------
Entertainment/Leisure Time (0.4%)
Walt Disney Co. ................................ 300 18
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Financial Services (4.0%)
AT&T Capital ..................................... 1,600 $ 47
Cigna Corp. ...................................... 600 48
Lehman Brothers Holdings ......................... 3,200 71
-----------
166
- -------------------------------------------------------------------------------
Food & Beverage (0.8%)
Ryan's Family Steak House, Inc. .................. 4,800 33
- -------------------------------------------------------------------------------
Food Wholesale (1.6%)
Pioneer Hi-Bred International, Inc. .............. 1,600 68
- -------------------------------------------------------------------------------
Forest Products & Paper (5.0%)
Rayonier, Inc. ................................... 1,212 47
Willamette Industries ............................ 2,600 159
-----------
206
- -------------------------------------------------------------------------------
Healthcare (1.2%)
Foundation Health Co. ............................ 1,400 48
- -------------------------------------------------------------------------------
Insurance (1.3%)
Humana, Inc. ..................................... 2,800 54
- -------------------------------------------------------------------------------
Machinery (3.6%)
INDRESCO, Inc. ................................... 4,200 66
Ingersoll-Rand Co. ............................... 2,000 84
-----------
150
- -------------------------------------------------------------------------------
Manufacturing (2.6%)
Ampco-Pittsburgh Corp. ........................... 2,900 29
Whittaker Corp. .................................. 3,400 78
-----------
107
- -------------------------------------------------------------------------------
Office Equipment (1.2%)
Intelligent Electronics, Inc. .................... 3,800 50
- -------------------------------------------------------------------------------
Oil - Gas (7.3%)
Occidental Petroleum Corp. ....................... 1,800 41
Repsol S.A. ADR .................................. 1,500 50
Stone Energy Corp. ............................... 4,600 53
Ultramar Corp. ................................... 3,500 93
YPF S.A. ADR ..................................... 3,900 68
-----------
305
- -------------------------------------------------------------------------------
Pharmaceuticals (4.6%)
American Home Products Corp. ..................... 1,000 79
Mylan Laboratories, Inc. ......................... 1,600 48
Smithkline Beecham plc ADR ....................... 1,400 63
-----------
190
- -------------------------------------------------------------------------------
Retail (7.3%)
American Stores Co. .............................. 1,800 53
Dayton-Hudson Corp. .............................. 1,650 124
Gap, Inc. ........................................ 1,750 61
Venture Stores, Inc. ............................. 2,800 18
Waban, Inc. ...................................... 2,800 47
-----------
303
- -------------------------------------------------------------------------------
Services (4.6%)
Bell Atlantic Corp. .............................. 1,000 57
Bowne & Co. ...................................... 4,900 90
Policy Management Systems Corp. .................. 800 43
-----------
190
- -------------------------------------------------------------------------------
Technology (1.4%)
Avid Technology, Inc. ............................ 1,300 57
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
Telecommunications (4.0%)
NYNEX Corp. ...................................... 1,600 $ 66
Sprint Corp. ..................................... 2,100 72
Telefonos de Mexico S.A. ADR, Class L ............ 800 26
-----------
164
- -------------------------------------------------------------------------------
Transportation (3.2%)
American President Cos. Ltd. ..................... 2,300 65
AMR Corp. ........................................ 900 67
-----------
132
- -------------------------------------------------------------------------------
Utilities (3.4%)
General Public Utilities Corp. ................... 1,800 52
Illinova Corp. ................................... 1,900 48
Southern New England Telecomm .................... 1,200 41
-----------
141
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.9%) (Cost $3,810) 4,063
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.1%)
- -------------------------------------------------------------------------------
Cash ............................................. 19
Dividends Receivable ............................. 4
Receivable for Investments Sold .................. 208
Receivable due from Investment Adviser ........... 7
Payable for Investments Purchased ................ (131)
Payable for Investment Advisory Fees ............. (2)
Payable for Administrative Fees .................. (3)
Payable for Directors' Fees ...................... (1)
Other Liabilities ................................ (14)
-----------
87
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 363,571 outstanding $.001 par value
Institutional Class shares ...................... $4,150
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE OFFERING AND REDEMPTION PER SHARE ...... $11.41
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
ADR American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
<PAGE>
McKEE DOMESTIC EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MARCH 2,
1995* TO
JULY 31, 1995
(IN THOUSANDS) (UNAUDITED)
- ---------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . $20
Interest. . . . . . . . . . . . . . . . . . . . . . 6
- ---------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . 26
- ---------------------------------------------------------------------------
EXPENSES
Investment Advisory - Note B
Basic Fees. . . . . . . . . . . . . . . . . . . 7
Less: Fees Waived . . . . . . . . . . . . . . . (7)
----
Administrative Fees - Note C. . . . . . . . . . . . 11
Custodian Fees. . . . . . . . . . . . . . . . . . . 2
Audit Fees. . . . . . . . . . . . . . . . . . . . . 8
Directors' Fees - Note F. . . . . . . . . . . . . . 1
Registration and Filing Fees. . . . . . . . . . . . 2
Printing Fees . . . . . . . . . . . . . . . . . . . 4
Other Expenses. . . . . . . . . . . . . . . . . . . 1
Fees Reimbursed by Adviser - Note B . . . . . . . . (18)
- ---------------------------------------------------------------------------
Net Expenses . . . . . . . . . . . . . . . . . . 11
- ---------------------------------------------------------------------------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . 15
- ---------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS . . . . . . . . . . . 111
- ---------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
OF INVESTMENTS . . . . . . . . . . . . . . . . . . . 253
- ---------------------------------------------------------------------------
TOTAL NET REALIZED GAIN AND NET CHANGE IN
UNREALIZED APPRECIATION. . . . . . . . . . . . . . . 364
- ---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. . . . . . . . . . . . . . $379
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
The accompanying notes are an integral part of the financial statements.
<PAGE>
McKEE DOMESTIC EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MARCH 2, 1995
1995* TO
JULY 31, 1995
(IN THOUSANDS) (UNAUDITED)
- ---------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income . . . . . . . . . . . . . . . 1
Net Realized Gain . . . . . . . . . . . . . . . . . $15
Net Change in Unrealized Appreciation . . . . . . . 111
- ---------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operation 379
- ---------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income . . . . . . . . . . . . . . . (14)
- ---------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued - Regular. . . . . . . . . . . . . . . . . . 3,858
- In Lieu of Cash Distributions. . . . . . . 14
Redeemed. . . . . . . . . . . . . . . . . . . . . . (87)
- ---------------------------------------------------------------------------
Net Increase from Capital Share Transactions. . . 3,785
- ---------------------------------------------------------------------------
Total Increase. . . . . . . . . . . . . . . . . . . 4,150
Net Assets:
Beginning of Period . . . . . . . . . . . . . . . . -
- ---------------------------------------------------------------------------
End of Period(2). . . . . . . . . . . . . . . . . . $4,150
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued . . . . . . . . . . . . . . . . . . . 370
In Lieu of Cash Distributions . . . . . . . . . . . 1
Shares Redeemed . . . . . . . . . . . . . . . . . . (7)
- ---------------------------------------------------------------------------
364
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital . . . . . . . . . . . . . . . . . . $3,785
Undistributed Net Investment Income . . . . . . . . 1
Accumulated Net Realized Gain . . . . . . . . . . . 111
Unrealized Appreciation . . . . . . . . . . . . . . 253
--------
$4,150
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
*Commencement of Operations
The accompanying notes are an integral part of the financial statements.
<PAGE>
McKEE DOMESTIC EQUITY
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
MARCH 2, 1995
1995* TO
JULY 31, 1995
(UNAUDITED)
- ---------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . $10.00
- ---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . 0.05 +
Net Realized & Unrealized Gain
on Investments. . . . . . . . . . . . . . . . . 1.41
- ---------------------------------------------------------------------------
Total From Investment Operations. . . . . . . . 1.46
- ---------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income . . . . . . . . . . . . . . (0.05)
- ---------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . $11.41
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 14.63 %++
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands). . . . . . . . . $4,150
Ratio of Net Expenses to Average Net Assets. . . . . . 1.00 %*
Ratio of Net Investment Income to Average Net Assets . 1.39 %*
Portfolio Turnover Rate. . . . . . . . . . . . . . . . 28 %
- ---------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntary waived fees and reimbursed expenses of $0.09 per share for
the period ended July 31, 1995.
++ Total return would have been lower had certain fees not been waived and
reimbursed by the Adviser during the period
The accompanying notes are an integral part of the financial statements.
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The Regis Fund, Inc., The Regis Fund II and AEW Commercial Mortgage
Securities Fund, Inc., collectively The Regis Family of Funds (the "Funds"),
were organized on October 11, 1988, May 18, 1994 and December 15, 1994,
respectively, and are registered under the Investment Company Act of 1940, as
amended. The Regis Fund Inc. and The Regis Fund II are registered as open-end
investment companies and AEW Commercial Mortgage Securities Fund, Inc. is
registered as a closed-end management investment company. The McKee U.S.
Government Portfolio and McKee Domestic Equity Portfolio (the "Portfolios"),
portfolios of The Regis Fund, Inc., began operations on March 2, 1995. At July
31, 1995, the Funds were comprised of thirty-three active portfolios. The
financial statements of the remaining portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES. The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Portfolios
in the preparation of their financial statements.
1. SECURITY VALUATION: Equity securities listed on a U.S. securities
exchange for which market quotations are readily available are valued at
the last quoted sales price on the day the valuation is made or, if no sale
occurred on such day, at the mean of the bid and asked prices on such day.
Price information on listed securities is taken from the exchange where
the security is primarily traded. Over-the-Counter and unlisted equity
securities are valued between the current bid and asked prices. Fixed
income securities are valued on the basis of prices provided by a
pricing service which uses information with respect to transactions in
fixed income securities, quotations from dealers, market transactions in
comparable securities and various relationships between securities in
determining value. Short-term investments that have remaining maturities
of sixty days or less at the time of purchase are valued at amortized cost,
if it approximates market value.
The value of other assets and securities for which no quotations are
readily available is determined in good faith at fair value using methods
determined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to
continue to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code and to distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the
financial statements.
At July 31, 1995 cost and unrealized appreciation (depreciation) of
investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
COST APPRECIATION DEPRECIATION NET
MCKEE PORTFOLIOS (000) (000) (000) (000)
--------------- ----- ------------ ------------ ------
<S> <C> <C> <C> <C>
U.S. Government. . $ 2,770 $ 36 $ (11) $ 25
Domestic Equity. . 3,810 306 (53) 253
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions in
repurchase agreements, a bank as custodian for the Portfolios takes
possession of the underlying securities, the value of which exceeds the
principal amount of the repurchase transaction, including accrued interest.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to determine
the adequacy of the collateral. In the event of default on the obligation
to repurchase, the Portfolios have the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. In the event of
default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral or proceeds may be subject to legal
proceedings.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios will normally
distribute substantially all of their net investment income to shareholders
in the form of quarterly dividends. Any realized net capital gains will
normally be distributed annually. All distributions are recorded on ex-
dividend date.
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The amount and character of income and capital gain distributions to
be paid are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles.
5. OTHER: Security transactions are accounted for on the trade date,
the date the trade was executed. Costs used in determining realized gains
and losses on the sale of investment securities are determined based on the
specific identification method. Dividend income is recorded on the ex-
dividend date. Interest income is recognized on the accrual basis. Most
expenses of the Funds can be directly attributed to a particular portfolio.
Expenses which cannot be directly attributed are apportioned among the
portfolios of the Funds based on their relative net assets.
B. ADVISORY SERVICES. C.S. McKee & Co., Inc. (the "Adviser"), a wholly-
owned subsidiary of United Asset management Corporation (UAM), provides
investment advisory services to the Portfolios under an Investment Advisory
Agreement. Under the terms of the Investment Advisory Agreement, the Adviser is
paid a fee calculated at an annual rate of 0.45% and 0.65% of the Portfolio's
average daily net assets for the McKee U.S. Government and McKee Domestic Equity
Portfolios, respectively. The Adviser, while not required to do so, has
voluntarily agreed to reduce the fee payable to it and to reimburse other
expenses, if necessary, in order to keep the expense ratios from exceeding 0.85%
and 1.00% of average daily net assets for the McKee U.S. Government and McKee
Domestic Equity Portfolios, respectively.
C. ADMINISTRATIVE SERVICES. United States Trust Company of New York (the
"Administrator") provides administrative, fund accounting, dividend disbursing
and transfer agent services to the Funds under an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive a monthly fee for its services which on an annualized basis equals:
0.20 of 1% of the first $200 million of the aggregate net assets of the Funds;
plus 0.12 of 1% of the next $800 million of the aggregate net assets of the
Funds; plus 0.08 of 1% of the aggregate net assets in excess of $1 billion but
less than $3 billion; plus 0.06 of 1% of the aggregate net assets in excess of
$3 billion. The fees are allocated among the portfolios of the Funds on the
basis of their relative net assets and are subject to a graduated minimum fee
schedule per portfolio, which rises from $2,000 per month upon inception of a
portfolio to $70,000 annually after two years.
D. DISTRIBUTION SERVICES. RFI Distributors (the "Distributor") a division
of Regis Retirement Plan Services Inc., a wholly-owned subsidiary of UAM,
distributes the shares of the Portfolios. The Distributor does not receive any
fee or other compensation with respect to the Portfolios.
E. PURCHASES AND SALES. During the period ended July 31, 1995, the
purchases and sales of investment securities other than long-term U.S.
Government and agency securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
MCKEE PORTFOLIOS (000) (000)
---------------- --------- -----
<S> <C> <C>
U.S. Government $ 394 $ -
Domestic Equity 4,492 793
</TABLE>
Purchases and sales of long-term U.S. Government and Agency securities were
$4,537,000 and $2,225,000, respectively for the McKee U.S. Government Portfolio.
F. DIRECTORS' FEES. The Funds pay each Trustee, who is not an officer or
affiliated person, $2,000 per meeting attended plus a quarterly retainer of $150
for each active portfolio of the Funds and reimbursement of expenses incurred in
attending board meetings.
G. LINE OF CREDIT. The McKees Portfolios along with certain other
Portfolios of the Regis Fund, Inc. and The Regis Fund II, collectively entered
into an agreement which enables them to participate in a $100 million unsecured
line of credit with several banks. Borrowings will be made solely to
temporarily finance the repurchase of portfolio shares. Interest is charged to
each participating Portfolio based on its borrowings at a rate per annum equal
to the Federal Funds Rate plus 0.75%. In addition, a commitment fee of 1/10th
of 1% per annum, payable at the end of each calender quarter, is accrued by each
participating Portfolio based on their average daily unused portion of the line
of credit. During the period ended July 31, 1995, there were no significant
borrowings or allocated fees under the agreement.
<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES AND RATINGS
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE CORPORATE BOND RATINGS
Aaa - Bonds which are Aaa are judged to be 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.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier 3
indicates that the issue ranks at the lower end of the rating category.
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.
STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay principal
and interest.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat fore susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds 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 for debt in higher rated categories.
A-1
<PAGE>
UAM FUNDS
RICE, HALL, JAMES SMALL CAP PORTFOLIO
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 28, 1995 AS SUPPLEMENTED OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
PHILOSOPHY/STYLE
Rice, Hall, James & Associates applies a value oriented approach to small
capitalization growth stocks. The Portfolio is constructed through bottom up
research where stocks selected must possess catalysts--positive fundamental
changes which the Adviser believes should lead to greater investor recognition
and, subsequently, higher stock prices. The PE ratios of selected stocks are
typically lower than the projected 3 to 5 year earnings growth rates. Stocks
are sold when they reach preset upside targets, violate preset downside price
limits or when a deterioration of the fundamentals or the catalyst occur.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- University of Kansas Endowment
- San Diego Society of Natural History
- American Business Products
- City of San Diego
- California Western School of Law
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
RICE, HALL, JAMES SMALL CAP PORTFOLIO
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995
This Statement is not a Prospectus but should be read in conjunction
with The Regis Fund, Inc.'s Prospectus relating to the Rice, Hall, James
Small Cap Portfolio's Institutional Class Shares dated February 28, 1995. To
obtain the Prospectus, please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
Investment Objective and Policies . . . . . . . . . . . . . . 2
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . 8
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . 8
Shareholder Services . . . . . . . . . . . . . . . . . . . . . 9
Investment Limitations . . . . . . . . . . . . . . . . . . . . 9
Management of the Fund . . . . . . . . . . . . . . . . . . . . 10
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . 11
Administrative Services . . . . . . . . . . . . . . . . . . . 12
Performance Calculations . . . . . . . . . . . . . . . . . . . 12
General Information . . . . . . . . . . . . . . . . . . . . . 14
Financial Statements . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment objective and policies
of the Portfolio as set forth in the Prospectus for the Rice, Hall, James
Small Cap Portfolio:
SECURITIES LENDING
The Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to
deliver securities or completing arbitrage operations. By lending its
investment securities, the Portfolio attempts to increase its income through
the receipt of interest on the loan. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be
for the account of the Portfolio. The Portfolio may lend its investment
securities to qualified brokers, dealers, domestic and foreign banks or other
financial institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the Investment Company Act of
1940, as amended, (the "1940 Act") or the Rules and Regulations or
interpretations of the Securities and Exchange Commission (the
"Commission") thereunder, which currently require that (a) the borrower
pledge and maintain with the Portfolio collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank or securities
issued or guaranteed by the United States Government having a value at all
times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the
loan be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review
by the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and
approved by the investment company's Directors. The Portfolio will continue
to retain any voting rights with respect to the loaned securities. If a
material event occurs affecting an investment on a loan, the loan must be
called and the securities voted.
INVESTMENTS IN FOREIGN SECURITIES
Investors in the Portfolio should recognize that investing in foreign
companies involves certain special considerations which are not typically
associated with investing in U.S. companies. Since the securities of foreign
companies are frequently denominated in foreign currencies, the Portfolio may
be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and may incur costs in connection with
conversions between various currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that
are not comparable to those of domestic companies, there may be less
information available about certain foreign companies than about domestic
companies. Securities of some foreign companies are generally less liquid
and more volatile than securities of comparable domestic companies. There is
generally less government supervision and regulation of stock exchanges,
brokers and listed companies than in the U.S. In addition, with respect to
certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.
Although the Portfolio will endeavor to achieve the most favorable
execution costs in its portfolio transactions, fixed commissions on many
foreign stock exchanges are generally higher than negotiated commissions on
U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recoverable portion of foreign withholding taxes will
reduce the income received from the companies comprising the Portfolio's
investments. However, these foreign withholding taxes are not expected to
have a significant impact.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of the Portfolio may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Portfolio may incur costs in connection
with conversions between various currencies. The Portfolio will conduct
their foreign currency exchange transactions either on a spot (i.e., cash)
2
<PAGE>
basis at the spot rate prevailing in the foreign currency exchange market, or
through entering into forward foreign currency exchange contracts ("forward
contracts") to purchase or sell foreign currencies. A forward contract
involves an obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for such trades.
The Portfolio may enter into forward contracts in several circumstances.
When the Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when the Portfolio anticipates
the receipt in a foreign currency of dividends or interest payments on a
security which it holds, the Portfolio may desire to "lock-in" the U.S.
dollar price of the security or the U.S. dollar equivalent of such dividend
or interest payment, as the case may be. By entering into a forward contract
for a fixed amount of dollars, for the purchase or sale of the amount of
foreign currency involved in the underlying transactions, the Portfolio will
be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is
purchased or sold, or on which the dividend or interest payment is declared,
and the date on which such payments are made or received.
Additionally, when the Portfolio anticipates that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract for a fixed amount of dollars,
to sell the amount of foreign currency approximating the value of some or all
of the Portfolio's securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date on which the
forward contract is entered into and the date it matures. The projection of
short-term currency market movement is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
The Portfolio does not intend to enter into such forward contracts to protect
the value of portfolio securities on a regular or continuous basis. The
Portfolio will not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of
the value of the Portfolio securities or other assets denominated in that
currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made
with regard to overall diversification strategies. However, the Adviser
believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the
performance of the Portfolio will thereby be served. The Fund's Custodian
will place cash, U.S. government securities, or high-grade debt securities
into a segregated account of the Portfolio in an amount equal to the value of
the Portfolio's total assets committed to the consummation of forward
contracts. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account on a
daily basis so that the value of the account will be equal to the amount of
the Portfolio's commitments with respect to such contracts.
The Portfolio generally will not enter into a forward contract with a
term of greater than one year. At the maturity of a forward contract, the
Portfolio may either sell the security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual
obligation to deliver the foreign currency by purchasing an "offsetting"
contract with the same currency trader obligating it to purchase, on the same
maturity date, the same amount of the foreign currency.
It is impossible to forecast with absolute precision the market value of
a particular portfolio security at the expiration of the contract.
Accordingly, it may be necessary for the Portfolio to purchase additional
foreign currency on the spot market (and bear the expense of such purchase)
if the market value of the security is less than the amount of foreign
currency that the Portfolio is obligated to deliver and if a decision is made
to sell the security and make delivery of the foreign currency.
If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio will incur a gain or loss (as described
below) to the extent that there has been movement in forward contract prices.
Should forward prices decline during the period between the Portfolio
entering into a forward contract for the sale of a foreign currency and the
date it enters into an offsetting contract for the purchase of the foreign
currency, the Portfolio will realize a gain to the extent that the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Portfolio would
suffer a loss to the extent that the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
The Portfolio's dealings in forward contracts will be limited to the
transactions described above. Of course, the Portfolio is not required to
enter into such transactions with regard to their foreign
currency-denominated securities. It also should be
3
<PAGE>
realized that this method of protecting the value of portfolio securities
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange which one can achieve at some future point in time. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, at the same time, they tend to limit any
potential gain which might result should the value of such currency increase.
FUTURES CONTRACTS
The Portfolio may enter into futures contracts for the purposes of
hedging, remaining fully invested and reducing transactions costs. Futures
contracts provide for the future sale by one party and purchase by another
party of a specified amount of a specific security at a specified future time
and at a specified price. Futures contracts which are standardized as to
maturity date and underlying financial instrument are traded on national
futures exchanges. Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission
("CFTC"), a U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are
closed out before the settlement date without the making or taking of
delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold" or
"selling" a contract previously "purchased") in an identical contract to
terminate the position. Brokerage commissions are incurred when a futures
contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash
or acceptable securities with a broker or custodian to initiate and maintain
open positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date.
Minimal initial margin requirements are established by the futures exchange
and may be changed. Brokers may establish deposit requirements which are
higher than the exchange minimums. Futures contracts are customarily
purchased and sold on margin that may range upward from less than 5% of the
value of the contract being traded. After a futures contract position is
opened, the value of the contract is marked to market daily. If the futures
contract price changes to the extent that the margin on deposit does not
satisfy margin requirements, payment of additional "variation" margin will
be required. Conversely, change in the contract value may reduce the
required margin, resulting in a repayment of excess margin to the contract
holder. Variation margin payments are made to and from the futures broker
for as long as the contract remains open. The Portfolio expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators". Hedgers use the futures markets primarily to
offset unfavorable changes in the value of securities otherwise held for
investment purposes or expected to be acquired by them. Speculators are less
inclined to own the securities underlying the futures contracts which they
trade and use futures contracts with the expectation of realizing profits
from a fluctuation in interest rates. The Portfolio intends to use futures
contracts only for hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation
value of the Portfolio. The Portfolio will only sell futures contracts to
protect securities it owns against price declines or purchase contracts to
protect against an increase in the price of securities it intends to
purchase. As evidence of this hedging interest, the Portfolio expects that
approximately 75% of its futures contracts purchases will be "completed",
that is, equivalent amounts of related securities will have been purchased or
are being purchased by the Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this
exposure. While the Portfolio will incur commission expenses in both opening
and closing out future positions, these costs are lower than transaction
costs incurred in the purchase and sale of the underlying securities.
4
<PAGE>
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposits
on open contracts exceeds 5% of the market value of its total assets. In
addition, the Portfolio will not enter into futures contracts to the extent
that its outstanding obligations to purchase securities under these contracts
would exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out
a futures position by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market
will exist for any particular futures contract at any specific time. Thus,
it may not be possible to close a futures position. In the event of adverse
price movements, the Portfolio would continue to be required to make daily
cash payments to maintain its required margin. In such situations, if the
Portfolio has insufficient cash, it may have to sell securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In
addition, the Portfolio may be required to make delivery of the instruments
underlying futures contracts it holds. The inability to close futures
positions also could have an adverse impact on the Portfolio's ability to
effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial due both to the low margin deposits required and the extremely
high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at
the time of purchase, 10% of the value of the futures contract is deposited
as margin, a subsequent 10% decrease in the value of the futures contract
would result in a total loss of the margin deposit, before any deduction for
the transaction costs, if the account were then closed out. A 15% decrease
would result in a loss equal to 150% of the original margin deposit if the
contract were closed out. Thus, a purchase or sale of a futures contract may
result in excess of the amount invested in the contract. However, because
the futures strategies of the Portfolio are engaged in only for hedging
purposes, the Adviser does not believe that the Portfolio is subject to the
risks of loss frequently associated with futures transactions. The Portfolio
would presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying financial instrument and sold it
after the decline.
Utilization of futures transactions by the Portfolio does involve the
risk of imperfect or no correlation where the securities underlying the
futures contracts have different maturities than the Portfolio securities
being hedged. It is also possible that the Portfolio could lose money on
futures contracts and also experience a decline in value of portfolio
securities. There is also the risk of loss by the Portfolio of margin
deposits in the event of bankruptcy of a broker with whom the Portfolio has
an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type
of contract, no trades may be made on that day at a price beyond that limit.
The daily limit governs only price movement during a particular trading day
and, therefore, does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days,
with little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses.
OPTIONS
The Portfolio may purchase and sell put and call options on futures
contracts for hedging purposes. Investments in options involve some of the
same considerations that are involved in connection with investments in
futures contracts (e.g., the existence of a liquid secondary market). In
addition, the purchase of an option also entails the risk that changes in the
value of the underlying security or contract will not be fully reflected in
the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract on which it is based or the price of
the securities being hedged, an option may or may not be less risky than
ownership of the futures contract or such securities. In general, the market
prices of options can be expected to be more volatile than the market prices
on the underlying futures contract or securities.
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OPTIONS ON FOREIGN CURRENCIES
The Portfolio may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio dollar
value of a foreign currency in which portfolio securities are denominated
will reduce the dollar value of such securities, even if their value in the
foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Portfolio may purchase
put options on the foreign currency. If the value of the currency does
decline, the Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the adverse
effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing
the cost of such securities, the Portfolio may purchase call options thereon.
The purchase of such options could offset, at least partially, the effects
of the adverse movements in exchange rates. As in the case of other types of
options, however, the benefit to the Portfolio deriving from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, the Portfolio could
sustain losses on transaction in foreign currency options which would require
it to forego a portion or all of the benefits of advantageous changes in such
rates.
The Portfolio may write options on foreign currencies for the same types
of hedging purposes. For example, where the Portfolio anticipates a decline
in the dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline
occurs, the option will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the premium
received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates
move in the manner projected, will expire unexercised and allow the Portfolio
to hedge such increased cost up to the amount of the premium. As in the case
of other types of options, however, the writing of a foreign currency option
will constitute only a partial hedge up to the amount of the premium, and
only if rates move in the expected direction. If this does not occur, the
option may be exercised and the Portfolio would be required to purchase or
sell the underlying currency at a loss which may not be offset by the amount
of the premium. Through the writing of options on foreign currencies, the
Portfolio also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements in exchange
rates.
The Portfolio intends to write covered call options on foreign
currencies. A call option written on a foreign currency by the Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by
the call or has an absolute and immediate right to acquire that foreign
currency without additional cash consideration (or for additional cash
consideration held in a segregated account by the Custodian) upon conversion
or exchange of other foreign currency held in its portfolio. A call option
is also covered if the Portfolio has a call on the same foreign currency and
in the same principal amount as the call written where the exercise price of
the call held (a) is equal to or less than the exercise price of the call
written of (b) is greater than the exercise price of the call written if the
difference is maintained by the Portfolio in cash, U.S. Government securities
or other high grade liquid debt securities in a segregated account with the
Custodian.
The Portfolio also intends to write call options on foreign currencies
that are not covered for cross-hedging purposes. A call option on a foreign
currency is for cross-hedging purposes if it is not covered, but is designed
to provide a hedge against a decline in the U.S. dollar value of a security
which the Portfolio owns or has the right to acquire and which is denominated
in the currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Portfolio collateralized the
option by maintaining in a segregated account with the Custodian, cash or
U.S. Government securities or other high grade liquid debt securities in an
amount not less than the value of the underlying foreign currency in U.S.
dollars marked to market daily.
RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES
Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain
foreign currency options) by the Commission. To the contrary, such
instruments are traded through financial institutions acting as
market-makers, although foreign currency options are also traded on certain
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national securities exchanges, such as the Philadelphia Stock Exchange and
the Chicago Board Options Exchange, subject to the regulation of the
Commission. Similarly, options on currencies may be traded over-the-counter.
In an over-the-counter trading environment, many of the protection afforded
to exchange participants will not be available. For example, there are no
daily price fluctuation limits, and adverse market movements could therefore
continue to an unlimited extent over a period of time. Although the purchase
of an option cannot lose more than the amount of the premium plus related
transaction costs, this entire amount could be lost. Moreover, the option
writer and a trader of forward contracts could lose amounts substantially in
excess of their initial investments, due to the margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Furthermore, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the
over-the-counter market, potentially permitting the Portfolio to liquidate
open positions at a profit prior to exercise or expiration, or to limit
losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effect of
other political and economic events. In addition, exchange-traded options of
foreign currencies involve certain risks not presented by the
over-the-counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has established
banking relationships in applicable foreign counties for this purpose. As a
result, the OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency option
exercises, or would result in undue burdens on the OCC or its clearing
member, impose special procedures on exercise and settlement, such as
technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward
contracts and options of foreign currencies may be traded on foreign
exchanges. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decision, (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States, (iv) the imposition of
different exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading volume.
FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS
Except for transactions the Portfolio has identified as hedging
transactions, the Portfolio is required for Federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses
on regulated futures contracts as of the end of each taxable year as well as
those actually realized during the year. In most cases, any such gain or
loss recognized with respect to a regulated futures contract is considered to
be 60% long-term capital gain or loss and 40% short-term capital gain or loss
without regard to the holding period of the contract.
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), at least 90% of its gross income for a
taxable year must be derived from certain qualifying income, i.e., dividends,
interest, income derived from loans of securities and gains from the sale or
other disposition of stock, securities or foreign currencies, or other
related income, including gains from options, futures and forward contracts,
derived with respect to its business investing in stock, securities or
currencies. Any net gain realized from the closing out of futures contracts
will, therefore, generally be qualifying income for purposes of the 90%
requirement. Qualification as a regulated investment company also requires
that less than 30% of the Portfolio's gross income be derived from the sale
or other disposition of stock, securities, options, futures or forward
contracts (including certain foreign currencies not directly related to the
Fund's business of investing in stock or securities) held less than three
months. In order to avoid realizing excessive gains on securities held for
less than three months, the Portfolio may be required to defer the closing
out of futures contracts beyond the time when it would
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otherwise be advantageous to do so. It is anticipated that unrealized gains
on futures contracts which have been open for less than three months as of
the end of the Portfolio's taxable year, and which are recognized for tax
purposes, will not be considered gains on securities held for less than three
months for the purposes of the 30% test.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's taxable year) on futures
transactions. Such distribution will be combined with distributions of
capital gains realized on the Portfolio's other investments, and shareholders
will be advised on the nature of the payment.
PURCHASE OF SHARES
Shares of the Portfolio may be purchased without a sales commission at
the net asset value per share next determined after an order is received in
proper form by the Fund and payment is received by the Fund's Custodian. The
minimum initial investment required for the Portfolio is $100,000 with
certain exceptions as may be determined from time to time by the officers of
the Fund. An order received in proper form prior to the 4:00 p.m. close of
the New York Stock Exchange ("Exchange") will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the 4:00 p.m. close of the Exchange will be executed at the price
computed on the next day the Exchange is open after proper receipt. The
Exchange will be closed on the following days: Good Friday, April 14, 1995;
Memorial Day, May 29, 1995; Independence Day, July 4, 1995; Labor Day,
September 4, 1995; Thanksgiving Day, November 23, 1995; Christmas Day,
December 25, 1995; New Years Day, January 1, 1996; and Presidents Day,
February 19, 1996.
The Portfolio reserves the right in its sole discretion (1) to suspend
the offering of its shares, (2) to reject purchase orders when in the
judgement of management such rejection is in the best interests of the Fund,
and (3) to reduce or waive the minimum for initial and subsequent investment
for certain fiduciary accounts such as employee benefit plans or under
circumstances where certain economies can be achieved in sales of a
Portfolio's shares.
REDEMPTION OF SHARES
The Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Portfolio to dispose of securities owned by it or to fairly determine
the value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the net assets of the
Fund at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Commission. Redemptions in excess of the above
limits may be paid, in whole or in part, in investment securities or in cash
as the Directors may deem advisable; however, payment will be made wholly in
cash unless the Directors believe that economic or market conditions exist
which would make such a practice detrimental to the best interests of the
Fund. If redemptions are paid in investment securities, such securities will
be valued as set forth in the Prospectus under "Valuation of Shares" and a
redeeming shareholder would normally incur brokerage expenses if these
securities were converted to cash.
No charge is made by the Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and Mutual Funds Service Company (the
"Administrator") from fraud, signature guarantees are required for certain
redemptions. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) or
the registered address or (2) share transfer requests. The purpose of
signature guarantees is to verify the identity of the party who has
authorized a redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition
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<PAGE>
of eligible guarantor institution is available from the Administrator.
Broker-dealers guaranteeing signatures must be a member of a clearing
corporation or maintain net capital of at least $100,000. Credit unions must
be authorized to issue signature guarantees. Signatures guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program.
The signature guarantee must appear either: (1) on the written request
for redemption; (2) on a separate instrument for assignment ("stock power")
which should specify the total number of shares to be redeemed; or (3) on all
stock certificates tendered for redemption and, if shares held by the Fund
are also being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth
in the Rice, Hall, James Small Cap Portfolio's Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of the Rice, Hall, James Small Cap Portfolio
may be exchanged for any other Institutional Class Shares of a Portfolio
included in The Regis Family of Funds which is comprised of the Fund and The
Regis Fund II. (See the list of Portfolios of The Regis Family of Funds -
Institutional Class Shares at the end of the Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to The
Regis Fund, Inc., The Regis Service Center, c/o Mutual Funds Service Company,
P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is only
available with respect to Portfolios that are registered for sale in the
shareholders state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sale commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
The Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close
of business on the same day. Requests received after 4:00 p.m. will be
processed on the next business day. Neither the Fund nor the Administrator
will be responsible for the authenticity of the exchange instructions
received by telephone. Exchanges may also be subject to limitations as to
amounts or frequency and to other restrictions established by the Board of
Directors to assure that such exchanges do not disadvantage the Fund and its
shareholders.
For Federal income tax purposes an exchange between Portfolios is a
taxable event, and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange
between Portfolios; you may want to consult your tax adviser for further
information in this regard. The exchange privilege may be modified or
terminated at any time.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall be determined
immediately after and as a result of the Portfolio's acquisition of such
security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will not
be considered when determining whether the investment complies with the
Portfolio's investment limitations. Investment limitations (1), (2), (3) and
(4) are classified as fundamental. The Portfolio's fundamental investment
limitations cannot be changed without approval by a "majority of the
outstanding shares" (as defined in the 1940 Act) of the Portfolio. The
Portfolio will not:
(1) invest in physical commodities or contracts on physical commodities;
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(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which
deal in real estate and may purchase and sell securities which are
secured by interests in real estate;
(3) make loans except (i) by purchasing debt securities in
accordance with its investment objectives and (ii) by lending its
portfolio securities to banks, brokers, dealers and other financial
institutions so long as such loans are not inconsistent with the 1940
Act or the rules and regulations or interpretations of the
Commission thereunder;
(4) underwrite the securities of other issuers;
(5) invest in stock or bond futures and/or options on futures unless
(i) not more than 5% of the Portfolio's assets are required as
deposit to secure obligations under such futures and/or options on
futures contracts provided, however, that in the case of an option
that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in computing such 5% and (ii) not more than
20% of the Portfolio's assets are invested in stock or bond futures
and options;
(6) purchase on margin or sell short except as specified in (5) above;
(7) purchase or retain securities of an issuer if those officers and
directors of the Fund or its investment adviser owning more than
of 1% of such securities together own more than 5% of such
securities;
(8) invest more than an aggregate of 15% of the assets of the Portfolio,
determined at the time of investment, in securities subject to
legal or contractual restrictions on resale or securities for which
there are no readily available markets;
(9) invest for the purpose of exercising control over management of any
company;
(10) write or acquire options or interests in oil, gas or other mineral
exploration or development programs; and
(11) invest in warrants, valued at the lower of cost or market, not
exceeding 5.0% of the value of the Portfolio's net assets.
Included within that amount, but not to exceed 2.0% of the value of
the Portfolio's net assets, may be warrants which are not listed on
the New York or American Stock Exchange. Warrants acquired by the
Portfolio in units or attached to securities may be deemed to be
without value.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad
policies for the Fund and elect its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past 5 years is set forth in the Fund's
Prospectus. As of January 31, 1995, the Directors and officers of the Fund
owned less than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director
receives a $2,000 meeting fee which is aggregated for all of the Directors
and allocated proportionately among the Portfolios of the Fund and The Regis
Fund II as well as the AEW Commercial Mortgage Securities Fund, Inc. and
reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no
remuneration for their service as Directors. The Fund's officers and
employees are paid by either the Adviser, United Asset Management Corporation
("UAM"), or the Administrator and receive no compensation from the Fund.
PRINCIPAL HOLDERS OF SECURITIES
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As of January 31, 1995, the following persons or organizations held of
record or beneficially 5% or more of the shares of the Portfolio, as noted.
Robert P. Gregory, Trustee For Gregory & Cook Profit Sharing Plan,
Houston, TX, 7.5%*; Jean E. Hahn Trustee, Hahn Family Trust, Rancho Santa Fe,
CA, 6.1%*; Bank of America, Custodian for The Atchison Hospital Foundation,
Los Angeles, CA, 6.0%*; and Bank of California, Custodian for The Thomas C.
Ackerman Foundation, San Francisco, CA, 5.4%.*
The persons or organizations owning 25% or more of the outstanding shares
of a Portfolio may be presumed to "control" (as that term is defined in the
1940 Act such Portfolio. As a result, those persons or organizations could
have the ability to vote a majority of the shares of the Portfolio on any
matter requiring the approval of shareholders of such Portfolio.
________________
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Rice, Hall, James & Associates (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December
1980 for the purpose of acquiring and owning firms engaged primarily in
institutional investment management. Since its first acquisition in August
1983, UAM has acquired or organized approximately 42 such wholly-owned
affiliated firms (the "UAM Affiliated Firms"). UAM believes that
permitting UAM Affiliated Firms to retain control over their investment
advisory decisions is necessary to allow them to continue to provide
investment management services that are intended to meet the particular needs
of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, the Portfolio pays the Adviser an annual fee in monthly
installments, calculated by applying the following annual percentage rate to
the Portfolio's average daily net assets for the month:
Small Cap Portfolio . . . . . . 0.75%
For the period from July 1, 1994 (commencement of operations) to October
31, 1994, the Portfolio paid advisory fees of $10,000 which the Adviser
waived.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts
to obtain the best execution with respect to all transactions for the
Portfolio. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services
provided by the broker effecting the transaction. It is not the Fund's
practice to allocate brokerage or effect principal transactions with dealers
on the basis of sales of shares which may be made through broker-dealer
firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's Portfolios or who act as agents in
the purchase of shares of the Portfolios for their clients. During the fiscal
years ended October 31, 1992, 1993 and 1994, the entire Fund paid brokerage
commissions of approximately $1,248,000, $1,592,000 and $2,402,000,
respectively.
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Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about
the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
The Administrator, an affiliate of United States Trust Company of New
York, provides administrative, fund accounting, dividend disbursing and
transfer agency services to the Fund under an Administration Agreement. For
the period from July 1, 1994 (commencement of operations) to October 31,
1994, administrative services fees paid by the Rice, Hall, James Small Cap
Portfolio totaled $9,000. The services provided by the Administrator and the
current fees payable to the Administrator are described in the Portfolio's
Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may from time to time quote various performance figures to
illustrate past performance. Performance quotations by investment companies
are subject to rules adopted by the Commission, which require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied
by certain standardized performance information computed as required by the
Commission. An explanation of those and other methods used to compute or
express performance follows.
YIELD
Current yield reflects the income per share earned by the Portfolio's
investment. The current yield of the Portfolio is determined by dividing the
net investment income per share earned during a 30-day base period by the
maximum offering price per share on the last day of the period and
annualizing the result. Expenses accrued for the period include any fees
charged to all shareholders during the base period.
This figure was obtained using the following formula:
Yield = 2[( a-b + 1 )(6) - 1]
---
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
TOTAL RETURN
The average annual total return of the Portfolio is determined by finding
the average annual compounded rates of return over 1, 5 and 10 year periods
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes that all dividends and
distributions are reinvested when paid. The quotation assumes the amount was
completely redeemed at the end of each 1, 5 and 10 year period and the
deduction of all applicable Fund expenses on an annual basis.
The total rate of return for the Rice, Hall, James Small Cap Portfolio
from inception to the date of the financial statements included herein is
11.40%.
These figures were calculated according to the following formula:
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P(1+T)(n) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods at
the end of the 1, 5 or 10 year periods (or fractional
portion thereof).
COMPARISONS
To help investors better evaluate how an investment in the Portfolio of
the Fund might satisfy their investment objective, advertisements regarding
the Fund may discuss various measures of Fund performance as reported by
various financial publications. Advertisements may also compare performance
(as calculated above) to performance as reported by other investments,
indices and averages. The following publications, indices and averages may
be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices - an
unmanaged index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of
performance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation and finance stocks
listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices - represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income
Fund Performance Analysis - measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.
(g) Goldman Sachs 100 Convertible Bond Index - currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index - includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index - consists of publicly
issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond - is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage pass through securities.
13
<PAGE>
(k) Lehman Brothers LONG-TERM Treasury Bond - is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(l) NASDAQ Industrial Index - is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change
only and does not include income.
(m) Value Line - composed of over 1,600 stocks in the Value Line Investment
Survey.
(n) Russell 2000 - composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S.
publicly-traded companies.
(o) Composite indices - 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and
65% Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(p) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. - analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(q) Mutual Fund Source Book published by Morningstar, Inc. - analyzes
price, yield, risk and total return for equity funds.
(r) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest,
Financial Times, Global Investor, Wall Street Journal and Weisenberger
Investment Companies Service - publications that rate fund
performance over specified time periods.
(s) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change over
time in the price of goods and services in major expenditure groups.
(t) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates
- historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U. S. Treasury bills
and inflation.
(u) Savings and Loan Historical Interest Rates - as published by the U.S.
Savings & Loan League Fact Book.
(v) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill Lynch,
Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Portfolio,
that the averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Portfolio to calculate its performance. In addition, there can be no
assurance that the Fund will continue this performance as compared to such
other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund
was changed to "The Regis Fund, Inc." The Fund's Articles of Incorporation,
as amended, authorize the Directors to issue 3,000,000,000 shares of common
stock, $.001 par value. The Board of Directors has the power to designate
one or more series ("Portfolios") or classes of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. Currently, the Fund is offering
shares of 29 Portfolios.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
14
<PAGE>
The Fund's policy is to distribute substantially all of the Portfolio's
net investment income, if any, together with any net realized capital gains
in the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the Federal excise tax on
undistributed income and capital gains. (See discussion under "Dividends,
Capital Gains Distributions and Taxes" in the Prospectus.) The amounts of
any income dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of
the Portfolio by an investor may have the effect of reducing the per share
net asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in
effect a return of capital, are subject to income taxes as set forth in the
Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise
in writing, all dividend and capital gains distributions are automatically
received in additional shares of the Portfolio at net asset value (as of the
business day following the record date). This will remain in effect until
the Fund is notified by the shareholder in writing at least three days prior
to the record date that either the Income Option (income dividends in cash
and capital gains distributions in additional shares at net asset value) or
the Cash Option (both income dividends and capital gains distributions in
cash) has been elected. An account statement is sent to shareholders
whenever an income dividend or capital gains distribution is paid.
The Portfolio will be treated as a separate entity (and hence as a
separate "regulated investment company") for Federal tax purposes. Any net
capital gains recognized by the Portfolio will be distributed to its
investors without need to offset (for Federal income tax purposes) such gains
against any net capital losses of another Portfolio.
FEDERAL TAXES
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of
its gross income for a taxable year must be derived from qualifying income,
i.e., dividends, interest, income derived from loans of securities, and gains
from the sale of securities or foreign currencies or other income derived
with respect to its business of investing in such securities or currencies.
In addition, gains realized on the sale or other disposition of securities
held for less than three months must be limited to less than 30% of the
Portfolio's annual gross income.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes.
Shareholders will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Portfolio for the fiscal year ended
October 31, 1994 and the Financial Highlights for the respective period
presented which appear in the Portfolio's 1994 Annual Report to Shareholders
and the report thereon of Price Waterhouse LLP, the Fund's independent
accountants, also appearing therein, are incorporated by reference into this
Statement of Additional Information. Annual Reports may be obtained, without
charge, by writing to the Fund or by calling The Regis Service Center at
1-800-638-7983.
15
<PAGE>
UAM FUNDS
ENHANCED MONTHLY INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
APRIL 25, 1995 AS SUPPLEMENTED OCTOBER 31, 1995
The following information supplements the "Investment Objective and Policies"
section:
PORTFOLIO OVERVIEW:
The Enhanced Monthly Income Portfolio seeks to achieve its objective by
diversifying the Portfolio's assets in investment grade preferred and fixed
income securities, of short to intermediate term, which will be hedged with U.S.
Government Securities futures to minimize capital fluctuations of the Portfolio
caused by interest rate movements. While the Adviser intends to concentrate
the Portfolio's investments (i.e., 25%) in the utilities industry, the Portfolio
will include financial and industrial issues. The investment philosophy is
primarily one of buy and hold, however, the Adviser will seek to optimize total
returns by trading the Portfolio when it believes market, economic or other
conditions make it advantageous to do so (i.e., to take advantage of market or
pricing inefficiencies to improve dividend income).
The Adviser may invest the Portfolio's assets in a broad variety of preferred
securities with an emphasis on the recently developed, rapidly growing "hybrid
preferred" market. This market is comprised of various types of issues which
combine certain debt and equity features and are known by several acronyms
including, but not limited to, MIPS (Monthly Income Preferred Securities), TOPS
(Trust Originated Preferred Securities), MIDS (Monthly Income Debt Securities),
and QIDS (Quarterly Income Debt Securities). No portion of the income generated
by these issues will be eligible for the corporate dividends received deduction.
The following information supplements the "Investment Adviser" section:
PHILOSOPHY/STYLE:
Spectrum Asset Management has been managing diversified hedged preferred stock
portfolios for major institutional investors since 1987. Focused exclusively on
preferred stocks, Spectrum's three senior executives have a total of nearly 50
years of experience in this specialized market. The firm uses sophisticated,
proprietary pricing and hedging models, in addition to the expertise of its
investment professionals, to develop strategies which take advantage of market
inefficiencies and opportunities while mitigating the effect of interest rate
movements on the capital value of the Portfolio.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- Coca-Cola
- Procter & Gamble
- A.E. Staley
- Montana Dakota Utilities
- American Bankers Insurance Corporation
<PAGE>
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
ENHANCED MONTHLY INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 25, 1995
This Statement of Additional Information is not a Prospectus but should be
read in conjunction with The Regis Fund, Inc.'s Prospectus relating to the
Enhanced Monthly Income Portfolio Institutional Class Shares dated April 25,
1995. To obtain the Prospectus, please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . . . 1
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . 7
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Appendix-Description of Securities and Ratings . . . . . . . . . . . . . . .A-1
INVESTMENT OBJECTIVE AND POLICIES
The following discussion supplements the discussion of the investment
objective and policies of the Enhanced Monthly Income Portfolio (the
"Portfolio") as set forth in the Fund's prospectus:
RISKS PARTICULAR TO THE PUBLIC UTILITIES INDUSTRY
The public utilities industries are subject to various uncertainties,
including: difficulty in obtaining adequate returns on invested capital;
frequent difficulty in obtaining approval of rate increases by public service
commissions; increased costs, delays and restrictions as a result of
environmental considerations; difficulty and delay in securing financing of
large construction projects; difficulties of the capital markets in absorbing
utility debt and equity securities; difficulties in obtaining fuel for electric
generation at reasonable prices; difficulty in obtaining natural gas for resale;
special risks associated with the construction and operation of nuclear power
generating facilities, including technical and cost factors of such construction
and operation and the possibility of imposition of additional governmental
requirements for construction and operation; and the effects of energy
conservation and the effects of regulatory changes, such as the possible adverse
effects on profits of recent increased competition among telecommunications
companies and the uncertainties resulting from such companies' diversification
into new domestic and international businesses, as well as
<PAGE>
agreements by many such companies linking future rate increases to inflation or
other factors not directly related to the actual operating profits of the
enterprise.
FUTURES CONTRACTS
The Portfolio may enter into futures contracts for the purposes of hedging,
remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery.
Closing out an open futures position is done by taking an opposite position
("buying" a contract which has previously been "sold" or "selling" a contract
previously "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates. The Portfolio intends to use futures contracts only for
hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions. A Portfolio
will only sell futures contracts to protect securities it owns against price
declines or purchase contracts to protect against an increase in the price of
securities it intends to purchase. As evidence of this hedging interest, the
Portfolio expects that approximately 75% of its futures contracts purchases will
be "completed"; that is, equivalent amounts of related securities will have been
purchased or are being purchased by the Portfolio upon sale of open futures
contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this exposure.
While the Portfolio will incur commission expenses in both opening and closing
out futures positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets.
2
<PAGE>
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out a
futures position by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance, that a liquid secondary market will exist
for a particular futures contract at any given time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
the Portfolio would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Portfolio has
insufficient cash, it may have to sell Portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Portfolio may be required to make delivery of the instruments underlying
futures contracts it holds. The inability to close futures positions also could
have an adverse impact on the Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contracts would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in excess of the
amount invested in the contract. However, because the futures strategies of the
Portfolio are engaged in only for hedging purposes, the Adviser does not believe
that the Portfolio is subject to the risks of loss frequently associated with
futures transactions. The Portfolio would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the underlying
financial instrument and sold it after the decline.
Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is
also possible that the Portfolio could both lose money on futures contracts and
also experience a decline in value of portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the Portfolio has identified as hedging
transactions, the Portfolio is required for Federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses on
futures contracts as of the end of the year, as well as those actually realized
during the year. In most cases any gains or loss recognized with respect to a
futures contract is considered to be 60% long-term capital gain or loss and 40%
short-term capital gain or loss, without regard to the holding period of the
contract. Furthermore, sales of futures contracts which are intended to hedge
against a change in the value of securities held by the Portfolio may affect the
holding period of such securities and, consequently, the nature of the gain or
loss on such securities upon disposition.
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income: i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities of
foreign currencies, or other income derived with respect to its business
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than
3
<PAGE>
three months must be limited to less than 30% of a Portfolio's annual gross
income. It is anticipated that any net gain realized from the closing out of
futures contracts will be considered a gain from the sale of securities and
therefore will be qualifying income for purposes of the 90% requirement. In
order to avoid realizing excessive gains on securities held for less than three
months, the Portfolio may be required to defer the closing out of futures
contracts beyond the time when it would otherwise be advantageous to do so. It
is anticipated that unrealized gains on futures contracts, which have been open
for less than three months as of the end of the Portfolio's fiscal year and
which are recognized for tax purposes, will not be considered gains on
securities held for less than three months for the purpose of the 30% test.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distribution will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.
PURCHASE OF SHARES
Shares of the Portfolio may be purchased without a sales commission, at the
net asset value per share next determined after an order is received by the Fund
and payment is received by the Fund's custodian. The minimum initial investment
required is $500,000. Certain exceptions to the minimums may be determined from
time to time by the officers of the Fund. For the Enhanced Monthly Income
Portfolio, an order received in proper form prior to the 4:00 p.m. close of the
New York Stock Exchange ("Exchange") will be executed at the price computed on
the date of receipt; and an order received not in proper form or after the 4:00
p.m. close of the Exchange will be executed at the price computed on the next
day the Exchange is open after proper receipt. The Exchange will be closed on
the following days: Memorial Day, May 29, 1995; Independence Day, July 4, 1995;
Labor Day, September 4, 1995; Thanksgiving Day, November 23, 1995; Christmas
Day, December 25, 1995; New Year's Day, January 1, 1996; and President's Day,
February 19, 1996.
The Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (3) to reduce
or waive the minimum for initial and subsequent investment for certain fiduciary
accounts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of the Portfolio's shares.
REDEMPTION OF SHARES
The Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Securities
and Exchange Commission, (the "Commission"), (2) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for the Portfolio to dispose of securities
owned by it, or to fairly determine the value of its assets, and (3) for such
other periods as the Commission may permit. The Fund has made an election with
the Commission to pay in cash all redemptions requested by any shareholder of
record limited in amount during any 90-day period to the lesser of $250,000 or
1% of the net assets of the Fund at the beginning of such period. Such
commitment is irrevocable without the prior approval of the Commission.
Redemptions in excess of the above limits may be paid in whole or in part, in
investment securities or in cash, as the Directors may deem advisable; however,
payment will be made wholly in cash unless the Directors believe that economic
or market conditions exist which would make such a practice detrimental to the
best interests of the Fund. If redemptions are paid in investment securities,
such securities will be valued as set forth in the Prospectus under "Valuation
of Shares" and a redeeming shareholder would normally incur brokerage expenses
if those securities were converted to cash.
No charge is made by the Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES - To protect your account, the Fund and Mutual Funds
Service Company (the "Administrator") from fraud, signature guarantees are
required for certain redemptions. The purpose of signature guarantees is to
verify the identity of the person who has authorized a redemption from your
account. Signature
4
<PAGE>
guarantees are required in connection with (1) all redemptions when the proceeds
are to be paid to someone other than the registered owner(s) and/or registered
address; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of l934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Administrator. Broker-dealers guaranteeing signatures must
be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Buying, Selling
and Exchanging Shares" in the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of the Enhanced Monthly Income Portfolio may be
exchanged for any other Institutional Class Shares of a Portfolio included in
The Regis Family of Funds which is comprised of the Fund and The Regis Fund II.
(See a list of Portfolios of The Regis Family of Funds - Institutional Class
Shares at the end of the Prospectus.) Exchange requests should be made by
calling the Fund (1-800-638-7983) or by writing to The Regis Fund, Inc., The
Regis Service Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston,
MA 02208-2798. The exchange privilege is only available with respect to
Portfolios that are registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling The
Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Administrator will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolio to another person by
making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
5
<PAGE>
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Redemption
of Shares". As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The Enhanced Monthly Income Portfolio is subject to the following
restrictions which may be changed by the Fund's Board of Directors upon
reasonable notice to investors. These restrictions supplement the investment
objectives and policies set forth in the Prospectus. The Enhanced Monthly
Income Portfolio will not:
(1) invest in commodities, except for hedging, liquidity and related purposes
as provided in the Prospectus and herein;
(2) purchase or sell real estate, although it may purchase and sell securities
of companies which deal in real estate and may purchase and sell securities
which are secured by interests in real estate;
(3) purchase on margin or sell short;
(4) purchase or retain securities of an issuer if those Officers and Directors
of the Fund or its investment adviser owning more than 1/2 of 1% of such
securities together own more than 5% of such securities;
(5) underwrite the securities of other issuers or invest more than an aggregate
of 15% of the net assets of the Portfolio, determined at the time of
investment, in securities subject to legal or contractual restrictions on
resale and for which there are no readily available markets, including
repurchase agreements having maturities of more than seven days;
(6) invest for the purpose of exercising control over management of any
company;
(7) invest its assets in securities of any investment company, except in
connection with a merger, acquisition of assets or consolidation;
(8) acquire any securities of companies within one industry, other than the
utilities industry, if, as a result of such acquisition, more than 25% of
the value of the Portfolio's total assets would be invested in securities
of companies within such industry; provided, however, that there shall be
no limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments issued
by U.S. banks when the Portfolio adopts a temporary defensive position; and
(9) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and choose its officers. A list of the Directors and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past 5 years is set forth in the Fund's Prospectus.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio, which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all the Directors and allocated
proportionately among the Portfolios of the Fund and
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<PAGE>
The Regis Fund II as well as AEW Commercial Mortgage Securities Fund, Inc. and
reimbursement for travel and other expenses incurred while attending Board
meetings. Directors who are also officers or affiliated persons receive no
remuneration for their service as Directors. The Fund's officers and employees
are paid by either the Adviser, United Asset Management Corporation ("UAM"), or
the Administrator and receive no compensation from the Fund.
INVESTMENT ADVISER
Spectrum Asset Management, Inc. is a wholly-owned subsidiary of UAM, a
holding company incorporated in Delaware in December 1980 for the purpose of
acquiring and owning firms engaged primarily in institutional investment
management. Since its first acquisition in August 1983, UAM has acquired or
organized approximately 42 wholly-owned affiliated firms (the "UAM Affiliated
Firms"). UAM believes that permitting UAM Affiliated Firms to retain control
over their investment advisory decisions is necessary to allow them to continue
to provide investment management services that are intended to meet the
particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each of
them.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, a Portfolio may pay higher commission rates than the lowest
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or principal business on the basis of sales of shares which may be made through
such firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's Portfolios or who act as agents in the
purchase of shares of the Portfolios for their clients.
The Portfolio may place a portion of its portfolio transactions with the
Adviser, which is a registered broker. Transactions placed with the Adviser are
subject to procedures adopted and supervised by the Board of Directors.
Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
The Administrator, an affiliate of United States Trust Company of New York,
provides administrative, fund accounting, dividend disbursing and transfer
agency services to the Fund under an Administration Agreement. The services
provided by the Fund and the current fees payable to the Administrator are
described in the Portfolio's Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may from time to time quote various performance figures to
illustrate past performance. Performance quotations by investment companies are
subject to rules adopted by the Commission, which require the use of
standardized performance quotations or, alternatively, that every non-
standardized performance quotation furnished by
7
<PAGE>
the Fund be accompanied by certain standardized performance information computed
as required by the Commission. An explanation of those and other methods used
to compute or express performance follows.
TOTAL RETURN
The average annual total return of the Portfolio is determined by finding
the average annual compounded rates of return over 1, 5, and 10 year periods
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes that all dividends and distributions
are reinvested when paid. The quotation assumes the amount was completely
redeemed at the end of each 1, 5 and 10 year period and the deduction of all
applicable Fund expenses on an annual basis.
These figures will be calculated according to the following formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10
year periods (or fractional portion thereof).
YIELD
Current yield reflects the income per share earned by the Portfolio's
investment.
The current yield of the Portfolio is determined by dividing the net
investment income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and annualizing the
result. Expenses accrued for the period include any fees charged to all
shareholders during the base period.
This figure will be obtained using the following formula:
6
Yield = 2[(a-b + 1) - 1]
---
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
COMPARISONS
To help investors better evaluate how an investment in the Portfolio might
satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated above)
to performance as reported by other investments, indices and averages. The
following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
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<PAGE>
(b) Standard & Poor's 500 Stock Index or its component indices - an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices - represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income
Fund Performance Analysis - measures total return and average current
yield for the mutual fund industry. Ranks individual mutual fund
performance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents, plus
North America.
(g) Goldman Sachs 100 Convertible Bond Index - currently includes 67 bonds
and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index - includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index - consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond - is a market-weighted
index that contains approximately 4700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency
issues and mortgage pass through securities.
(k) Salomon 1-3 year Treasury Index - the Salomon 1-3 Year Treasury Index
includes only U.S. Treasury Notes and Bonds with maturities one year
or greater and less than three years.
(l) Lehman Brothers LONG-TERM Treasury Bond - is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(m) NASDAQ Industrial Index - is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line - composed of over 1,600 stocks in the Value Line
Investment Survey.
(o) Russell 2000 - composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S.
publicly-traded companies.
(p) Composite indices - 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
9
<PAGE>
(q) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
- analyzes price, current yield, risk, total return and average rate
of return (average compounded growth rate) over specified time periods
for the mutual fund industry.
(r) Mutual fund source book, published by Morningstar, Inc. - analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger
Investment Companies Service - publications that rate fund performance
over specified time periods.
(t) Consumer Price Index (or cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates -
historical measure of yield, price and total return for common and
small company stock, long-term government bonds, treasury bills and
inflation.
(v) Savings and Loan Historical Interest Rates - as published by the U.S.
Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the fund to calculate its performance. In addition, there can
be no assurance that the Fund will continue this performance as compared to such
other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
Corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." The Fund's Articles of Incorporation, as
amended, authorize the Directors to issue 3,000,000,000 shares of common stock,
$.001 par value. The Board of Directors has the power to designate one or more
series (Portfolios) of common stock and to classify or reclassify any unissued
shares with respect to such portfolios, without further action by shareholders.
Currently, the Fund is offering shares of twenty-nine portfolios.
The shares of the Portfolio of the Fund, when issued and paid for as
provided for in the Prospectus, will be fully paid and nonassessable, and have
no preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Fund have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Directors
if they choose to do so. A shareholder is entitled to one vote for each full
share held (and a fractional vote for each fractional share held), then standing
in his name on the books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on
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<PAGE>
it and the imposition of the Federal excise tax on undistributed income and
capital gains (see discussion under "Dividends, Capital Gains Distributions and
Taxes" in the Prospectus). The amounts of any income dividends or capital gains
distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of
the Portfolio by an investor may have the effect of reducing the per share net
asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect
a return of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gain distributions are automatically received
in additional shares of the Portfolios of the Fund at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to the
record date that either the Income Option (income dividends in cash and capital
gains distributions in additional shares at net asset value) or the Cash Option
(both income dividends and capital gains distributions in cash) has been
elected. An account statement is sent to shareholders whenever an income
dividend or capital gain distribution is paid.
The Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital gains
recognized by the Portfolio will be distributed to its investors without need to
offset (for Federal income tax purposes) such gains against any net capital
losses of another Portfolio.
FEDERAL TAXES
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must be
limited to less than 30% of the Portfolio's annual gross income.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
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<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF RATINGS FOR BONDS AND PREFERRED SECURITIES
Excerpts from Moody's Investors Service ("Moody's") description of its
highest bond ratings: Aaa - judged to be the best quality; carry the smallest
degree of investment risk: Aa - judged to be of high quality by all standards; A
- - possess many favorable investment attributes and are to be considered as
higher medium grade obligations; Baa - considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA - highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA - also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A - regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
- - regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
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 or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies
which are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and The Tennessee Valley Authority.
A-1
<PAGE>
III. COMMERCIAL PAPER
The Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or, by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Portfolio's
investment in variable amount master demand notes, The Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash flow
and other liquidity ratios of the issuer, and the borrower's ability to pay
principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating 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 the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer acceptance; (4) liquidity; (5) amount and quality of
long term debt; (6) trend of earnings over a issuer; (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.
IV. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may increase or decrease periodically.
Frequently, dealers selling variable rate certificates of deposit to the
Portfolio will agree to repurchase such instruments, at the Portfolio's option,
at par on or near the coupon dates. The dealers' obligations to repurchase
these instruments are subject to conditions imposed by various dealers; such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolio is also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.
A-2
<PAGE>
UAM FUNDS
SAMI PREFERRED STOCK INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 28, 1995 AS REVISED JUNE 15, 1995 AND
AS SUPPLEMENTED OCTOBER 31, 1995
The following information supplements the "Investment Objective and Policies"
section:
PORTFOLIO OVERVIEW:
The SAMI Preferred Stock Income Portfolio seeks to achieve its objective by
investing primarily in investment grade, fixed-dividend utility preferred stock.
In selecting specific issues, the Adviser will consider current yield and all
variables that could affect the value of a security (e.g., sinking fund
provisions, call features, redemption characteristics, and credit quality).
While the investment philosophy is primarily one of buy and hold, the Adviser
will seek to optimize total returns by trading the Portfolio when the Adviser
believes market, economic or other conditions make it advantageous to do so.
For example, the Adviser may take advantage of market or pricing inefficiencies
to improve dividend income. The Portfolio is also structured to take maximum
advantage of potential spread tightening due to the increasing scarcity value of
dividend received deduction (DRD) qualifying preferred stock. As new preferred
type structures have developed, the supply of traditional DRD preferreds has
decreased. Spectrum focuses on issues either trading at a discount with strong
call protection or with attractive yields to call.
The following information supplements the "Investment Adviser" section:
PHILOSOPHY/STYLE:
Spectrum Asset Management has been managing diversified hedged preferred stock
portfolios for major institutional investors since 1987. Focused exclusively on
preferred stocks, Spectrum's three senior executives have a total of nearly 50
years of experience in this specialized market. The firm uses sophisticated,
proprietary pricing and hedging models, in addition to the expertise of its
investment professionals, to develop strategies which take advantage of market
inefficiencies and opportunities while mitigating the effect of interest rate
movements on the capital value of the Portfolio.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- Coca-Cola
- Procter & Gamble
- Staley
- Montana Dakota Utilities
- American Bankers Insurance Corporation
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
SAMI PREFERRED STOCK INCOME PORTFOLIO
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995, as revised June 15, 1995
This Statement is not a Prospectus but should be read in conjunction with
the The Regis Fund, Inc.'s Prospectus relating to the SAMI Preferred Stock
Income Portfolio's Institutional Class Shares dated February 28, 1995. To obtain
the Prospectus, please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
Page
----
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . 1
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 7
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . 8
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 8
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Appendix _ Description of Securities and Ratings . . . . . . . . . . . . 13
INVESTMENT OBJECTIVE AND POLICIES
The following discussion supplements the discussion of the investment
objective and policies of the SAMI Preferred Stock Income Portfolio as set forth
in the SAMI Prospectus:
SECURITIES LENDING
The Portfolio may lend its investment securities to qualified investors who
need to borrow securities in order to complete certain transactions, such as
covering short sales, avoiding failures to deliver securities or completing
arbitrage operations. By lending its investment securities, the Portfolio
attempts to increase its income through the receipt of interest on the loan. Any
gain or loss in the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Portfolio. The
Portfolio may lend its investment securities to qualified brokers, dealers,
domestic and foreign banks or other financial institutions, so long as the
terms, the structure and the aggregate amount of such loans are not inconsistent
with the Investment Company Act of 1940, as amended, (the "1940 Act") or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank, or securities
issued or guaranteed by the United States Government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis),
<PAGE>
(c) the loan be made subject to termination by the Portfolio at any time, and
(d) the Portfolio receives reasonable interest on the loan (which may include
the Portfolio investing any cash collateral in interest bearing short-term
investments), any distribution on the loaned securities and any increase in
their market value. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Directors. The Portfolio will continue to
retain any voting rights with respect to the loaned securities. If a material
event occurs affecting an investment on loan, the loan must be called and the
securities voted.
RISKS PARTICULAR TO THE PUBLIC UTILITIES INDUSTRY
The public utilities industries are subject to various uncertainties,
including: difficulty in obtaining adequate returns on invested capital;
frequent difficulty in obtaining approval of rate increases by public service
commissions; increased costs, delays and restrictions as a result of
environmental considerations; difficulty and delay in securing financing of
large construction projects; difficulties of the capital markets in absorbing
utility debt and equity securities; difficulties in obtaining fuel for electric
generation at reasonable prices; difficulty in obtaining natural gas for resale;
special risks associated with the construction and operation of nuclear power
generating facilities, including technical and cost factors of such construction
and operation and the possibility of imposition of additional governmental
requirements for construction and operation; and the effects of energy
conservation and the effects of regulatory changes, such as the possible adverse
effects on profits of recent increased competition among telecommunications
companies and the uncertainties resulting from such companies' diversification
into new domestic and international businesses, as well as agreements by many
such companies linking future rate increases to inflation or other factors not
directly related to the actual operating profits of the enterprise.
FUTURES CONTRACTS
The Portfolio may enter into futures contracts for the purposes of hedging,
remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes
<PAGE>
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from a fluctuation in
interest rates. The Portfolio intends to use futures contracts only for hedging
purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the Fund's
commodity futures and option positions be for other purposes, to the extent that
the aggregate initial margins and premiums required to establish such
non-hedging positions do not exceed five percent of the liquidation value of the
Portfolio. A Portfolio will only sell futures contracts to protect securities it
owns against price declines or purchase contracts to protect against an increase
in the price of securities it intends to purchase. As evidence of this hedging
interest, the Portfolio expects that approximately 75% of its futures contracts
purchases will be "completed"; that is, equivalent amounts of related securities
will have been purchased or are being purchased by the Portfolio upon sale of
open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this exposure.
While the Portfolio will incur commission expenses in both opening and closing
out futures positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter the sum of its initial margin deposits on
open contracts exceeds 5% of the market value of its total assets. The
Portfolio's outstanding obligations to purchase securities under these contracts
may be 100% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out
by only entering into futures which are traded on national futures exchanges and
for which there appears to be a liquid secondary market. However, there can be
no assurance that a liquid secondary market will exist for any particular
futures contract at any specific time. Thus, it may not be possible to close a
futures position. In the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if the Portfolio has insufficient cash, it may have
to sell Portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Portfolio may be required to
make delivery of the instruments underlying futures contracts it holds. The
inability to close futures positions also could have an adverse impact on the
Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contracts would result in a total loss
of the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in excess of the amount
invested in the contract. However, because the futures strategies of the
Portfolio are engaged in only for hedging purposes, the Adviser does not believe
that the Portfolio is subject to the risks of loss frequently associated with
futures transactions. The Portfolio would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the underlying
financial instrument and sold it after the decline.
Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures contracts
have different maturities than the Portfolio securities being hedged. It is also
possible that the Portfolio could lose money on futures contracts and also
experience a decline in value of Portfolio securities. There is also the risk of
loss by the Portfolio of margin deposits in the event of bankruptcy of a broker
with whom the Portfolio has an open position in a futures contract.
<PAGE>
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the Portfolio has identified as hedging
transactions, the Portfolio is required for Federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses on
regulated futures contracts as of the end of the year as well as those actually
realized during the year. In most cases any gains or loss recognized with
respect to a futures contract is considered to be 60% long-term capital gain or
loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which are
intended to hedge against a change in the value of securities held by the
Portfolio may affect the holding period of such securities and, consequently,
the nature of the gain or loss on such securities upon disposition.
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income: i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities of
foreign currencies, or other income derived with respect to its business
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must be
limited to less than 30% of a Portfolio's annual gross income. It is anticipated
that any net gain realized from the closing out of futures contracts will be
considered a gain from the sale of securities and therefore will be qualifying
income for purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities held for less than three months, the Portfolio may
be required to defer the closing out of futures contracts beyond the time when
it would otherwise be advantageous to do so. It is anticipated that unrealized
gains on futures contracts, which have been open for less than three months as
of the end of the Portfolio's fiscal year and which are recognized for tax
purposes, will not be considered gains on securities held for less than three
months for the purposes of the 30% test.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distribution will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.
PURCHASE OF SHARES
Shares of the Portfolio may be purchased without a sales commission, at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investment required is $500,000 with certain exceptions as may be
determined from time to time by the officers of the Fund. For the SAMI Preferred
Stock Income Portfolio, an order received in proper form prior to the 4:00 p.m.
close of the New York Stock Exchange ("Exchange") will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the 4:00 p.m. close of the Exchange will be executed at the price computed
on the next day the Exchange is open after proper receipt. The Exchange will be
closed on the following days: Good Friday, April 14, 1995; Memorial Day, May 29,
1995; Independence Day, July 4, 1995; Labor Day, September 4, 1995; Thanksgiving
Day, November 23, 1995; Christmas Day, December 25, 1995; New Year's Day,
January 1, 1996; and Presidents' Day, February 19, 1996.
The Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (3) to reduce
or waive the minimum for initial and subsequent investment for certain fiduciary
accounts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of the Portfolio's shares.
<PAGE>
REDEMPTION OF SHARES
REDEMPTIONS
The Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Portfolio to dispose of securities owned by it, or to fairly determine
the value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares" and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.
No charge is made by the Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES _ To protect your account, the Fund and Mutual Funds
Service Company (the "Administrator") from fraud, signature guarantees are
required for certain redemptions. The purpose of signature guarantees is to
verify the identity of the person who has authorized a redemption from your
account. Signature guarantees are required in connection with (1) all
redemptions when the proceeds are to be paid to someone other than the
registered owner(s) and/or registered address; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the transfer agent. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder
Services" in the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of the SAMI Preferred Stock Income Portfolio may
be exchanged for any other Institutional Class Shares of a Portfolio included in
The Regis Family of Funds which is comprised of the Fund and The Regis Fund II.
(See the list of Portfolios of The Regis Family of Funds _ Institutional Class
Shares at the end of the Prospectus.) Exchange requests should be made by
calling the Fund (1-800-638-7983) or by writing to The Regis Fund, Inc., The
Regis Service Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston,
MA 02208-2798. The exchange privilege is only available with respect to
Portfolios that are registered for sale in the shareholder's state of residence.
<PAGE>
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling The
Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed
on the next business day. Neither the Fund nor the Administrator will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency, and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolio to another person by
making a written request to the Fund. The request should clearly identify the
account and number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to the
transfer. The signature on the letter of request, the stock certificate or any
stock power must be guaranteed in the same manner as described under "Redemption
of Shares". As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The SAMI Preferred Stock Income Portfolio is subject to the following
restrictions which may be changed by the Fund's Board of Directors upon
reasonable notice to investors. These restrictions supplement the investment
objectives and policies set forth in the Prospectus. The SAMI Preferred Stock
Income Portfolio will not:
(1) invest in commodities, except for hedging, liquidity and related
purposes as provided in the Prospectus and herein;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) purchase on margin or sell short;
(4) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;
(5) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the total assets of the Portfolio, determined
at the time of investment, in securities subject to legal or
contractual restrictions on resale and for which there are no
readily available markets, including repurchase agreements having
maturities of more than seven days (until further notice, as an
undertaking for state securities registration purposes in
Wisconsin, the Portfolio will limit such investments to 5% or
less of its total assets, determined at the time of investment);
(6) invest for the purpose of exercising control over management of
any company;
<PAGE>
(7) invest its assets in securities of any investment company, except
in connection with a merger, acquisition of assets or
consolidation;
(8) acquire any securities of companies within one industry, other
than the utilities industry, if, as a result of such acquisition,
more than 25% of the value of the Portfolio's total assets would
be invested in securities of companies within such industry;
provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or
instruments issued by U.S. banks when the Portfolio adopts a
temporary defensive position; and
(9) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and choose its officers. A list of the Directors and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past 5 years is set forth in the SAMI Prospectus. As of
January 31, 1995, the Directors and officers of the Fund owned less than 1% of
the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all of the Directors and allocated
proportionately among the Portfolios of the Fund and The Regis Fund II as well
as the AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for
travel and other expenses incurred while attending Board meetings. Directors who
are also officers or affiliated persons receive no remuneration for their
service as Directors. The Fund's officers and employees are paid by either the
Adviser, United Asset Management Corporation ("UAM"), or the Administrator and
receive no compensation from the Fund.
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations owned of
record or beneficially 5% or more of the shares of the Portfolio:
Southtrust Bank of Alabama, N.A. Trustee for Energen Corporation Retirement
Income Plan, Birmingham, AL, 21.6%*; Amsouth Bank, N.A., Trustee for Drummond
Co., Inc., Revised Pension Plan, Birmingham, AL, 14.8%*; Kansas City Power &
Light Company, Kansas City, MO, 13.8%; Proctor Hospital, Peona, IL, 10.6%;
Continental Trust Company, Trustee for Sisters of St. Francis Health Services
Inc. Retirement Trust, Chicago, IL, 8.8%*; Intercoast Capital Company,
Wilmington, DE, 7.9%; Lasalle National Trust, N.A., Trustee for Miner Ent.,
Chicago, IL, 6.6%*; Intercoast Capital Company, Wilmington, DE, 5.8%; and
Lasalle National Trust, N.A., Trustee for Miner Pension Trust Enhanced, Chicago,
IL, 5.7%.
The persons or organizations owning 25% or more of the outstanding shares
of a Portfolio may be presumed to control (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have the
ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
___________
* Denotes shares held by a trustee or other fiduciary for which
beneficial ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Spectrum Asset Management, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 42 wholly-owned affiliated firms (the "UAM
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to retain
control over their investment advisory decisions is necessary to allow them to
continue to provide investment management services that are intended to meet the
particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each of
them.
For the period from June 23, 1992 (commencement of operations) to
October 31, 1992, the SAMI Preferred Stock Income Portfolio paid no advisory
fees. During this period, the Adviser voluntarily waived advisory fees of
approximately $34,000. For the fiscal year ended October 31, 1993 the Portfolio
paid approximately $244,000 in advisory fees. During this period, the Adviser
voluntarily waived advisory fees of approximately $61,000. For the fiscal year
ended October 31, 1994, the Portfolio paid $535,000 in advisory fees.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio. In
doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or principal business on the basis of sales of shares which may be made through
broker-dealer firms. However, the Adviser may place portfolio orders with
qualified broker-dealers who recommend the Fund's Portfolios or who act as
agents in the purchase of shares of the Portfolios for their clients. During the
fiscal years ended October 31, 1992, 1993
<PAGE>
and 1994, the entire Fund paid brokerage commissions of approximately
$1,248,000, $1,592,000, and $2,402,000, respectively.
The Portfolio may place a portion of its portfolio transactions with the
Adviser, which is a registered broker. Transactions placed with the Adviser are
subject to procedures adopted and supervised by the Board of Directors. For the
period from June 23, 1992 to October 31, 1992 and for the fiscal years ended
October 31, 1993 and 1994, the Portfolio paid commissions of approximately
$29,000, $209,000 and $177,000, respectively, to the Adviser for transactions
placed through its brokerage facilities.
Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
The Administrator, an affiliate of United States Trust Company of New York,
provides administrative, fund accounting, dividend disbursing and transfer
agency services to the Fund under an Administration Agreement. For the period
from June 23, 1992 (commencement of operations) to October 31, 1992,
administrative fees paid to the Administrator amounted to $7,000. During the
fiscal year ended October 31, 1993, administrative services fees paid to the
Administrator by the Portfolio totaled approximately $56,000. The basis of the
fees paid to the Administrator for the 1992 and 1993 fiscal years was as
follows: the Fund paid a monthly fee for its services which on an annualized
basis equaled 0.16 of 1% of the first $200 million of the aggregate net assets
of the Fund; plus 0.12 of 1% of the next $800 million of the aggregate net
assets of the Fund; plus 0.06 of 1% of the aggregate net assets in excess of
$1 billion. The fees were allocated among the Portfolios on the basis of their
relative assets and were subject to a graduated minimum fee schedule per
Portfolio, which rose from $1,000 per month upon inception of a Portfolio to
$50,000 annually after two years. During the fiscal year ended October 31, 1994,
administrative services fees paid to the Administrator by the Portfolio totaled
$90,000. The services provided by the Administrator and the current fees payable
to the Administrator are described in the Portfolio's Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may from time to time quote various performance figures to
illustrate past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quotations
or, alternatively, that every non-standardized performance quotation furnished
by the Fund be accompanied by certain standardized performance information
computed as required by the Commission. An explanation of those and other
methods used to compute or express performance follows.
TOTAL RETURN
The average annual total return of the Portfolio is determined by finding
the average annual compounded rates of return over 1, 5, and 10 year periods
that would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes that all dividends and distributions
are reinvested when paid. The quotation assumes the amount was completely
redeemed at the end of each 1, 5 and 10 year period and the deduction of all
applicable Fund expenses on an annual basis. From inception and for the one year
period ended on the date of the Financial Statements included herein, the
Portfolio had average annual total returns of 2.52% and -1.15%, respectively.
These figures were calculated according to the following formula:
P (1 + T)n = ERV
<PAGE>
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5, or
10 year periods (or fractional portion thereof).
YIELD
Current yield reflects the income per share earned by the Portfolio's
investment.
The current yield of the Portfolio is determined by dividing the net
investment income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and annualizing the
result. Expenses accrued for the period include any fees charged to all
shareholders during the base period. The yield for the Portfolio for the 30-day
period ended October 31, 1994 was 6.79%.
This figure was obtained using the following formula:
Yield = 2[( a - b + 1)6 - 1]
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
TAXABLE EQUIVALENT YIELD
In addition to its standardized performance quotations, the SAMI Preferred
Stock Income Portfolio may from time to time quote a non-standardized
performance figure for taxable equivalent yield. Taxable equivalent yield
represents the return that a corporate tax-paying investor qualifying for the
70% dividends received deduction would need to earn on a fully taxable
investment in order to achieve an equivalent after-tax yield during a specified
time period. For the twelve months ended October 31, 1994, the Portfolio's
taxable equivalent yield was 1.65%. This figure was calculated using the
following formula:
A Given Quarter = [DI x (1 - CT x DRD)
--------------------
(1 - CT) + (I - E) + Net Realized and Unrealized Capital Gains]
- -------------------------------------------------------------------------------
Average Net Assets During Quarter
Taxable Equivalent Yield = [ (Q1 + 1) x (Q2 + 1) x (Q3 + 1) x (Q4 + 1) ] - 1
where:
<PAGE>
DI = dividend income from domestic equity securities subject to the
dividends received deduction for qualifying investors,
CT = corporate income tax rate,
DRD = dividends received deduction,
I = interest and dividend income not subject to the dividends received
deduction,
E = expenses and fees incurred during the period,
Q1 = 1st Quarter,
Q2 = 2nd Quarter,
Q3 = 3rd Quarter, and
Q4 = 4th Quarter.
The formula used to derive taxable equivalent yield is in accordance with
the acceptable methods set forth by the Association of Investment Management and
Research ("AIMR").
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages _ an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices _ an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks. Comparisons
of performance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices _ unmanaged
indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices _ represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper _ Mutual Fund Performance Analysis and Lipper _ Fixed Income
Fund Performance Analysis _ measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestments of all
distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index _
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe. Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.
(g) Goldman Sachs 100 Convertible Bond Index _ currently includes 67 bonds
and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index _ includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
<PAGE>
(i) Salomon Brothers High Grade Corporate Bond Index _ consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond _ is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better. U.S. Treasury/agency issues
and mortgage pass through securities.
(k) Salomon 1-3 Year Treasury Index _ The Salomon 1-3 Year Treasury Index
includes only U.S. Treasury Notes and Bonds with maturities one year
or greater and less than three years.
(l) Lehman Brothers LONG-TERM Treasury Bond _ is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(m) NASDAQ Industrial Index _ is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(n) Value Line _ composed of over 1,600 stocks in the Value Line
Investment Survey.
(o) Russell 2000 _ composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest
U.S. publicly-traded companies.
(p) Composite indices _ 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond Index.
(q) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. _ analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(r) Mutual Fund Source Book, published by Morningstar, Inc. _ analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger
Investment Companies Service _ publications that rate fund performance
over specified time periods.
(t) Consumer Price Index (or cost of Living Index), published by the
U.S. Bureau of Labor Statistics _ a statistical measure of change,
over time in the price of goods and services in major expenditure
groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates _
historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.
(v) Savings and Loan Historical Interest Rates _ as published by the
U.S. Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its performance. In addition, there can be
no assurance that the Fund will continue this performance as compared to such
other averages.
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." The Fund's Articles of Incorporation, as
amended, authorize the Directors to issue 3,000,000,000 shares of common stock,
$.001 par value. The Board of Directors has the power to designate one or more
series (Portfolios) or classes of common stock and to classify or reclassify any
unissued shares with respect to such Portfolios, without further action by
shareholders. Currently, the Fund is offering shares of 29 Portfolios.
The shares of the Portfolio, when issued and paid for as provided for in
the Prospectus, will be fully paid and nonassessable, have no preference as to
conversion, exchange, dividends, retirement or other features and have no
preemptive rights. The shares of the Fund have noncumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they choose to do so. A
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his or her name on the
books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed income
and capital gains (see discussion under "Dividends, Capital Gains Distributions
and Taxes" in the Prospectus). The amounts of any income dividends or capital
gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of
the Portfolio by an investor may have the effect of reducing the per share net
asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of the Portfolio at net asset value (as of the business day
following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.
The Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital gains
recognized by the Portfolio will be distributed to its investors without need to
offset (for Federal income tax purposes) such gains against any net capital
losses of another Portfolio.
FEDERAL TAXES
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must be
limited to less than 30% of the Portfolio's annual gross income.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
<PAGE>
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the SAMI Preferred Stock Income Portfolio for
the fiscal period ended October 31, 1994 and the Financial Highlights for the
respective periods presented, which appear in the Portfolio's 1994 Annual Report
to Shareholders, and the reports thereon of Price Waterhouse LLP, independent
accountants, also appearing therein, are incorporated by reference into this
Statement of Additional Information. An Annual Report may be obtained, without
charge, by writing to the Fund or by calling The Regis Service Center at
1-800-638-7983.
<PAGE>
APPENDIX _ DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF RATINGS FOR BOND AND PREFERRED SECURITIES
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of
its highest bond ratings: AAA _ judged to be the best quality; carry the
smallest degree of investment risk: AA _ judged to be of high quality by all
standards; A _ possess many favorable investment attributes and are to be
considered as higher medium grade obligations; BAA _ considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA _ highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA _ also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A _ regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
_ regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and
U.S. Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
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 or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the U.S. Treasury, if needed, to service
its debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
III. COMMERCIAL PAPER
The Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by S&P.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be
<PAGE>
traded, and there is no secondary market for these notes, although they are
redeemable (and thus immediately repayable by the borrower) at face value, plus
accrued interest, at any time. In connection with the Portfolio's investment in
variable amount master demand notes, the Adviser's investment management staff
will monitor, on an ongoing basis, the earning power, cash flow and other
liquidity ratios of the issuer, and the borrower's ability to pay principal and
interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating 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 the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer acceptance; (4) liquidity; (5) amount and quality of
long term debt; (6) trend of earnings over a issuer; (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.
IV. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may increase or decrease periodically.
Frequently, dealers selling variable rate certificates of deposit to the
Portfolio will agree to repurchase such instruments, at the Portfolio's option,
at par on or near the coupon dates. The dealers' obligations to repurchase these
instruments are subject to conditions imposed by various dealers; such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolio is also able to
sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.
<PAGE>
PART B
THE REGIS FUND, INC.
SIRACH PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995, AS REVISED JUNE 15, 1995
This Statement is not a Prospectus but should be read in conjunction with
The Regis Fund, Inc.'s Prospectus relating to the Sirach Portfolios'
Institutional Class Shares dated February 28, 1995 and the Prospectus
relating to the Sirach Strategic Balanced, Growth and Special Equity
Portfolios Institutional Service Class Shares (the "Service Class Shares")
dated November 21, 1994. To obtain a Prospectus, please call The Regis
Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
----
Investment Objectives and Policies............................... 2
Purchase of Shares............................................... 4
Redemption of Shares............................................. 5
Shareholder Services............................................. 5
Investment Limitations........................................... 6
Management of the Fund........................................... 7
Investment Adviser............................................... 8
Service and Distribution Plans................................... 9
Portfolio Transactions........................................... 11
Administrative Services.......................................... 11
Performance Calculations......................................... 12
General Information.............................................. 14
Financial Statements............................................. 15
Appendix-Description of Securities and Ratings................... A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies
of the Sirach Portfolios as set forth in the Fund's Sirach Portfolios'
Prospectuses:
SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to
deliver securities or completing arbitrage operations. By lending its
investment securities, a Portfolio attempts to increase its income through
the receipt of interest on the loan. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be
for the account of the Portfolio. Each Portfolio may lend its investment
securities to qualified brokers, dealers, domestic and foreign banks or other
financial institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the Investment Company Act of
1940, as amended, (the "1940 Act") or the Rules and Regulations or
interpretations of the Securities and Exchange Commission, (the "Commission")
thereunder, which currently require that (a) the borrower pledge and maintain
with the Portfolio collateral consisting of cash, an irrevocable letter of
credit issued by a domestic U.S. bank or securities issued or guaranteed by
the United States Government having a value at all times not less than 100%
of the value of the securities loaned, (b) the borrower add to such
collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis), (c) the loan be made
subject to termination by the Portfolio at any time, and (d) the Portfolio
receives reasonable interest on the loan (which may include the Portfolio
investing any cash collateral in interest bearing short-term investments).
All relevant facts and circumstances, including the creditworthiness of the
broker, dealer or institution, will be considered in making decisions with
respect to the lending of securities, subject to review by the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and
approved by the investment company's Directors. The Portfolio will continue
to retain any voting rights with respect to the loaned securities. If a
material event occurs affecting an investment on a loan, the loan must be
called and the securities voted.
FUTURES CONTRACTS
The Sirach Fixed Income Portfolio may enter into futures contracts,
options, and options on futures contracts for the purposes of remaining fully
invested and reducing transactions costs. Futures contracts provide for the
future sale by one party and purchase by another party of a specified amount
of a specific security at a specified future time and at a specified price.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures
exchanges and trading are regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are
closed out before the settlement date without making or taking of delivery.
Closing out an open futures position is done by taking an opposite position
("buying" a contract which has previously been "sold" or "selling" a contract
previously "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash
or government securities with a broker or custodian to initiate and maintain
open positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date.
Minimal initial margin requirements are established by the futures exchange
and may be changed. Brokers may establish deposit requirements which are
higher than the exchange minimums. Futures contracts are customarily
purchased and sold on margin that may range upward from less than 5% of the
value of the contract being traded.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to
and from the futures broker for as long as the contract remains open. The
Fund expects to earn interest income on its margin deposits.
-2
<PAGE>
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from a
fluctuation in interest rates. Each Portfolio intends to use futures
contracts only for hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed 5% of the liquidation value of a
Portfolio. The Portfolio will only sell futures contracts to protect
securities it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. As
evidence of this hedging interest, the Portfolio expects that approximately
75% of its futures contracts purchases will be "completed"; that is,
equivalent amounts of related securities will have been purchased or are
being purchased by the Portfolio upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this
exposure. While the Portfolio will incur commission expenses in both opening
and closing out futures positions, these costs are lower than transaction
costs incurred in the purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Sirach Fixed Income Portfolio will not enter into futures contract
transactions to the extent that, immediately thereafter, the sum of its
initial margin deposits on open contracts exceeds 5% of the market value of
its total assets. In addition, the Portfolio will not enter into futures
contracts to the extent that its outstanding obligations to purchase
securities under these contracts would exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary
market. However, there can be no assurance that a liquid secondary market
will exist for any particular futures contract at any specific time. Thus, it
may not be possible to close a futures position. In the event of adverse
price movements, the Sirach Fixed Income Portfolio would continue to be
required to make daily cash payments to maintain its required margin. In such
situations, if the Portfolio has insufficient cash, it may have to sell
Portfolio securities to meet daily margin requirements at a time when it may
be disadvantageous to do so. In addition, the Portfolio may be required to
make delivery of the instruments underlying futures contracts it holds. The
inability to close options and futures positions also could have an adverse
impact on the Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at
the time of purchase, 10% of the value of the futures contract is deposited
as margin, a subsequent 10% decrease in the value of the futures contracts
would result in a total loss of the margin deposit, before any deduction for
the transaction costs, if the account were then closed out. A 15% decrease
would result in a loss equal to 150% of the original margin deposit if the
contract were closed out. Thus, a purchase or sale of a futures contract may
result in excess of the amount invested in the contract. However, because the
futures strategies of the Portfolio is engaged in only for hedging purposes,
the Adviser does not believe that the Portfolio is subject to the risks of
loss frequently associated with futures transactions. The Portfolio would
presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying financial instrument and sold it
after the decline.
Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures
contracts have different maturities than the Portfolio securities being
hedged. It is also possible that the Portfolio could lose money on futures
contracts and also experience a decline in value of Portfolio securities.
There is also the risk of loss by the Portfolio of margin deposits in the
event of bankruptcy of a broker with whom the Portfolio has an open position
in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type
of contract, no trades
-3-
<PAGE>
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days, with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting
some futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the Portfolio has identified as hedging
transactions, the Portfolio is required for Federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses
on regulated futures contracts as of the end of the year as well as those
actually realized during the year. In most cases, any gain or loss recognized
with respect to a futures contract is considered to be 60% long-term capital
gain or loss and 40% short-term capital gain or loss, without regard to the
holding period of the contract. Furthermore, sales of futures contracts which
are intended to hedge against a change in the value of securities held by the
Portfolio may affect the holding period of such securities and, consequently,
the nature of the gain or loss on such securities upon disposition.
In order for the Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income: i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or foreign currencies, or other income derived with respect to its
business of investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less than
three months must be limited to less than 30% of the Portfolio's annual gross
income. It is anticipated that any net gain realized from the closing out of
futures contracts will be considered a gain from the sale of securities and
therefore will be qualifying income for purposes of the 90% requirement. In
order to avoid realizing excessive gains on securities held for less than
three months, the Portfolio may be required to defer the closing out of
futures contracts beyond the time when it would otherwise be advantageous to
do so. It is anticipated that unrealized gains on futures contracts, which
have been open for less than three months as of the end of the Portfolio's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities held for less than three months for the purposes of the
30% test.
The Sirach Fixed Income Portfolio will distribute to shareholders annually
any net capital gains which have been recognized for Federal income tax
purposes (including unrealized gains at the end of the Portfolio's fiscal
year) on futures transactions. Such distributions will be combined with
distributions of capital gains realized on the Portfolio's other investments,
and shareholders will be advised on the nature of the payments.
PURCHASE OF SHARES
Both classes of shares of the Portfolios may be purchased without a sales
commission at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's
Custodian. The minimum initial investment required is $100,000 ($500,000 for
the Special Equity Portfolio) with certain exceptions as may be determined
from time to time by officers of the Fund. An order received in proper form
prior to the 4:00 p.m. close of the New York Stock Exchange ("Exchange") will
be executed at the price computed on the date of receipt; and an order
received not in proper form or after the 4:00 p.m. close of the Exchange will
be executed at the price computed on the next day the Exchange is open after
proper receipt. The Exchange will be closed on the following days: Good
Friday, April 14, 1995; Memorial Day, May 29, 1995; Independence Day, July 4,
1995; Labor Day, September 4, 1995; Thanksgiving Day, November 23, 1995;
Christmas Day, December 25, 1995; New Year's Day, January 1, 1996; and
Presidents' Day, February 19, 1996.
Each Portfolio reserves the right in its sole discretion (1) to suspend
the offering of its shares, (2) to reject purchase orders when in the
judgement of management such rejection is in the best interest of the Fund,
and (3) to reduce or waive the minimum for initial and subsequent investment
for certain fiduciary accounts such as employee benefit plans or under
circumstances where certain economies can be achieved in sales of a
Portfolio's shares.
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REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the
Commission, (2) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for a Portfolio to dispose of securities owned by it, or to fairly determine
the value of its assets, and (3) for such other periods as the Commission may
permit. The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the net assets of the
Fund at the beginning of such period. Such commitment is irrevocable without
the prior approval of the Commission. Redemptions in excess of the above
limits may be paid in whole or in part, in investment securities or in cash,
as the Directors may deem advisable; however, payment will be made wholly in
cash unless the Directors believe that economic or market conditions exist
which would make such a practice detrimental to the best interests of the
Fund. If redemptions are paid in investment securities, such securities will
be valued as set forth in the Prospectus under "Valuation of Shares" and a
redeeming shareholder would normally incur brokerage expenses if these
securities were converted to cash.
No charge is made by the Portfolios for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolios.
SIGNATURE GUARANTEES - To protect your account, the Fund and the
Administrator from fraud, signature guarantees are required for certain
redemptions. The purpose of signature guarantees is to verify the identity of
the person who has authorized a redemption from your account. Signature
guarantees are required in connection with (1) all redemptions when the
proceeds are to be paid to someone other than the registered owner(s) or
registered address; or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible
guarantor institutions is available from the Administrator. Broker-dealers
guaranteeing signatures must be a member of a clearing corporation or
maintain net capital of at least $100,000. Credit unions must be authorized
to issue signature guarantees. Signature guarantees will be accepted from any
eligible guarantor institution which participates in a signature guarantee
program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth
in the Sirach Portfolios' Prospectuses:
EXCHANGE PRIVILEGE
Institutional Class Shares of each Sirach Portfolio may be exchanged for
Institutional Class Shares of the other Sirach Portfolios and Service Class
Shares of each Sirach Portfolio may be exchanged for Service Class Shares of
the other Sirach Portfolios. In addition, Institutional Class Shares of each
Sirach Portfolio may be exchanged for any other Institutional Class Shares of
a Portfolio included in The Regis Family of Funds which is comprised of the
Fund and The Regis Fund II. (See the list of Portfolios of The Regis Family
of Funds - Institutional Class Shares at the end of the Sirach Portfolios -
Institutional Class Shares Prospectus.) Service Class Shares of the Sirach
Strategic Balanced, Growth and Special Equity Portfolios may be exchanged for
any other Service Class Shares of a Portfolio included in The Regis Family of
Funds which is comprised of the Fund and The Regis Fund II. (See the list of
Portfolios of The Regis Family of Funds - Service Class Shares at the end of
the Sirach Portfolios - Service Class Shares Prospectus.) Exchange requests
should be made by calling the Fund (1-800-638-7983) or by writing to The
Regis Fund, Inc., The Regis Service Center, c/o Mutual Funds Service Company,
P.O. Box 2798, Boston, MA 02208-2798. The exchange privilege is only
available with respect to Portfolios that are registered for sale in a
shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You
may obtain a Prospectus for the Portfolio(s) you are interested in by calling
The Regis Service Center at 1-800-638-7983.
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Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder, and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close
of business on the same day. Requests received after 4:00 p.m. will be
processed on the next business day. Neither the Fund nor the Administrator
will be responsible for the authenticity of the exchange instructions
received by telephone. Exchanges may also be subject to limitations as to
amounts or frequency and to other restrictions established by the Fund's
Board of Directors to assure that such exchanges do not disadvantage the Fund
and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange
between Portfolios. You may want to consult your tax adviser for further
information in this regard. The exchange privilege may be modified or
terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares to another person by making a written
request to the Fund. The request should clearly identify the account and
number of shares to be transferred, and include the signature of all
registered owners and all stock certificates, if any, which are subject to
the transfer. The signature on the letter of request, the stock certificate
or any stock power must be guaranteed in the same manner as described under
"Redemption of Shares". As in the case of redemptions, the written request
must be received in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall be determined
immediately after and as a result of a Portfolio's acquisition of such
security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will not
be considered when determining whether the investment complies with the
Portfolio's investment limitations.
Each Portfolio is subject to the following limitations which are
fundamental policies and may not be changed without the approval of the
lesser of: (1) at least 67% of the voting securities of a Portfolio present
at a meeting if the holders of more than 50% of the outstanding voting
securities of a Portfolio are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of a Portfolio. Each Portfolio
will not:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase or sell securities of companies which deal
in real estate and may purchase and sell securities which are secured
by interests in real estate;
(3) with respect to 75% of its assets, purchase more than 10% of any
class of the outstanding voting securities of any issuer;
(4) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in securities of any single issuer
(other than obligations issued or guaranteed as to principal and
interest by the government of the U.S. or any agency or instrumentality
thereof);
(5) borrow money, except (i) from banks and as a temporary measure for
extraordinary or emergency purposes or (ii) except in connection with
reverse repurchase agreements provided that (i) and (ii) in combination
do not exceed 331/3% of the Portfolios' total assets (10% for the
Sirach Special Equity Portfolio) (including the amount borrowed) less
liabilities (exclusive of borrowings);
(6) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of a Portfolio's
total assets would be invested in securities of companies within
such industry; provided, however, that there shall be no limitation on
the purchase of obligations issued or guaranteed by the U.S.
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<PAGE>
Government, its agencies or instrumentalities or instruments issued
by U.S. banks when a Portfolio adopts a temporary defensive position;
(7) make loans except (i) by purchasing debt securities in accordance
with its investment objectives and policies, or entering into
repurchase agreements, subject to the limitation described in
(d) below and (ii) by lending its portfolio securities to banks,
brokers, dealers and other financial institutions so long as such
loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the Commission thereunder; and
(8) underwrite the securities of other issuers.
The following limitations are fundamental policies of the Sirach Special
Equity Portfolio and non-fundamental policies of the Sirach Strategic
Balanced, Sirach Growth, Sirach Fixed Income and Sirach Short-Term Reserves
Portfolios. Each of the Sirach Portfolios will not:
(a) purchase on margin or sell short;
(b) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment advisor owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;
(c) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(d) invest more than an aggregate of 10% of the assets of the Portfolio
(15% for the Sirach Strategic Balanced, Sirach Growth, Sirach Fixed
Income and Sirach Short-Term Reserves Portfolios), determined at
the time of investment, in securities subject to legal or contractual
restrictions on resale or securities for which there are no readily
available markets, including repurchase agreements having maturities
of more than seven days;
(e) invest for the purpose of exercising control over management of any
company;
(f) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) continuous
operations consisting of less than three years; and
(g) write or acquire options or interests in oil, gas, mineral leases or
other mineral exploration or development programs.
As a matter of non-fundamental policy, each Portfolio will not:
(i) invest in warrants, valued at the lower of cost or market, in excess
of 5.0% of the value of the Portfolio's net assets. Included within
that amount, but not to exceed 2.0% of the value of the Portfolio's
net assets, may be warrants that are not listed on the New York or
American Stock Exchanges. Warrants acquired in units or attached to
securities may be deemed to be without value.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad
policies for the Fund and choose its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past 5 years is set forth in the Sirach
Portfolios' Prospectus. As of January 31, 1995, the Directors and officers of
the Fund owned less than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director
receives a $2,000 meeting fee which is aggregated for all of the Directors
and allocated proportionately among the Portfolios of the Fund and The Regis
Fund II as well as the AEW Commercial Mortgage Securities Fund, Inc. and
reimbursement for travel and other expenses incurred while
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attending Board meetings. Directors who are also officers or affiliated
persons receive no remuneration for their service as Directors. The Fund's
officers and employees are paid by either the Adviser, United Asset
Management Corporation ("UAM"), or the Administrator and receive no
compensation from the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations held of
record or beneficially 5% or more of the shares of a Portfolio, as noted.
SIRACH SPECIAL EQUITY PORTFOLIO: Chase Manhattan Bank, Trustee, #66
Boeing Co. Voluntary Invest Plan, Brooklyn, NY, 6.1%.*
SIRACH STRATEGIC BALANCED PORTFOLIO: Seattle First National Bank,
Trustee, Lane Powell Spears Lubersky, Los Angeles, CA, 9.7%*; Skagit Valley
Medical 401(k) Savings Plan, Mt. Vernon, WA, 7.0%; South Bay Hotel Employees
& Restaurant Employees' Pension Plan, San Jose, CA, 5.7%; and Alaska
Bricklayers' Retirement Plan, Anchorage, AK, 5.2%.
SIRACH FIXED INCOME PORTFOLIO: Bankamerica State Trust Company,
Custodian, Conner Development, Los Angeles, CA, 18.9%*; Davis Wright Tremaine
401(k) Profit Sharing Plan & Trust, Seattle, WA, 12.6%; Seattle First
National Bank, Trustee Levinson Freidman for beneficial ownership R. Duggan
Pension Plan, Los Angeles, CA, 9.1%*; Inslee, Best, Doezie & Ryder, P.S.,
401(k) Savings Plan, Bellevue, WA, 8.7%; Inslee, Best, Doezie & Ryder, P.S.,
Profit Sharing Plan, Bellevue, WA, 8.2%; Veco International, Inc., 401(k)
Savings Plan, Anchorage, AK, 6.9%; Orthopedics International Limited PS,
Profit Sharing & Savings Plan for beneficial ownership Robert L. Romano,
M.D., Bellevue, WA, 5.8%; James G. Murphy Co. Profit Sharing Plan, Edmonds,
WA, 5.5%; and Dr. Donald H. Mott Money Purchase Pension Plan, Puyallup, WA,
5.3%.
SIRACH GROWTH PORTFOLIO: Seattle First National Bank, Trustee, Tractor
and Machinery 401(k) Savings Plan, Los Angeles, CA, 10.2%*; Davis Wright
Tremaine 401(k) Profit Sharing Plan & Trust, Seattle, WA, 8.3%; King County
Medical Blue Shield 401(k) Savings Plan, Seattle, WA, 6.8%; Harris Trust and
Savings Bank Ringier America, Inc., Chicago, IL, 6.7%; Seattle First National
Bank, Trustee, Lane Powell Spears Lubersky, Los Angeles, CA 5.9%*; and So.
Alaska Carpenters Defined Contribution Pension Plan, Anchorage, AK, 5.8%.
SIRACH SHORT-TERM RESERVES PORTFOLIO: So. Alaska Carpenters Defined
Contribution Pension Plan, Anchorage, AK, 29.2 %; Veco International, Inc.
401(k) Savings Plan, Anchorage, AK, 24.3%; Seattle First National Bank,
Trustee, Tractor and Machinery 401(k) Savings Plan, Los Angeles, CA, 14.5%*;
and Seattle First National Bank, Trustee, Superior Fireplace Co., Los
Angeles, CA, 7.0%*.
The persons or organizations listed above as owning 25% or more of the
outstanding shares of a Portfolio may be presumed to "control" (as that term
is defined in the 1940 Act) such Portfolio. As a result, those persons or
organizations could have the ability to vote a majority of the shares of the
Portfolio on any matter requiring the approval of shareholders of such
Portfolio.
_________________
* Denotes shares held by a trustee or other fiduciary for
which beneficial ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Sirach Capital Management, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December
1980 for the purpose of acquiring and owning firms engaged primarily in
institutional investment management. Since its first acquisition in August
1983, UAM has acquired or organized approximately 42 such wholly-owned
affiliated firms (the "UAM Affiliated Firms"). UAM believes that permitting
UAM Affiliated Firms to retain control over their investment advisory
decisions is necessary to allow them to continue to provide investment
management services that are intended to meet the particular needs of their
respective clients. Accordingly, after acquisition by UAM, UAM Affiliated
Firms continue to operate under their own firm name, with their own
leadership and individual investment philosophy and approach. Each UAM
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Affiliated Firm manages its own business independently on a day-to-day basis.
Investment strategies employed and securities selected by UAM Affiliated
Firms are separately chosen by each of them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Portfolios'
Investment Advisory Agreements, each Portfolio pays the Adviser an annual
fee, in monthly installments, calculated by applying the following annual
percentage rates to the Portfolios' average net assets for the month:
Sirach Strategic Balanced Portfolio...............................0.65%
Sirach Fixed Income Portfolio.....................................0.65%
Sirach Growth Portfolio...........................................0.65%
Sirach Short-Term Reserves Portfolio..............................0.40%
Sirach Special Equity Portfolio...................................0.70%
For the periods ended October 31, 1992, 1993 and 1994, the Sirach
Special Equity Portfolio paid advisory fees of approximately $2,115,000,
$3,166,000 and $3,501,000, respectively, to the Adviser. For the period from
December 1, 1993 (commencement of operations) to October 31, 1994, the Sirach
Strategic Balanced, Sirach Fixed Income, Sirach Growth and Sirach Short-Term
Reserves Portfolios paid advisory fees of approximately $584,000, $0,
$502,000 and $5,000, respectively. During the period from December 1, 1993 to
October 31, 1994, the Adviser voluntarily waived advisory fees of
approximately $77,000 and $78,000 for the Sirach Fixed Income and Sirach
Short-Term Reserves Portfolio, respectively.
SERVICE AND DISTRIBUTION PLANS
As stated in the Sirach Strategic Balanced, Growth and Special Equity
Portfolios' Service Class Shares Prospectus, RFI Distributors may enter into
agreements with broker-dealers and other financial institutions ("Service
Organizations"), pursuant to which they will provide administrative support
services to Service Class shareholders who are their customers ("Customers")
in consideration of such Fund's payment of 0.25% (on an annualized basis) of
the average daily net asset value of the Service Class Shares held by the
Service Organization for the benefit of its Customers. Such services include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account record for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders about
their accounts;
(e) processing shareholder orders to purchase, redeem and exchange shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by
shareholders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting dividend
and other account options and opening any necessary custody accounts;
(j) providing account maintenance and accounting support for all
transactions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Organization, provided that any such
additional shareholder service must constitute a permissible
non-banking activity in accordance with the then current regulations
of, and interpretations thereof by, the Board of Governors of the
Federal Reserve System, if applicable.
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<PAGE>
Each agreement with a Service Organization is governed by a shareholder
Service Plan (the "Service Plan") that has been adopted by the Fund's Board
of Directors. Pursuant to the Service Plan, the Board of Directors reviews,
at least quarterly, a written report of the amounts expended under each
agreement with Service Organizations and the purposes for which the
expenditures were made. In addition, arrangements with Service Organizations
must be approved annually by a majority of the Fund's directors, including a
majority of the directors who are not "interested persons" of the company as
defined in the 1940 Act and have no direct or indirect financial interest in
such arrangements.
The Board of Directors has approved the arrangements with Service
Organizations based on information provided by the Fund's service contractors
that there is a reasonable likelihood that the arrangements will benefit the
Fund and its shareholders by affording the Fund greater flexibility in
connection with the servicing of the accounts of the beneficial owners of its
shares in an efficient manner. Any material amendment to a Fund's
arrangements with Service Organizations must be approved by a majority of the
Fund's Board of Directors (including a majority of the disinterested
directors). So long as the arrangements with Service Organizations are in
effect, the selection and nomination of the members of the Fund's Board of
Directors who are not "interested persons" (as defined in the 1940 Act) of
the Company will be committed to the discretion of such non-interested
directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Distribution Plan for the Service Class Shares of the Fund (the "Distribution
Plan"). The Distribution Plan permits the Fund to pay for certain
distribution, promotional and related expenses involved in the marketing of
only the Service Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the
Distribution Agreement, to pay a monthly fee to the Distributor for its
services and expenses in distributing and promoting sales of the Service
Class Shares. These expenses include, among other things, preparing and
distributing advertisements, sales literature and prospectuses and reports
used for sales purposes, compensating sales and marketing personnel, and
paying distribution and maintenance fees to securities brokers and dealers
who enter into agreements with the Distributor. In addition, the Service
Class Shares may make payments directly to other unaffiliated parties, who
either aid in the distribution of their shares or provide services to the
Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares'
average daily net assets for the year. The Fund's Board of Directors may
reduce this amount at any time. Although the maximum fee payable under the
12b-1 Plan relating to the Service Class Shares is 0.75% of average daily net
assets of such class, the Board of Directors has determined that the annual
fee, payable on a monthly basis, under the Plans relating to the Service
Class Shares, currently cannot exceed 0.50% of the average daily net assets
represented by Service Class. While the current fee which will be payable
under the Service Plan has been set at 0.25%, the Plan permits a full 0.75%
on all assets to be paid at any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class
Shares will be borne by such persons without any reimbursement from such
classes. Subject to seeking best price and execution, the Fund may, from
time to time, buy or sell portfolio securities from or to firms which receive
payments under the Plans. From time to time, the Distributor may pay
additional amounts from its own resources to dealers for aid in distribution
or for aid in providing administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and
services agreements have all been approved by the Board of Directors of the
Fund, including a majority of the directors who are not "interested persons"
(as defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the Plan or any related agreements, by vote cast in
person at a meeting duly called for the purpose of voting on the Plan and
such Agreements. Continuation of the Plan, the Distribution Agreement and
the related agreements must be approved annually by the Board of Directors in
the same manner, as specified above. No Service Class Shares have been
offered prior to the date of this Part B.
Each year the directors must determine whether continuation of the Plans
is in the best interest of the shareholders of Service Class Shares and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Plans, the Distribution Agreement and the related agreements with
any broker-dealer or others relating to a Class may be terminated at any time
without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
Class. Any amendment materially increasing the maximum percentage payable
under the Plans must likewise be approved by a majority vote of the relevant
Class' outstanding voting securities, as well as by a majority vote of those
directors who are not "interested persons." Also, any other material
amendment to the Plans must be approved by a majority vote of the directors
including a majority of the directors of the Fund having no interest in the
Plans. In addition, in order for the Plans to remain effective, the
selection and nomination of directors who are not "interested persons" of the
Fund must be effected by the directors who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plans.
Persons authorized
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to make payments under the Plans must provide written reports at least
quarterly to the Board of Directors for their review. The NASD has adopted
amendments to its Rules of Fair Practice relating to investment company sales
charges. The Fund and the Distributor intend to operate in compliance with
these rules.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and direct the Adviser to use its best efforts
to obtain the best execution with respect to all transactions for the
Portfolios. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services
provided by the broker effecting the transaction. It is not the Fund's
practice to allocate brokerage or effect principal transactions with dealers
on the basis of sales of shares which may be made through broker-dealer
firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's Portfolios or who act as agents in
the purchase of shares of the Portfolios for their clients. During the fiscal
years ended, October 31, 1992, 1993 and 1994, the entire Fund paid brokerage
commissions of approximately $1,248,000, $1,592,000 and $2,402,000,
respectively.
Some securities considered for investment by the Portfolios may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolios and one
or more of these other clients served by the Adviser is considered at or
about the same time, transactions in such securities will be allocated among
the Portfolios and clients in a manner deemed fair and reasonable by the
Adviser. Although there is no specified formula for allocating such
transactions, the various allocation methods used by the Adviser, and the
results of such allocations, are subject to periodic review by the Fund's
Directors.
ADMINISTRATIVE SERVICES
Effective February 1, 1992, Mutual Funds Service Company, an affiliate of
United States Trust Company of New York, (the "Administrator") provides
administrative, fund accounting, dividend disbursing and transfer agency
services to the Fund under an Administration Agreement. Prior to February 1,
1992, administrative services were provided to the Sirach Special Equity
Portfolio by The Vanguard Group, ("Vanguard") under a similar agreement. For
its services, the Portfolio paid Vanguard a fee which represented a monthly
fee which on an annual basis equaled 0.20 of 1% of the first $200 million of
the aggregate net assets of the Fund; 0.12 of 1% of the next $800 million of
the aggregate net assets of the Fund; and .08% of 1% of the aggregate net
assets of the Fund in excess of $1 billion This fee was allocated based on
the relative net assets of each Portfolio, provided, however, that the
minimum annual fee equaled $50,000 for each active Portfolio. For the fiscal
year ended October 31, 1992, administrative fees paid by the Sirach Special
Equity Portfolio totaled $398,662, of which $97,131 was paid to Vanguard and
$301,531 was paid to the Administrator. During the fiscal year ended October
31, 1993, administrative services fees paid to the Administrator by the
Sirach Special Equity Portfolio totaled $559,000. The basis of the fees paid
to the Administrator for the 1992 and 1993 fiscal years was as follows: the
Fund paid a monthly fee for its services which on an annualized basis equaled
0.16 of 1% of the first $200 million of the aggregate net assets of the Fund;
plus 0.12 of 1% of the next $800 million of the aggregate net assets of the
Fund; plus 0.06 of 1% of the aggregate net assets in excess of $1 billion.
The fees were allocated among the Portfolios on the basis of their relative
assets and were subject to a graduated minimum fee schedule per Portfolio,
which rose from $1,000 per month upon inception of a Portfolio to $50,000
annually after two years. During the fiscal year ended October 31, 1994,
administrative services fees paid to the Administrator by the Sirach Special
Equity Portfolio totaled $586,000. During the period from December 1, 1993 to
October 31, 1994, administrative services fees paid to the Administrator by
the Sirach Strategic Balanced, Sirach Fixed Income, Sirach Growth and Sirach
Short-Term Reserves Portfolios totaled $116,000, $27,000, $95,000 and
$29,000, respectively. The services provided by the Administrator and the
current fees payable to the Administrator are described in the Portfolios'
Prospectus.
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PERFORMANCE CALCULATIONS
PERFORMANCE
The Fund may from time to time quote various performance figures to
illustrate each class of the Fund's past performance.
Performance quotations by investment companies are subject to rules
adopted by the Commission, which require the use of standardized performance
quotations or, alternatively, that every non-standardized performance
quotation furnished by each class of the Fund be accompanied by certain
standardized performance information computed as required by the SEC. Total
return quotations used by each class of the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by each class of the Fund to
compute or express performance follows.
TOTAL RETURN
The average annual total return is determined by finding the average
annual compounded rates of return over 1, 5, and 10 year periods that would
equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely
redeemed at the end of each 1, 5 and 10 year period and the deduction of all
applicable Fund expenses on an annual basis. Since Service Class Shares of
the Sirach Strategic Balanced, Growth and Special Equity Portfolios bear
additional service and distribution expenses, the average annual total return
of the Service Class Shares of a Portfolio will generally be lower than that
of the Institutional Class Shares of the same Portfolio.
The average annual total rates of return of the Institutional Class Shares
of the Sirach Special Equity Portfolio from inception to October 31, 1994 and
for the one and five-year periods ended October 31, 1994 are 13.93%, -4.68%
and 14.94%, respectively.
The total return of the Institutional Class Shares of the Sirach Fixed
Income, Sirach Growth, Sirach Short-Term Reserves and Sirach Strategic
Balanced Portfolios from December 1, 1993 (commencement of operations) to
October 31, 1994 is -4.33%, -2.58%, 3.24% and -4.19%, respectively.
These figures were calculated according to the following formula:
P (1 + T)n = ERV
where:
P= a hypothetical initial payment of $1,000
T= average annual total return
n= number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end
of the 1, 5, or 10 year periods (or fractional portion thereof).
Service Class Shares of the Sirach Strategic Balanced, Growth and Special
Equity Portfolios were not offered as of October 31, 1994. Accordingly, no
total return figures are available.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices
and averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume reinvestment
of dividends.
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(b) Standard & Poor's 500 Stock Index or its component indices - an
unmanaged index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of
performance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices - unmanaged
indices of all industrial, utilities, transportation and finance
stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index or its component indices - represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income
Fund Performance Analysis - measures total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestment of
all distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.
(g) Goldman Sachs 100 Convertible Bond Index - currently includes 67 bonds
and 33 preferred. The original list of names was generated by screening
for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index - includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index - consists of
publicly issued, non-convertible corporate bonds rated AA or AAA.
It is a value-weighted, total return index, including approximately
800 issues with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond - is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/agency issues
and mortgage passthrough securities.
(k) Lehman Brothers LONG-TERM Treasury Bond - is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities
of 10 years or greater.
(l) Lehman Brothers Intermediate Government/Corporate Index - is an
unmanaged index composed of a combination of the Government and
Corporate Bond Indices. All issues are investment grade (BBB) or
higher, with maturities of one to ten years and an outstanding
par value of at least $100 million for U.S. Government issues and $25
million for others. The Government Index includes public obligations
of the U.S. Treasury, issues of Government agencies, and corporate
debt backed by the U.S. Government. The Corporate Bond Index includes
fixed-rate nonconvertible corporate debt. Also included are Yankee
Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. Any security downgraded
during the month is held in the index until month-end and then
removed. All returns are market value weighted inclusive of accrued
income.
(m) NASDAQ Industrial Index - is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change
only and does not include income.
(n) Value Line - composed of over 1,600 stocks in the Value Line
Investment Survey.
(o) Russell 2000 - composed of the 2,000 smallest stocks in the Russell
3000, a market value weighted index of the 3,000 largest U.S.
publicly-traded companies.
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(p) Composite Indices - 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and
65% Salomon Brothers High Grade Bond Index; all stocks on the
NASDAQ system exclusive of those traded on an exchange, and 65%
Standard & Poor's 500 Stock Index and 35% Salomon Brothers High Grade
Bond Index.
(q) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc.
- analyzes price, current yield, risk, total return and average rate
of return (average annual compounded growth rate) over specified time
periods for the mutual fund industry.
(r) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Investor's Daily, Lipper Analytical Services, Inc.,
Morningstar, Inc., New York Times, Personal Investor, Wall Street
Journal and Weisenberger Investment Companies Service - publications
that rate fund performance over specified time periods.
(t) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics - a statistical measure of change, over
time in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates -
historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.
(v) Savings and Loan Historical Interest Rates - as published in the U.S.
Savings & Loan League Fact Book.
(w) Lehman Brothers Aggregate Index - is a fixed income market value-
weighted index that combines the Lehman Brothers Government/Corporate
Index and the Lehman Brothers Mortgage-Backed Securities Index. It
includes fixed rate issues of investment grade (BBB) or higher, with
maturities of at least one year and outstanding par values of at
least $100 million for U.S. Government issues and $25 million for
others.
(x) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its performance. In addition, there can
be no assurance that the Fund will continue this performance as compared to
such other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund
was changed to "The Regis Fund, Inc." The Fund's principal executive office
is located at 803 Cathedral Street, Baltimore, MD 21201; however, all
investor correspondence should be directed to the Fund at The Regis Service
Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA
02208-2798. The Fund's Articles of Incorporation, as amended, authorize the
Directors to issue 3,000,000,000 shares of common stock, $.001 par value. The
Board of Directors has the power to designate one or more series (Portfolios)
or classes of common stock and to classify or reclassify any unissued shares
with respect to such Portfolios, without further action by shareholders.
Currently, the Fund is offering shares of 29 Portfolios. The Directors of
the Fund may create additional Portfolios and classes of shares at a future
date.
Both classes of shares of a Portfolio, when issued and paid for as
provided for in the Prospectus, will be fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Fund have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the
Directors if they choose to do so. A shareholder is entitled to one vote for
each full share held (and a fractional vote for each fractional share held),
then standing in his or her name on the books of the Fund.
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<PAGE>
Both Institutional Class and Service Class Shares represent an interest in
the same assets of a Portfolio and are identical in all respects except that
the Service Class Shares bear certain expenses related to shareholder
servicing and the distribution of such shares, and have exclusive voting
rights with respect to matters relating to such distribution expenditures.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of a Portfolio's net
investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the Federal excise tax on
undistributed income and capital gains (see discussion under "Dividends,
Capital Gains Distributions and Taxes" in the Prospectus). The amounts of any
income dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of
a Portfolio by an investor may have the effect of reducing the per share net
asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in
effect a return of capital, are subject to income taxes as set forth in the
Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically
received in additional shares of a Portfolio at net asset value (as of the
business day following the record date). This will remain in effect until the
Fund is notified by the shareholder in writing at least three days prior to
the record date that either the Income Option (income dividends in cash and
capital gains distributions in additional shares at net asset value) or the
Cash Option (both income dividends and capital gains distributions in cash)
has been elected. An account statement is sent to shareholders whenever an
income dividend or capital gains distribution is paid.
Each Portfolio will be treated as a separate entity (and hence as a
separate "regulated investment company") for Federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for Federal income tax purposes) such gains against
any net capital losses of another Portfolio.
FEDERAL TAXES
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, and gains from the sale of
securities or foreign currencies, or other income derived with respect to its
business of investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less than
three months must be limited to less than 30% of a Portfolio's annual gross
income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes.
Shareholders will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Institutional Class Shares of the Sirach
Portfolios and the Financial Highlights for the respective periods presented,
which appear in the Portfolios' 1994 Annual Report to Shareholders, and the
reports thereon of Price Waterhouse LLP, independent accountants, also
appearing therein, are incorporated by reference into this Statement of
Additional Information. An Annual Report may be obtained, without charge, by
writing to the Fund or by calling The Regis Service Center at 1-800-638-7983.
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<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF RATINGS FOR BOND AND PREFERRED SECURITIES
Excerpts from Moody's Investor Service ("Moody's") description of its
highest bond ratings: Aaa - judged to be the highest quality; carry the
smallest degree of investment risk: Aa - judged to be of high quality by all
standards; A - possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa - considered as lower
medium grade obligations, i.e., they are neither highly protected nor poorly
secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA - highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA - also qualify as high
grade obligations, and in the majority of instances differs from AAA issues
only in small degree; A - regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes
in economic and trade conditions. Interest and principal are regarded as
safe; BBB - regarded as borderline between definitely sound obligations and
those where the speculative element begins to predominate; this group is the
lowest which qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
instrumentalities which have been established or sponsored by the United
States Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
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 or
instrumentality issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies
which are backed by the full faith and credit of the United States include
the Export-Import Bank, Farmers Home Administration, Federal Financing Bank,
and others. Certain agencies and instrumentalities, such as the Government
National Mortgage Association, are, in effect, backed by the full faith and
credit of the United States through provisions in their charters that they
may make "indefinite and unlimited" drawings on the Treasury, if needed, to
service its debt. Debt from certain other agencies and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage
Association, is not guaranteed by the United States, but those institutions
are protected by the discretionary authority of the U.S. Treasury to purchase
certain amounts of their securities to assist the institution in meeting its
debt obligations. Finally, other agencies and instrumentalities, such as the
Farm Credit System and the Federal Home Loan Mortgage Corporation, are
federally chartered institutions under government supervision, but their debt
securities are backed only by the credit worthiness of those institutions,
not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration,
Small Business Administration, and The Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
Each Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by
S&P. Commercial paper refers to short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance
not exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying
market rates of interest pursuant to arrangement between the issuer and a
commercial bank acting as agent for the payees of such notes whereby both
parties have the right to vary the amount of the outstanding indebtedness on
the notes. As variable amount master demand notes are direct lending
arrangements between a lender and a borrower, it is not generally
contemplated that such instruments will be traded, and there is no secondary
market for these notes, although they are redeemable (and thus immediately
repayable by the borrower) at face value, plus accrued interest, at any time.
In connection with the Portfolios' investment in variable amount master
demand notes, the Adviser's investment
A-1
<PAGE>
management staff will monitor, on an ongoing basis, the earning power, cash
flow and other liquidity ratios of the issuer and the borrower's ability to
pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically,
the issuer's industry is well established, and the issuer has a strong
position within the industry; and (6) the reliability and quality of
management are unquestioned. Relative strength or weakness of the above
factors determine whether the issuer's commercial paper is A-1, A-2 or A-3.
The rating Prime-1 is the highest commercial paper rating assignment 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 the appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to completion and customer 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 issuer of obligations which may be present
or may arise as a result of public interest questions and preparations to
meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated
maturity based upon a specified market rate. As a result of these
adjustments, the interest rate on these obligations may increase or decrease
periodically. Frequently, dealers selling variable rate certificates of
deposit to the Portfolio will agree to repurchase such instruments, at the
Portfolio's option, at par on or near the coupon dates. The dealers'
obligations to repurchase these instruments are subject to conditions imposed
by various dealers. Such conditions typically are the continued credit
standing of the issuer and the existence of reasonably orderly market
conditions. The Portfolios are also able to sell variable rate certificates
of deposit in the secondary market. Variable rate certificates of deposit
normally carry a higher interest rate than comparable fixed rate certificates
of deposit. A bankers' acceptance is a time draft drawn on a commercial bank
by a borrower usually in connection with an international commercial
transaction to finance the import, export, transfer or storage of goods. The
borrower is liable for payment as well as the bank which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Most
acceptances have maturities of six months or less and are traded in the
secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with
investing in U.S. companies. Since the securities of foreign companies are
frequently denominated in foreign currencies, the Fund's Portfolios may be
affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and may incur costs in connection with
conversions between various currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that
are not comparable to those of domestic companies, there may be less
information available about certain foreign companies than about domestic
companies. Securities of some foreign companies are generally less liquid and
more volatile than securities of comparable domestic companies. There is
generally less government supervision and regulation of stock exchanges,
brokers and listed companies than in the U.S. In addition, with respect to
certain foreign countries, there is the possibility of expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recoverable portion of foreign withholding taxes will
reduce the income received from the companies comprising the Fund's
Portfolios. However, these foreign withholding taxes are not expected to have
a significant impact.
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<PAGE>
UAM FUNDS
SIRACH PORTFOLIOS
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 1995
AS REVISED JUNE 15, 1995 AND AS SUPPLEMENTED JULY 3, 1995 AND OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
SIRACH FIXED INCOME PORTFOLIO - INSTITUTIONAL CLASS SHARES
PHILOSOPHY/STYLE:
In managing fixed income portfolios, Sirach regularly assesses monetary policy,
inflation expectations, economic trends and capital market flows and then
establishes a duration target and maturity structure. Sector weightings are
determined by business cycle analysis, relative valuation and expected interest
rate volatility. Sirach also screens for mispriced securities emphasizing both
incremental yield and potential price performance. Before any security is
purchased, a thorough credit and fundamental analysis is done.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- Boeing
- Honda of America
- Nestle
- Unilever
- United Technologies
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
SIRACH GROWTH PORTFOLIO - INSTITUTIONAL CLASS
AND INSTITUTIONAL SERVICE CLASS SHARES
SIRACH SPECIAL EQUITY PORTFOLIO - INSTITUTIONAL CLASS
AND INSTITUTIONAL SERVICE CLASS SHARES
PHILOSOPHY/STYLE:
Sirach specializes in identifying and investing in growth-oriented securities
which have demonstrated strong earnings acceleration and what the Adviser judges
to be strong relative price strength and value. The firm emphasizes disciplined
security selection in all asset classes. As equity analysts, Sirach monitors a
large list of companies which have passed an initial screening process. The
firm's investment objective is to identify the point at which a good company is
becoming a good investment, purchase the stock at a fair value, and then to
identify when that good investment period is coming to an end. To achieve the
objective of identifying good investments, Sirach uses a disciplined equity
selection process that is built on a number of buying tests. To identify when a
good investment period is changing, Sirach uses disciplined selling tests.
Capital protection is an integral part of the Adviser's investment management
objective.
<PAGE>
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- Boeing
- Honda of America
- Nestle
- Unilever
- United Technologies
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
SIRACH STRATEGIC BALANCED PORTFOLIO - INSTITUTIONAL CLASS
AND INSTITUTIONAL SERVICE CLASS SHARES
PHILOSOPHY/STYLE:
Sirach specializes in identifying and investing in growth-oriented securities
which have demonstrated strong earnings acceleration and what the Adviser judges
to be strong relative price strength and value. The firm emphasizes disciplined
security selection in all asset classes. As equity analysts, Sirach monitors a
large list of companies which have passed an initial screening process. The
firm's investment objective is to identify the point at which a good company is
becoming a good investment, purchase the stock at a fair value, and then to
identify when that good investment period is coming to an end. To achieve the
objective of identifying good investments, Sirach uses a disciplined equity
selection process that is built on a number of buying tests. To identify when a
good investment period is changing, Sirach uses disciplined selling tests.
Capital protection is an integral part of the Adviser's investment management
objective.
In managing fixed income portfolios, Sirach regularly assesses monetary policy,
inflation expectations, economic trends and capital market flows and then
establishes a duration target and maturity structure. Sector weightings are
determined by business cycle analysis, relative valuation and expected interest
rate volatility. Sirach also screens for mispriced securities emphasizing both
incremental yield and potential price performance. Before any security is
purchased, a thorough credit and fundamental analysis is done.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
- Boeing
- Honda of America
- Nestle
- Unilever
- United Technologies
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
UAM FUNDS
STERLING PARTNERS' PORTFOLIOS
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 1995
AS REVISED JUNE 15, 1995 AND AS SUPPLEMENTED JULY 3, 1995 AND OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
STERLING PARTNERS' BALANCED PORTFOLIO
INSTITUTIONAL CLASS AND INSTITUTIONAL SERVICE CLASS SHARES
PHILOSOPHY/STYLE
Sterling Capital Management's balanced philosophy focuses on long-term growth
and capital preservation utilizing common stock and fixed income securities.
Sterling's equity philosophy is to maintain a well-diversified portfolio of high
quality stocks selling at reasonable prices. Although Sterling is a value-
oriented manager, the Adviser believes that earnings improvement is the catalyst
required to unlock value. As a result, Sterling's process is highly focused on
fundamental analysis. Improvement in fundamentals is a central consideration in
all buy decisions. Just as important, fundamental deterioration is the primary
consideration in the firm's highly-developed sell discipline. Sterling's short-
term fixed income philosophy is focused on capital preservation and liquidity.
Sterling spends a significant amount of time reviewing issuer credit quality to
ensure the Portfolio holds only stable-to-improving issuer obligations. The
average maturity of the Portfolio is adjusted from time to time to take
advantage of trends in interest rates. The overall focus of the Portfolio is to
preserve capital while producing a competitive rate of return.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
* Nalle Clinic
* Nucor Corp.
* McDevitt Street Bovis
* ENT Associates
* Dean Witter, Reynolds Inc.
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
STERLING PARTNERS' EQUITY PORTFOLIO
INSTITUTIONAL CLASS AND INSTITUTIONAL SERVICE CLASS SHARES
PHILOSOPHY/STYLE
Sterling Capital Management's equity philosophy is to maintain a well-
diversified portfolio of high quality stocks selling at reasonable prices.
Although Sterling is a value-oriented equity manager, the Adviser believes that
earnings improvement is the catalyst required to unlock value. As a result,
Sterling's process is highly focused on fundamental analysis. Improvement in
fundamentals is a central consideration in all buy decisions. Just as
important, fundamental deterioration is the primary consideration in the firm's
highly-developed sell discipline.
<PAGE>
REPRESENTATIVE INSTITUTIONAL CLIENTS:
* Walter Industries, Inc.
* Street Enterprises, Inc.
* Georgia Marble Corp.
* Cheraw Yarn Mills
* Sanger Clinic
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
INSTITUTIONAL CLASS AND INSTITUTIONAL SERVICE CLASS SHARES
PHILOSOPHY/STYLE
Sterling Capital Management's short-term fixed income philosophy is focused on
capital preservation and liquidity. Sterling spends a significant amount of
time reviewing issuer credit quality to ensure the Portfolio holds only stable-
to-improving issuer obligations. The average maturity of the Portfolio is
adjusted from time to time to take advantage of trends in interest rates. The
overall focus of the Portfolio is to preserve capital while producing a
competitive rate of return.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
* Adobe Systems, Inc.
* Paychex, Inc.
* Belk Store Services
* Davidson College
* Lakeland Regional Medical Center
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
STERLING PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995, AS REVISED JUNE 15, 1995
This Statement is not a Prospectus but should be read in conjunction with
The Regis Fund, Inc.'s Prospectus relating to the Sterling Partners' Portfolios'
Institutional Class Shares dated February 28, 1995 and the Prospectus relating
to the Institutional Service Class Shares (the "Service Class Shares") dated
November 21, 1994. To obtain a Prospectus, please call The Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
----
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . 2
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Service and Distribution Plans . . . . . . . . . . . . . . . . . . . . . 8
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 10
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . 10
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 10
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Appendix - Description of Securities and Ratings . . . . . . . . . . . . A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Sterling Partners' Portfolios as set forth in the Fund's Sterling Partners'
Prospectuses:
FUTURES CONTRACTS
Each Portfolio may enter into futures contracts, options, and options on
futures contracts for the purpose of remaining fully invested and reducing
transactions costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC"),
a U.S. Government agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Fund expects to earn
interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates. Each Portfolio intends to use futures contracts only for
hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the Fund's
commodity futures and option positions be for other purposes, to the extent that
the aggregate initial margins and premiums required to establish such
non-hedging positions do not exceed five percent of the liquidation value of a
Portfolio. A Portfolio will only sell futures contracts to protect securities it
owns against price declines or purchase contracts to protect against an increase
in the price of securities it intends to purchase. As evidence of this hedging
interest, each Portfolio expects that approximately 75% of its futures contract
purchases will be "completed;" that is, equivalent amounts of related securities
will have been purchased or are being purchased by the Portfolio upon sale of
open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the use
of futures contracts may be a more effective means of hedging this exposure.
While a Portfolio will incur commission expenses in both opening and closing out
futures positions, these costs are lower than transaction costs incurred in the
purchase and sale of the underlying securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
A Portfolio will not enter into futures contract transactions to the extent
that, immediately thereafter, the sum of its initial margin deposits on open
contracts exceeds 5% of the market value of its total assets. In addition, a
Portfolio will not
2
<PAGE>
enter into futures contracts to the extent that its outstanding obligations to
purchase securities under these contracts would exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
A Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements, a
Portfolio would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if the Portfolio has insufficient cash,
it may have to sell Portfolio securities to meet daily margin requirements at a
time when it may be disadvantageous to do so. In addition, the Portfolio may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contracts would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio are engaged in only for hedging purposes, the
Adviser does not believe that the Portfolios are subject to the risks of loss
frequently associated with futures transactions. A Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the Portfolio securities being hedged. It is also
possible that the Portfolio could lose money on futures contracts and also
experience a decline in value of Portfolio securities. There is also the risk of
loss by the Portfolio of margin deposits in the event of bankruptcy of a broker
with whom the Portfolio has an open position in a futures contract or related
option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions a Portfolio has identified as hedging transactions,
the Portfolio is required for Federal income tax purposes to recognize as income
for each taxable year its net unrealized gains and losses on regulated futures
contracts as of the end of the year, as well as those actually realized during
the year. In most cases, any gain or loss recognized with respect to a futures
contract is considered to be 60% long-term capital gain or loss and 40% short-
term capital gain or loss, without regard to the holding period of the contract.
Furthermore, sales of futures contracts which are intended to hedge against a
change in the value of securities held by the Portfolio may affect the holding
period of such securities and, consequently, the nature of the gain or loss on
such securities upon disposition.
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income: i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or
3
<PAGE>
currencies. In addition, gains realized on the sale or other disposition of
securities held for less than three months must be limited to less than 30% of a
Portfolio's annual gross income. It is anticipated that any net gain realized
from the closing out of futures contracts will be considered a gain from the
sale of securities and therefore will be qualifying income for purposes of the
90% requirement. In order to avoid realizing excessive gains on securities held
for less than three months, a Portfolio may be required to defer the closing out
of futures contracts beyond the time when it would otherwise be advantageous to
do so. It is anticipated that unrealized gains on futures contracts, which have
been open for less than three months as of the end of a Portfolio's fiscal year
and which are recognized for tax purposes, will not be considered gains on
securities held for less than three months for the purposes of the 30% test.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures
transactions. Such distributions will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the payments.
PURCHASE OF SHARES
Both classes of shares of the Portfolios may be purchased without a sales
commission at the net asset value per share next determined after an order is
received in proper form by the Fund and payment is received by the Fund's
Custodian. The minimum initial investment required is $100,000 with certain
exceptions as may be determined from time to time by officers of the Fund. An
order received in proper form prior to the 4:00 p.m. close of the New York Stock
Exchange ("Exchange") will be executed at the price computed on the date of
receipt; and an order received not in proper form or after the 4:00 p.m. close
of the Exchange will be executed at the price computed on the next day the
Exchange is open after proper receipt. The Exchange will be closed on the
following days: Good Friday, April 14, 1995; Memorial Day, May 29, 1995;
Independence Day, July 4, 1995; Labor Day, September 4, 1995; Thanksgiving Day,
November 23, 1995; Christmas Day, December 25, 1995; New Year's Day, January 1,
1996; and Presidents' Day, February 19, 1996.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (3) to reduce
or waive the minimum for initial and subsequent investment for certain fiduciary
accounts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed, or trading on the Exchange is restricted as determined by the Securities
and Exchange Commission (the "Commission"), (2) during any period when an
emergency exists as defined by the rules of the Commission as a result of which
it is not reasonably practicable for a Portfolio to dispose of securities owned
by it, or to fairly determine the value of its assets, and (3) for such other
periods as the Commission may permit. The Fund has made an election with the
Commission to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
the net assets of the Fund at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Commission. Redemptions in excess
of the above limits may be paid in whole or in part, in investment securities or
in cash, as the Directors may deem advisable; however, payment will be made
wholly in cash unless the Directors believe that economic or market conditions
exist which would make such a practice detrimental to the best interests of the
Fund. If redemptions are paid in investment securities, such securities will be
valued as set forth in the Prospectus under "Valuation of Shares" and a
redeeming shareholder would normally incur brokerage expenses if these
securities were converted to cash.
No charge is made by any Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
SIGNATURE GUARANTEES - To protect your account, the Fund and the
Administrator from fraud, signature guarantees are required for certain
redemptions. The purpose of signature guarantees is to verify the identity of
the person who has authorized a redemption from your account. Signature
guarantees are required in connection with (1) all redemptions when the proceeds
are to be paid to someone other than the registered owner(s) and/or registered
address; or (2) share transfer requests.
4
<PAGE>
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Administrator. Broker-dealers guaranteeing signatures must
be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder
Services" in the Sterling Partners' Prospectuses:
EXCHANGE PRIVILEGE
Institutional Class Shares of each Sterling Portfolio may be exchanged for
Institutional Class Shares of the other Sterling Portfolios and Service Class
Shares of each Sterling Portfolio may be exchanged for Service Class Shares of
the other Sterling Portfolios. In addition, Institutional Class Shares of each
Sterling Portfolio may be exchanged for any other Institutional Class Shares of
a Portfolio included in The Regis Family of Funds which is comprised of the Fund
and The Regis Fund II. (See the list of Portfolios of The Regis Family of Funds
- - Institutional Class Shares at the end of the Sterling Portfolios -
Institutional Class Shares Prospectus.) Service Class Shares of each Sterling
Portfolio may be exchanged for any other Service Class Shares of a Portfolio
included in The Regis Family of Funds which is comprised of the Fund and The
Regis Fund II. (See the list of Portfolios of The Regis Family of Funds -
Service Class Shares at the end of the Sterling Portfolios - Service Class
Shares Prospectus.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to The Regis Fund, Inc., The Regis Service
Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA 02208-2798.
The exchange privilege is only available with respect to Portfolios that are
registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling The
Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close
of business on the same day. Requests received after these times will be
processed on the next business day. Neither the Fund nor the Administrator will
be responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares to another person by making a written
request to the Fund. The request should clearly identify the account and number
of shares to be transferred, and include the signature of all registered owners
and all
5
<PAGE>
stock certificates, if any, which are subject to the transfer. The signature on
the letter of request, the stock certificate or any stock power must be
guaranteed in the same manner as described under "Redemption of Shares." As in
the case of redemptions, the written request must be received in good order
before any transfer can be made.
INVESTMENT LIMITATIONS
Each Sterling Partners' Portfolio is subject to the following restrictions
which are fundamental policies and may not be changed without the approval of
the lesser of: (1) at least 67% of the voting securities of the Portfolio
present at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of the Portfolio. Each Sterling
Partners' Portfolio will not:
(1) invest in commodities;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may purchase and
sell securities which are secured by interests in real estate;
(3) purchase on margin or sell short;
(4) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than 1/2
of 1% of such securities together own more than 5% of such securities;
(5) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the assets of the Portfolio, determined at the
time of investment, in securities subject to legal or contractual
restrictions on resale or securities for which there are no readily
available markets, including repurchase agreements having maturities
of more than seven days;
(6) invest for the purpose of exercising control over management of any
company;
(7) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a temporary defensive
position; and
(8) write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and choose its officers. A list of the Directors and officers of
the Fund and a brief statement of their present positions and principal
occupations during the past 5 years is set forth in the Sterling Partners'
Prospectus. As of January 31, 1995, the Directors and officers of the Fund
owned less than 1% of the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all of the Directors and allocated
proportionately among the Portfolios of the Fund and The Regis Fund II as well
as the AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for
travel and other expenses incurred while attending Board meetings. Directors who
are also officers or affiliated persons receive no remuneration for their
service as Directors. The Fund's officers and employees are paid by either the
Adviser, United Asset Management Corporation ("UAM"), or the Administrator and
receive no compensation from the Fund.
6
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations held of
record or beneficially 5% or more of the shares of a Portfolio, as noted.
STERLING PARTNERS' BALANCED PORTFOLIO: Charles Porter, John W. Foster, M.
John Bowen, Trustees McNair & Sanford, P.A. Profit Sharing Plan, Columbia, SC,
11.1%*; U.S. Trust Company of New York, Trustee IRA Rollover of Harry K.
Daugherty, Charlotte, NC, 6.0%*; U.S. Trust Company of New York, Trustee Georgia
Marble Co. Profit Sharing (MPP) Plan, New York, NY 6.0%*; U.S. Trust Company of
New York, Trustee J.C. Steele & Sons, Inc. Retirement & Profit Sharing Plan, New
York, NY, 5.5%*; U.S. Trust Company of New York, Trustee Employee Savings Plan &
Trust of Bowers Fibers, Inc., New York, NY, 5.5%*; and Nationsbank, NC, Trustee
Bovis Inc. Group Retirement Plan, Dallas, TX, 5.0%*.
STERLING PARTNERS' EQUITY PORTFOLIO: U.S. Trust Company of New York,
Trustee Georgia Marble Co. Profit Sharing (MPP) Plan, New York, NY 18%*; H.
Keith Brunnemer, Jr. Michael Peeler Fund, Charlotte, NC, 11.2%; and U.S. Trust
Company of New York, Trustee J.C. Steele & Sons, Inc. Retirement & Profit
Sharing Plan, New York, NY, 6.8%*.
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO: U.S. Trust Company
of New York, Trustee Princess House Inc. 401(k) Plan, New York, NY, 11.1%*; U.S.
Trust Company of New York, Trustee J.C. Steele & Sons, Inc. Retirement & Profit
Sharing Plan, New York, NY, 9.0%*; Independent Fiduciary Services, Custodian,
Charlotte, NC, 6.5%*; J.C. Steele & Sons Working Capital, Statesville, NC, 5.8%;
and Betty K. Love, Asheboro, NC, 5.4%.
The persons or organizations owning 25% or more of the outstanding shares
of a Portfolio may be presumed to "control" (as that term is defined in the
Investment Company Act of 1940, as amended, (the "1940 Act") such Portfolio. As
a result, those persons or organizations could have the ability to vote a
majority of the shares of the Portfolio on any matter requiring the approval of
shareholders of such Portfolio.
- -----------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Sterling Capital Management Company (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 42 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each of
them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, each Sterling Partners' Portfolio pays the Adviser an
annual fee, in monthly installments, calculated by applying the following annual
percentage rates to all of the Sterling Partners' Portfolios' average net assets
for the month:
RATE
----
Sterling Partners' Balanced Portfolio . . . . . . . . . . . . . . . 0.75%
Sterling Partners' Equity Portfolio . . . . . . . . . . . . . . . . 0.75%
Sterling Partners' Short-Term Fixed Income Portfolio . . . . . . . 0.50%
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<PAGE>
For the fiscal years ended October 31, 1992, 1993 and 1994, Sterling
Partners' Equity Portfolio paid advisory fees of approximately $0, $27,000 and
$89,000, respectively. During these periods, the Adviser voluntarily waived
advisory fees of approximately $36,000, $67,000 and $67,000, respectively.
For the fiscal years ended October 31, 1992, 1993 and 1994, Sterling
Partners' Balanced Portfolio paid advisory fees of approximately $222,000,
$328,000 and $423,000, respectively.
For the period from February 10, 1992 (commencement of operations) to
October 31, 1992, and the fiscal years ended October 31, 1993 and 1994, Sterling
Partners' Short-Term Fixed Income Portfolio paid advisory fees of approximately
$0, $0 and $1,000, respectively. During these periods, the Adviser voluntarily
waived advisory fees of approximately $25,000, $80,000 and $114,000,
respectively.
SERVICE AND DISTRIBUTION PLANS
As stated in the Portfolios' Service Class Shares Prospectus, RFI
Distributors may enter into agreements with broker-dealers and other financial
institutions ("Service Organizations"), pursuant to which they will provide
administrative support services to Service Class shareholders who are their
customers ("Customers") in consideration of such Fund's payment of 0.25% (on an
annualized basis) of the average daily net asset value of the Service Class
Shares held by the Service Organization for the benefit of its Customers. Such
services include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account record for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by
shareholders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting
dividend and other account options and opening any necessary custody
accounts;
(j) providing account maintenance and accounting support for all
transactions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Organization, provided that any such
additional shareholder service must constitute a permissible non-
banking activity in accordance with the then current regulations of,
and interpretations thereof by, the Board of Governors of the Federal
Reserve System, if applicable.
Each agreement with a Service Organization is governed by a shareholder
Service Plan (the "Service Plan") that has been adopted by the Fund's Board of
Directors. Pursuant to the Service Plan, the Board of Directors reviews, at
least quarterly, a written report of the amounts expended under each agreement
with Service Organizations and the purposes for which the expenditures were
made. In addition, arrangements with Service Organizations must be approved
annually by a majority of the Fund's directors, including a majority of the
directors who are not "interested persons" of the company as defined in the 1940
Act and have no direct or indirect financial interest in such arrangements.
The Board of Directors has approved the arrangements with Service
Organizations based on information provided by the Fund's service contractors
that there is a reasonable likelihood that the arrangements will benefit the
Fund and its
9
<PAGE>
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an efficient
manner. Any material amendment to a Fund's arrangements with Service
Organizations must be approved by a majority of the Fund's Board of Directors
(including a majority of the disinterested directors). So long as the
arrangements with Service Organizations are in effect, the selection and
nomination of the members of the Fund's Board of Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company will be
committed to the discretion of such non-interested directors.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Distribution Plan for the Service Class Shares of the Fund (the "Distribution
Plan"). The Distribution Plan permits the Fund to pay for certain distribution,
promotional and related expenses involved in the marketing of only the Service
Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the
Distribution Agreement, to pay a monthly fee to the Distributor for its services
and expenses in distributing and promoting sales of the Service Class Shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, and paying distribution
and maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. In addition, the Service Class Shares may make payments
directly to other unaffiliated parties, who either aid in the distribution of
their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares' average
daily net assets for the year. The Fund's Board of Directors may reduce this
amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such class, the Board of Directors has determined that the annual fee, payable
on a monthly basis, under the Plans relating to the Service Class Shares,
currently cannot exceed 0.50% of the average daily net assets represented by
Service Class. While the current fee which will be payable under the Service
Plan has been set at 0.25%, the Plan permits a full 0.75% on all assets to be
paid at any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class Shares
will be borne by such persons without any reimbursement from such classes.
Subject to seeking best price and execution, the Fund may, from time to time,
buy or sell portfolio securities from or to firms which receive payments under
the Plans. From time to time, the Distributor may pay additional amounts from
its own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and services
agreements have all been approved by the Board of Directors of the Fund,
including a majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the Plan or any related agreements, by vote cast in person
at a meeting duly called for the purpose of voting on the Plan and such
Agreements. Continuation of the Plan, the Distribution Agreement and the
related agreements must be approved annually by the Board of Directors in the
same manner, as specified above. No Service Class Shares have been offered
prior to the date of this Part B.
Each year the directors must determine whether continuation of the Plans is
in the best interest of the shareholders of Service Class Shares and that there
is a reasonable likelihood of the Plans providing a benefit to the Class. The
Plans, the Distribution Agreement and the related agreements with any broker-
dealer or others relating to a Class may be terminated at any time without
penalty by a majority of those directors who are not "interested persons" or by
a majority vote of the outstanding voting securities of the Class. Any
amendment materially increasing the maximum percentage payable under the Plans
must likewise be approved by a majority vote of the relevant Class' outstanding
voting securities, as well as by a majority vote of those directors who are not
"interested persons." Also, any other material amendment to the Plans must be
approved by a majority vote of the directors including a majority of the
directors of the Fund having no interest in the Plans. In addition, in order
for the Plans to remain effective, the selection and nomination of directors who
are not "interested persons" of the Fund must be effected by the directors who
themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plans. Persons authorized to make payments under the
Plans must provide written reports at least quarterly to the Board of Directors
for their review. The NASD has adopted amendments to its Rules of Fair Practice
relating to investment company sales charges. The Fund and the Distributor
intend to operate in compliance with these rules.
10
<PAGE>
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and direct the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or effect principal transactions with dealers on the basis of sales of shares
which may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended October 31, 1992, 1993 and 1994,
the entire Fund paid brokerage commissions of approximately $1,248,000,
$1,592,000 and $2,402,000, respectively.
Some securities considered for investment by the Portfolios may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
Effective January 20, 1992, Mutual Funds Service Company, an affiliate of
United States Trust Company of New York, (the "Administrator") provides
administrative, fund accounting, dividend disbursing and transfer agency
services to the Fund under an Administration Agreement. Prior to January 20,
1992, administrative services were provided to the Fund by The Vanguard Group,
("Vanguard") under a similar agreement. For its services, the Fund paid Vanguard
a monthly fee which on an annual basis equaled 0.20 of 1% of the first $200
million of the aggregate net assets of the Fund; 0.12 of 1% of the next $800
million of the aggregate net assets of the Fund; and 0.08 of 1% of the aggregate
net assets of the Fund in excess of $1 billion. This fee was allocated based on
the relative net assets of each Portfolio, provided, however, that the minimum
annual fee equaled $50,000 for each active Portfolio. During the fiscal year
ended October 31, 1992, administrative fees paid by the Sterling Partners'
Equity Portfolio totaled $34,589 of which $10,686 was paid to Vanguard and
$23,903 was paid to the Administrator. During the fiscal year ended October 31,
1992, administrative fees paid by Sterling Partners' Balanced Portfolio totaled
$41,186 of which $10,686 was paid to Vanguard and $30,500 was paid to the
Administrator. During the period February 10, 1992 (commencement of operations)
to October 31, 1992, administrative fees paid by Sterling Partners' Short-Term
Fixed Income Portfolio totaled $12,000 and were paid to the Administrator.
During the fiscal year ended October 31, 1993, administrative services fees
paid to the Administrator by the Sterling Partners' Equity Portfolio, Sterling
Partners' Balanced Portfolio and Sterling Partners' Short-Term Fixed Income
Portfolio totaled approximately $54,000, $60,000 and $40,000, respectively. The
basis of the fees paid to the Administrator for the 1992 and 1993 fiscal years
was as follows: the Fund paid a monthly fee for its services which on an
annualized basis equaled 0.16 of 1% of the first $200 million of the aggregate
net assets of the Fund; plus 0.12 of 1% of the next $800 million of the
aggregate net assets of the Fund; plus 0.06 of 1% of the aggregate net assets in
excess of $1 billion. The fees were allocated among the Portfolios on the basis
of their relative assets and were subject to a graduated minimum fee schedule
per Portfolio, which rose from $1,000 per month upon inception of a Portfolio to
$50,000 annually after two years. During the fiscal year ended October 31, 1994,
administrative services fees paid to the Administrator by the Sterling Partners'
Equity, Balanced and Short-Term Fixed Income Portfolios totaled $66,000, $72,000
and $74,000, respectively. The services provided by the Administrator and the
current fees payable to the Administrator are described in the Portfolios'
Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
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Each Portfolio may from time to time quote various performance figures to
illustrate each class of the Portfolio's past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quotations
or, alternatively, that every non-standardized performance quotation furnished
by each class of the Portfolio be accompanied by certain standardized
performance information computed as required by the Commission. Current yield
and average annual compounded total return quotations used by each class of the
Portfolio are based on the standardized methods of computing performance
mandated by the Commission. An explanation of those and other methods used by
each class of the Portfolio to compute or express performance follows.
TOTAL RETURN
The average annual total return of the Sterling Partners' Equity, Sterling
Partners' Balanced and Sterling Partners' Short-Term Fixed Income Portfolios is
determined by finding the average annual compounded rates of return over 1, 5,
and 10 year periods that would equate an initial hypothetical $1,000 investment
to its ending redeemable value. The calculation assumes that all dividends and
distributions are reinvested when paid. The quotation assumes the amount was
completely redeemed at the end of each 1, 5, and 10 year period and the
deduction of all applicable Fund expenses on an annual basis. Since Service
Class Shares of the Sterling Portfolios bear additional service and distribution
expenses, the average annual total return of the Service Class Shares of a
Portfolio will generally be lower than that of the Institutional Class Shares of
the same Portfolio.
The average annual total rates of return for the Institutional Class Shares
of the Sterling Portfolios from inception through the year ended October 31,
1994 and for the one-year period ended October 31, 1994 are as follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
ONE YEAR ENDED THROUGH YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
Sterling Partners' Balanced Portfolio . 0.66% 7.10%
Sterling Partners' Equity Portfolio . . 3.50% 9.01%
Sterling Partners' Short-Term Fixed
Income Portfolio . . . . . . . . . . . 1.16% 3.97%
</TABLE>
These figures were calculated according to the following formula:
P (1 + T) = ERV
n
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5, or 10
year periods (or fractional portion thereof).
Service Class Shares of the Sterling Portfolios were not offered as of
October 31, 1994. Accordingly, no total return figures are available.
YIELD
Current yield reflects the income per share earned by a Portfolio's
investments. Since Service Class Shares of the Sterling Partners' Short-Term
Fixed Income Portfolio bear additional service and distribution expenses, the
yield of the Service Class Shares of the Portfolio will generally be lower than
that of the Institutional Class Shares of the same Portfolio.
The current yield of the Sterling Partners' Short-Term Fixed Income
Portfolio is determined by dividing the net investment income per share earned
during a 30- day base period by the maximum offering price per share on the last
day
12
<PAGE>
of the period and annualizing the result. Expenses accrued for the period
include any fees charged to all shareholders during the base period. The yield
for the Sterling Partners' Short-Term Fixed Income Portfolio for the 30-day
period ended October 31, 1994 was 6.15%.
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<PAGE>
This figure was obtained using the following formula:
Yield = 2[(a - b + 1)6 - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
Service Class Shares of the Sterling Partners' Short-Term Fixed Income
Portfolio were not offered as of October 31, 1994. Accordingly, no yield figure
is available.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages - an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks. Comparisons of performance assume
reinvestment of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices - an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices -
unmanaged indices of all industrial, utilities, transportation and
finance stocks listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity Index or its component indices - represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(e) Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income
Fund Performance Analysis - measures total return and average
current yield for the mutual fund industry. Rank individual mutual
fund performance over specified time periods, assuming reinvestments
of all distributions, exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index -
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.
(g) Goldman Sachs 100 Convertible Bond Index - currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(h) Salomon Brothers GNMA Index - includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
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<PAGE>
(i) Salomon Brothers High Grade Corporate Bond Index - consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond - is a market-weighted
index that contains approximately 4,700 individually priced
investment grade corporate bonds rated BBB or better.
U.S. Treasury/agency issues and mortgage passthrough securities.
(k) Lehman Brothers LONG-TERM Treasury Bond - is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities
of 10 years or greater.
(l) The Lehman Brothers 1-3 Year Government Bond Index - The Government
Bond Index is made up of the Treasury Bond Index (all public
obligations of the U.S. Treasury, excluding flower bonds and
foreign-targeted issues with maturities of one to three years) and
the Agency Bond Index (all publicly issued debt of U.S. Government
agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. Government with maturities of one to three
years). The Lehman Brothers Bond Indices include fixed rate debt
issues rated investment grade or higher by Moody's Investors
Service, Standard and Poor's Corporation, or Fitch Investors
Service, in that order. All issues have at least one year to
maturity and an outstanding par value of at least $100 million for
U.S. Government issues and $50 million for all others.
(m) The Salomon Brothers 3 Month T-Bill Average - The average return for
all treasury bills for the previous three month period.
(n) The Lehman Brothers Intermediate Government/Corporate Index is an
unmanaged index composed of a combination of the Government and
Corporate Bond Indices. All issues are investment grade (BBB) or
higher, with maturities of one to ten years and an outstanding par
value of at least $100 million for U.S. Government issues and $25
million for others. The Government Index includes public obligations
of the U.S. Treasury, issues of Government agencies, and corporate
debt backed by the U.S. Government. The Corporate Bond Index
includes fixed-rate nonconvertible corporate debt. Also included are
Yankee Bonds and nonconvertible debt issued by or guaranteed by
foreign or international governments and agencies. Any security
downgraded during the month is held in the index until month-end and
then removed. All returns are market value weighted inclusive of
accrued income.
(o) Donoghue's Money Fund Average is an average of all major money
market fund yields, published weekly for 7- and 30-day yields.
(p) The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index
composed of all outstanding U.S. Treasury issues maturing within one
to three years.
(q) The Merrill Lynch 1-3 Year Corporate Index is an unmanaged index
composed of all outstanding public issues with a quality rating BBB3
- AAA maturing within one to three years.
(r) NASDAQ Industrial Index - is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(s) Value Line - composed of over 1,600 stocks in the Value Line
Investment Survey.
(t) Russell 2000 - composed of the 2,000 smallest stocks in the Russell
3000, market value weighted index of the 3,000 largest
U.S. publicly-traded companies.
(u) Composite Indices - 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and
65% Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ
system exclusive of those traded on an exchange, and 65% Standard &
Poor's 500 Stock Index and 35% Salomon Brothers High Grade Bond
Index.
15
<PAGE>
(v) CDA Mutual Fund Report, published by CDA Investment Technologies,
Inc. - analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(w) Mutual Fund Source Book, published by Morningstar, Inc. - analyzes
price, yield, risk and total return for equity funds.
(x) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest,
Financial Times, Global Investor, Investor's Daily, Lipper
Analytical Services, Inc., Morningstar, Inc., New York Times,
Personal Investor, Wall Street Journal and Weisenberger Investment
Companies Service - publications that rate fund performance over
specified time periods.
(y) Consumer Price Index (or Cost of Living Index), published by the
U.S. Bureau of Labor Statistics - a statistical measure of change,
over time in the price of goods and services in major expenditure
groups.
(z) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates
- historical measure of yield, price and total return for common and
small company stock, long-term government bonds, U.S. Treasury bills
and inflation.
(aa) Savings and Loan Historical Interest Rates - as published by the
U.S. Savings and Loan League Fact Book.
(bb) Historical data supplied by the research departments of First Boston
Corporation, the J.P. Morgan companies, Salomon Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Lehman Brothers, Inc. and Bloomberg
L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its futures. In addition, there can be no
assurance that the Fund will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." The Fund's principal executive office is
located at 803 Cathedral Street, Baltimore, MD 21201; however, all investor
correspondence should be directed to the Fund at The Regis Service Center, c/o
Mutual Funds Service Company, P.O. Box 2798, Boston, MA 02208-2798. The Fund's
Articles of Incorporation authorize the Directors to issue 3,000,000,000 shares
of common stock, $.001 par value. The Board of Directors has the power to
designate one or more series (Portfolios) or classes of common stock and to
classify or reclassify any unissued shares with respect to such Portfolios,
without further action by shareholders. Currently, the Fund is offering shares
of 29 Portfolios. The Directors of the Fund may create additional Portfolios
and classes of shares at a future date.
Both classes of shares of each Portfolio of the Fund, when issued and paid
for as provided for in the Prospectus, will be fully paid and nonassessable,
have no preference as to conversion, exchange, dividends, retirement or other
features and have no preemptive rights. The shares of the Fund have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of Directors can elect 100% of the Directors
if they choose to do so. A shareholder is entitled to one vote for each full
share held (and a fractional vote for each fractional share held), then standing
in his or her name on the books of the Fund. Both Institutional Class and
Service Class Shares represent an interest in the same assets of a Portfolio and
are identical in all respects except that the Service Class Shares bear certain
expenses related to shareholder servicing and the distribution of such shares,
and have exclusive voting rights with respect to matters relating to such
distribution expenditures.
16
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the Federal excise tax on undistributed
income and capital gains (see discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectus). The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of that Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of the Portfolios at net asset value (as of the business
day following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.
Each Portfolio will be treated as a separate entity (and hence as a
separate "regulated investment company") for Federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for Federal income tax purposes) such gains against any
net capital losses of another Portfolio.
FEDERAL TAXES
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from qualifying income; i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
foreign currencies, or other income derived with respect to its business of
investing in such securities or currencies. In addition, gains realized on the
sale or other disposition of securities held for less than three months must be
limited to less than 30% of the Portfolio's annual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Institutional Class Shares of the Sterling
Partners' Portfolios and the Financial Highlights for the respective periods
presented, which appear in the Portfolios' 1994 Annual Report to Shareholders,
and the reports thereon of Price Waterhouse LLP, independent accountants, also
appearing therein, are incorporated by reference into this Statement of
Additional Information. An Annual Report may be obtained, without charge, by
writing the Fund or by calling The Regis Service Center at 1-800-638-7983.
17
<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of
its highest bond ratings: Aaa - judged to be the best quality; carry the
smallest degree of investment risk; Aa - judged to be of high quality by all
standards; A - possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa - considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA - highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA - also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A - regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
- - regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
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 or
instrumentality 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 commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the U.S. Treasury, if needed to service
its debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Mortgage Corporation, are federally chartered
institutions under Government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
III. COMMERCIAL PAPER
A Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's, or, if
unrated, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P. Commercial paper refers to short-term,
unsecured promissory notes issued by corporations to finance short-term credit
needs. Commercial paper is usually sold on a discount basis and has a maturity
at the time of issuance not exceeding nine months. Variable amount master demand
notes are demand obligations that permit the investment of fluctuating amounts
at varying market rates of interest pursuant to arrangement between the issuer
and a commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. Because variable amount master demand notes are direct lending
arrangements
A-1
<PAGE>
between a lender and a borrower, it is not generally contemplated that such
instruments will be traded, and there is no secondary market for these notes,
although they are redeemable (and thus immediately repayable by the borrower) at
face value, plus accrued interest, at any time. In connection with the
Portfolio's investment in variable amount master demand notes, the Adviser's
investment management staff will monitor, on an ongoing basis, the earning
power, cash flow and other liquidity ratios of the issuer, and the borrower's
ability to pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating 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 the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer 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.
IV. BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may be increased or decreased periodically.
Frequently, dealers selling variable rate certificates of deposit to a Portfolio
will agree to repurchase such instruments, at the Portfolio's option, at par on
or near the coupon dates. The dealers' obligations to repurchase these
instruments are subject to conditions imposed by various dealers; such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolio is also able to
sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export, transfer or
storage of goods). The borrower is liable for payment as well as the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.
A-2
<PAGE>
UAM FUNDS
TS&W PORTFOLIOS
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JANUARY 22, 1996
TO THE STATEMENT OF ADDITIONAL INFORMATION DATED
FEBRUARY 28, 1995 AS SUPPLEMENTED OCTOBER 31, 1995
The following information supplements the "Investment Adviser" section:
TS&W EQUITY PORTFOLIO
PHILOSOPHY/STYLE:
TS&W's investment professionals work as a team in the development of investment
strategy. The stock selection process combines an economic top-down approach
with fundamental valuation analysis and market structure analysis. Through
economic analysis, the Adviser attempts to assess which areas of the economy are
expected to exhibit relative strength. Input for economic analysis is derived
from a detailed analysis of the economy and from an analysis of historical
corporate earnings trends, both prepared internally. Through fundamental
valuation analysis, TS&W attempts to seek out sectors, industries and companies
in the market which represent areas of undervaluation. Tools and measures
utilized include a dividend discount model and relative value screens as well as
other fundamental measures of value including price/earnings ratios, price to
book ratios and dividend yields. TS&W attempts to purchase stocks of companies
which should benefit from economic trends and which are attractively valued
relative to their fundamentals and other companies in the market.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
* Johnson & Higgins
* Cooper Tire & Rubber Co.
* Ames Co.
* James River Corporation
* Butterick Company
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
TS&W FIXED INCOME PORTFOLIO
PHILOSOPHY/STYLE:
TS&W's investment professionals work as a team in the development of fixed
income investment strategy. The decision making consists of an interactive
economic top-down approach, valuation analysis, market structure analysis, and
fundamental credit analysis. Economic analysis begins with an examination of
monetary policy, fiscal policy, and gross domestic product. An internally
generated outlook for the direction of interest rates is formulated, and the
maturity/duration of portfolios will be established to reflect TS&W's outlook.
Under normal market conditions, the maturity or duration will average within a
plus or minus range of 20% to the benchmark, which is the Lehman Brothers
Government/Corporate Index. Generally, duration is gradually adjusted as the
outlook for interest rates changes. Valuation analysis examines market
fundamentals and the relative pricing of maturities, sectors, and individual
issues. Market structure analysis compares the present cycle of interest rates
to historical cycles in terms of interest rates, supply and demand trends, and
investor sentiment. Extreme variance from the norm which creates excessive risk
or opportunity is often highlighted by this work, and portfolios are adjusted
accordingly.
<PAGE>
REPRESENTATIVE INSTITUTIONAL CLIENTS:
* Johnson & Higgins
* Cooper Tire & Rubber Co.
* Ames Co.
* James River Corporation
* Butterick Company
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
TS&W INTERNATIONAL EQUITY PORTFOLIO
PHILOSOPHY/STYLE:
TS&W's investment professionals work as a team in the development of investment
strategy. The stock selection process combines an economic top-down approach
with valuation and fundamental analysis. Through economic analysis, TS&W
studies broad economic and political trends and monitors the movement of
interest rates and corporate earnings. Through valuation analysis, TS&W
attempts to identify and evaluate pricing anomalies across national markets and
within industry sectors. Tools and measures utilized include a dividend discount
model and relative value screens as well as other traditional measures of value
including price/earnings ratios, price to book ratios and dividend yields.
Fundamental analysis is performed on industries and companies in order to verify
their potential attractiveness for investment. TS&W attempts to purchase stocks
of companies which should benefit from economic trends and which are
attractively valued relative to their fundamentals and other companies in the
market.
REPRESENTATIVE INSTITUTIONAL CLIENTS:
* Johnson & Higgins
* Cooper Tire & Rubber Co.
* Ames Co.
* James River Corporation
* Butterick Company
It is not known whether the listed clients approve or disapprove of the Adviser
or the advisory services provided. The Adviser used objective criteria in
compiling the client list, such as account size, geographic location and client
classification. The Adviser did not use any performance based criteria.
<PAGE>
PART B
THE REGIS FUND, INC.
TS&W PORTFOLIOS
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995
This Statement is not a Prospectus but should be read in conjunction with
The Regis Fund, Inc.'s Prospectus relating to the TS&W Portfolios' Institutional
Class Shares dated February 28, 1995. To obtain the Prospectus, please call The
Regis Service Center:
1-800-638-7983
TABLE OF CONTENTS
PAGE
----
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . 1
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . 6
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . 8
Performance Calculations . . . . . . . . . . . . . . . . . . . . . . . . 9
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Appendix _ Description of Securities and Ratings . . . . . . . . . . . . A-1
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the TS&W Portfolios as set forth in the TS&W Prospectus:
SECURITIES LENDING
Each Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. Each Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the rules and regulations or interpretations of the Securities and
Exchange Commission (the "Commission") thereunder, which currently require that
(a) the borrower pledge and maintain with the Portfolio collateral consisting of
cash, an irrevocable letter of credit issued by a domestic U.S. bank or
securities issued or guaranteed by the United States Government having a value
at all times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis),
<PAGE>
(c) the loan be made subject to termination by the Portfolio at any time, and
(d) the Portfolio receives reasonable interest on the loan (which may include
the Portfolio investing any cash collateral in interest bearing short-term
investments), any distribution on the loaned securities and increase in their
market value. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Directors. The Portfolios will continue to retain
any voting rights with respect to the loaned securities. If a material event
occurs affecting an investment on a loan, the loan must be called and the
securities voted.
FUTURES CONTRACTS
The TS&W International Equity Portfolio may enter into futures contracts
for the purposes of hedging, remaining fully invested and reducing transactions
costs. Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of a specific security at a specified
future time and at a specified price. Futures contracts which are standardized
as to maturity date and underlying financial instrument are traded on national
futures exchanges. Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC"), a
U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin that
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, change in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The TS&W International Equity
Portfolio expects to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates. The TS&W International Equity Portfolio intends to use
futures contracts only for hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bonafide hedging transactions or that the Fund's
commodity futures and option positions be for other purposes, to the extent that
the aggregate initial margins and premiums required to establish such
non-hedging positions do not exceed five percent of the liquidation value of the
Portfolio. The TS&W International Equity Portfolio will only sell futures
contracts to protect securities it owns against price declines or purchase
contracts to protect against an increase in the price of securities it intends
to purchase. As evidence of this hedging interest, the Portfolio expects that
approximately 75% of its futures contracts purchases will be "completed", that
is, equivalent amounts of related securities will have been purchased or are
being purchased by the Portfolio upon sale of open futures contracts.
<PAGE>
Although techniques other than the sale and purchase of futures contracts
could be used to control the TS&W International Equity Portfolio's exposure to
market fluctuations, the use of futures contracts may be a more effective means
of hedging this exposure. While the Portfolio will incur commission expenses in
both opening and closing out future positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The TS&W International Equity Portfolio will not enter into futures
contract transactions to the extent that, immediately thereafter, the sum of its
initial margin deposits on open contracts exceeds 5% of the market value of its
total assets. In addition, the Portfolio will not enter into futures contracts
to the extent that its outstanding obligations to purchase securities under
these contracts would exceed 5% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
The TS&W International Equity Portfolio will minimize the risk that it will
be unable to close out a futures position by only entering into futures which
are traded on national futures exchanges and for which there appears to be a
liquid secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular futures contract at any specific
time. Thus, it may not be possible to close a futures position. In the event of
adverse price movements, the TS&W International Equity Portfolio would continue
to be required to make daily cash payments to maintain its required margin. In
such situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Portfolio may be required to make
delivery of the instruments underlying futures contracts it holds. The inability
to close futures positions also could have an adverse impact on the Portfolio's
ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total loss
of the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in excess of the amount
invested in the contract. However, because the futures strategies of the TS&W
International Equity Portfolio are engaged in only for hedging purposes, the
Adviser does not believe that the Portfolio is subject to the risks of loss
frequently associated with futures transactions. The Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the TS&W International Equity
Portfolio does involve the risk of imperfect or no correlation where the
securities underlying the futures contracts have different maturities than the
portfolio securities being hedged. It is also possible that the Portfolio could
lose money on futures contracts and also experience a decline in value of
portfolio securities. There is also the risk of loss by the Portfolio of margin
deposits in the event of bankruptcy of a broker with whom the Portfolio has an
open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and, therefore, does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Except for transactions the TS&W International Equity Portfolio has
identified as hedging transactions, the Portfolio is required for Federal income
tax purposes to recognize as income for each taxable year its net unrealized
gains
<PAGE>
and losses on regulated futures contracts as of the end of the year as well as
those actually realized during the year. In most cases, any gain or loss
recognized with respect to a futures contract is considered to be 60% long-term
capital gain or loss and 40% short-term capital gain or loss without regard to
the holding period of the contract. Furthermore, sales of futures contracts
which are intended to hedge against a change in the value of securities held by
the Portfolio may affect the holding period of such securities and,
consequently, the nature of the gain or loss on such securities upon
disposition.
In order for the TS&W International Equity Portfolio to continue to qualify
for Federal income tax treatment as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities and gains from the
sale of securities of foreign currencies or other income derived with respect to
its business investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less than three
months must be limited to less than 30% of a Portfolio's annual gross income. It
is anticipated that any net gain realized from the closing out of futures
contracts will be considered a gain from the sale of securities and, therefore,
will be qualifying income for purposes of the 90% requirement. In order to avoid
realizing excessive gains on securities held for less than three months, the
Portfolio may be required to defer the closing out of futures contracts beyond
the time when it would otherwise be advantageous to do so. It is anticipated
that unrealized gains on futures contracts which have been open for less than
three months as of the end of the Portfolio's fiscal year, and which are
recognized for tax purposes, will not be considered gains on securities held for
less than three months for the purposes of the 30% test.
The TS&W International Equity Portfolio will distribute to shareholders
annually any net capital gains which have been recognized for Federal income tax
purposes (including unrealized gains at the end of the Portfolio's fiscal year)
on futures transactions. Such distribution will be combined with distributions
of capital gains realized on the Portfolio's other investments, and shareholders
will be advised on the nature of the payment.
OPTIONS
The TS&W International Equity Portfolio may purchase and sell put and call
options on futures contracts for hedging purposes. Investments in options
involve some of the same considerations that are involved in connection with
investments in futures contracts (e.g., the existence of a liquid secondary
market). In addition, the purchase of an option also entails the risk that
changes in the value of the underlying security or contract will not be fully
reflected in the value of the option purchased. Depending on the pricing of the
option compared to either the futures contract on which it is based or the price
of the securities being hedged, an option may or may not be less risky than
ownership of the futures contract or such securities. In general, the market
prices of options can be expected to be more volatile than the market prices on
the underlying futures contract or securities.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund, and payment is received by the Fund's Custodian. The minimum
initial investment required is $100,000 with certain exceptions for select
customers of the Adviser and Directors, officers and employees of the Fund and
the Adviser. An order received in proper form prior to the 4:00 p.m. close of
the New York Stock Exchange (the "Exchange") will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the 4:00 p.m. close of the Exchange will be executed at the price computed
on the next day the Exchange is open after proper receipt. The Exchange will be
closed on the following days: Good Friday, April 14, 1995; Memorial Day, May 29,
1995; Independence Day, July 4, 1995; Labor Day, September 4, 1995; Thanksgiving
Day, November 23, 1995; Christmas Day, December 25, 1995; New Year's Day,
January 1, 1996; and Presidents' Day, February 19, 1996.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
<PAGE>
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that both the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commission,
(2) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for a Portfolio
to dispose of securities owned by it or to fairly determine the value of its
assets, and (3) for such other periods as the Commission may permit. The Fund
has made an election with the Commission to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid, in whole or in part, in investment securities or in cash as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares", and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.
No charge is made by the Portfolios for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolios.
SIGNATURE GUARANTEES
To protect your account, the Fund and Mutual Funds Service Company (the
"Administrator") from fraud, signature guarantees are required for certain
redemptions. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) or
the registered address or (2) share transfer requests. The purpose of signature
guarantees is to verify the identity of the party who has authorized a
redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institution is
available from the Administrator. Broker-dealers guaranteeing signatures must be
a member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signatures
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder
Services" in the Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each TS&W Portfolio may be exchanged for
Institutional Class Shares of any other TS&W Portfolio. In addition,
Institutional Class Shares of each TS&W Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in The Regis Family of Funds
which is comprised of the Fund and The Regis Fund II. (See the list of
Portfolios of The Regis Family of Funds _ Institutional Class Shares in the
Prospectus.) Exchange requests should be made by calling the Fund
(1-800-638-7983) or by writing to The Regis Fund, Inc., The Regis Service
Center, c/o Mutual Funds Service Company, P.O. Box 2798, Boston, MA 02208-2798.
The exchange privilege is only available with respect to Portfolios that are
registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
<PAGE>
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling The
Regis Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder, and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. Eastern Time will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Administrator will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency and to other restrictions established by the Fund's Board of Directors
to assure that such exchanges do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between Funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios.
You may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
INVESTMENT LIMITATIONS
Each TS&W Portfolio is subject to the following restrictions which may be
changed by the Fund's Board of Directors upon reasonable notice to shareholders.
These restrictions supplement the investment objectives and policies set forth
in the Prospectus. Each TS&W Portfolio will not:
(1) invest in commodities except that the TS&W International Equity
Portfolio may invest in futures contracts and options to the
extent that not more than 5% of the Portfolio's assets is
required as deposit to secure obligations under futures contracts
and the entry into forward foreign currency exchange contracts is
not and shall not be deemed to involve investing in commodities;
(2) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the
limitation described in (10) below) which are publicly
distributed, and (ii) by lending its portfolio securities to
banks, brokers, dealers and other financial institutions so long
as such loans are not inconsistent with the 1940 Act or the rules
and regulations or interpretations of the Commission thereunder.
(4) purchase on margin or sell short except as specified in
(1) above;
(5) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(6) with respect to 75% of its assets, invest more than 5% of its
total assets at the time of purchase in securities of any single
issuer (other than obligations issued or guaranteed as to
principal and interest by the government of the U.S. or any
agency or instrumentality thereof);
(7) purchase or retain securities of an issuer if those Officers and
Directors of the Fund or its investment adviser owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;
(8) borrow money, except from banks and as a temporary measure for
extraordinary or emergency purposes, and then, in no event, in
excess of 10% of the Portfolio's gross assets valued at the lower
of market or cost, and a Portfolio may not purchase additional
securities when borrowings exceed 5% of total gross assets;
<PAGE>
(9) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 10% of its total assets at fair market value;
(10) underwrite the securities of other issuers or invest more than an
aggregate of 10% of the net assets of the Portfolio, determined
at the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there
are no readily available markets, including repurchase agreements
having maturities of more than seven days;
(11) invest for the purpose of exercising control over management of
any company;
(12) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) a
continuous operating history of less than 3 years;
(13) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of a
Portfolio's total assets would be invested in securities of
companies within such industry; provided, however, that there
shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities or instruments issued by U.S. banks when a
Portfolio adopts a temporary defensive position; and
(14) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Directors set broad policies
for the Fund and elect its officers. A list of the Directors and officers of the
Fund and a brief statement of their present positions and principal occupations
during the past 5 years is set forth in the TS&W Portfolios' Prospectus. As of
January 31, 1995, the Directors and officers of the Fund owned less than 1% of
the Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,350 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all of the Directors and allocated
proportionately among the Portfolios of the Fund and The Regis Fund II as well
as the AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for
travel and other expenses incurred while attending Board meetings. Directors who
are also officers or affiliated persons receive no remuneration for their
service as Directors. The Fund's officers and employees are paid by either the
Adviser, United Asset Management Corporation ("UAM"), or the Administrator and
receive no compensation from the Fund.
PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the following persons or organizations held of
record or beneficially 5% or more of the shares of the Portfolio:
TS&W INTERNATIONAL EQUITY PORTFOLIO: FICOR Corporation, C.A. Kraus, Manager,
Employee Benefit Fisons Corporation, Rochester, NY, 6.1%; Riverside Health Care
Foundation, Newport News, VA, 6.0%; The Kennedy Foundation, Corpus Christi, TX,
5.8%; and E. Morgan Massey, Richmond, VA, 5.4%.
TS&W EQUITY PORTFOLIO: Larco/Reinvest, Richmond, VA, 14.1%; C.B. Fleet Thrift
Plan, Lynchburg, VA, 6.1%; and Delta Oil Company Pension Fund, Petersburg, VA,
5.2%.
<PAGE>
TS&W FIXED INCOME PORTFOLIO: Nationsbank of Virginia, N.A., Trustee for C.B.
Fleet Defined Benefit Pension Plan, Dallas, TX, 10.7%*; Larco/Reinvest,
Richmond, VA, 7.0%; U.S. Trust Company of New York, Trustee for the IRA of
Donald E. Chambers, MD, Norfolk, VA, 5.0%*; and Radiology Consultants of
Lynchburg Group Trust, Lynchburg, VA, 5.0%.
The persons or organizations owning 25% or more of the outstanding shares
of a Portfolio may be presumed to control (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have the
ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
___________
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Thompson, Siegel & Walmsley, Inc. (the "Adviser") is a wholly-owned
subsidiary of UAM, a holding company incorporated in Delaware in December 1980
for the purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 42 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each of
them.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, each TS&W Portfolio pays the Adviser an annual fee, in
monthly installments, calculated by applying the following annual percentage
rates to the TS&W Portfolios' average net assets for the month:
TS&W Balanced Portfolio . . . . . . . . . . . . . . 0.75%
TS&W Equity Portfolio . . . . . . . . . . . . . . . 0.75%
TS&W Fixed Income Portfolio . . . . . . . . . . . . 0.45%
TS&W Limited Volatility Portfolio . . . . . . . . . 0.45%
TS&W International Equity Portfolio . . . . . . . . 1.00%
For the period from July 17, 1992 (commencement of operations) to
October 31, 1992, the TS&W Equity Portfolio and TS&W Fixed Income Portfolio paid
no advisory fees. During this period the Adviser voluntarily waived advisory
fees of approximately $6,000 for the TS&W Equity Portfolio and approximately
$4,000 for the TS&W Fixed Income Portfolio. For the fiscal year ended
October 31, 1993, the TS&W Equity Portfolio, TS&W Fixed Income Portfolio and
TS&W International Equity Portfolio paid advisory fees of approximately
$144,000, $125,000 and $75,000, respectively. For the fiscal year ended
October 31, 1994, the TS&W Equity Portfolio, TS&W Fixed Income Portfolio and
TS&W International Equity Portfolio paid advisory fees of approximately
$262,000, $200,000 and $384,000, respectively. During the period from
December 18, 1992 (commencement of operations) to October 31, 1993, the Adviser
voluntarily waived advisory fees of approximately $33,000 for the TS&W
International Equity Portfolio.
<PAGE>
Effective November 1, 1994, the advisory fee changed for the TS&W Fixed Income
Portfolio from an annual rate of 0.65% of average daily net assets to 0.45% of
average daily net assets.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreements authorize the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Fund's TS&W Portfolios and direct the Adviser to use its best
efforts to obtain the best execution with respect to all transactions for the
Portfolios. In doing so, a Portfolio may pay higher commission rates than the
lowest rate available when the Adviser believes it is reasonable to do so in
light of the value of the research, statistical, and pricing services provided
by the broker effecting the transaction. It is not the Fund's practice to
allocate brokerage or principal business on the basis of sales of shares which
may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended October 31, 1992, 1993 and 1994,
the entire Fund paid brokerage commissions of approximately $1,248,000,
$1,592,000 and $2,402,000, respectively.
Some securities considered for investment by each of the Fund's Portfolios
may also be appropriate for other clients served by the Adviser. If purchases or
sales of securities consistent with the investment policies of a Portfolio and
one or more of these other clients served by the Adviser is considered at or
about the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Directors.
ADMINISTRATIVE SERVICES
Mutual Funds Service Company, an affiliate of United States Trust Company
of New York, (the "Administrator") provides administrative, fund accounting,
dividend disbursing and transfer agency services to the Fund under an
Administration Agreement. For the period from July 17, 1992 (commencement of
operations) to October 31, 1992, administrative fees paid by the TS&W Equity
Portfolio and the TS&W Fixed Income Portfolio to the Administrator amounted to
$3,000 for each Portfolio. For the fiscal year ended October 31, 1993, the TS&W
Equity Portfolio and the TS&W Fixed Income Portfolio paid administrative fees of
approximately $33,000 and $44,000, respectively. For the period from
December 18, 1992 (commencement of operations) to October 31, 1993, the TS&W
International Equity Portfolio paid administrative fees of approximately
$22,000. For the fiscal year ended October 31, 1994, the TS&W Equity Portfolio,
the TS&W Fixed Income Portfolio and the TS&W International Equity Portfolio paid
administrative fees of approximately $65,000, $65,000 and $58,000, respectively.
The basis of the fees paid to the Administrator for the 1992 and 1993 fiscal
years was as follows: the Fund paid a monthly fee for its services which on an
annualized basis equaled 0.16 of 1% of the first $200 million of the aggregate
net assets of the Fund; plus 0.12 of 1% of the next $800 million of the
aggregate net assets of the Fund; plus 0.06 of 1% of the aggregate net assets in
excess of $1 billion. The fees were allocated among the Portfolios on the basis
of their relative assets and were subject to a graduated minimum fee schedule
per Portfolio, which rose from $1,000 per month upon inception of a Portfolio to
$50,000 annually after two years. The services provided by the Administrator and
the current fees payable to the Administrator are described in the Portfolios'
Prospectus.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolios may from time to time quote various performance figures to
illustrate past performance.
Performance quotations by investment companies are subject to rules adopted
by the Commission, which require the use of standardized performance quotations
or, alternatively, that every non-standardized performance quotation furnished
by the Fund be accompanied by certain standardized performance information
computed as required by the Commission. An explanation of those and other
methods used to compute or express performance follows.
TOTAL RETURN
<PAGE>
The average annual total return of a Portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis. The average annual total rates of return for
the TS&W Equity, TS&W Fixed Income and TS&W International Equity Portfolios from
inception and for the one year period ended on the date of the Financial
Statements included herein are 7.17%, 2.83% and 19.29% and 4.82%, -5.46% and
10.87%, respectively.
These figures were calculated according to the following formula:
P (1 + T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10 year periods at the end of the
1, 5, or 10 year periods (or fractional portion thereof).
YIELD
Current yield reflects the income per share earned by a Portfolio's
investment.
The current yield of a Portfolio is determined by dividing the net
investment income per share earned during a 30-day base period by the maximum
offering price per share on the last day of the period and annualizing the
result. Expenses accrued for the period include any fees charged to all
shareholders during the base period. The yield for the TS&W Fixed Income
Portfolio for the 30-day period ended on the date of the Financial Statements
included herein is 6.22%.
This figure was obtained using the following formula:
Yield = 2 [( a - b + 1)6 - 1]
-----
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
<PAGE>
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages _ an unmanaged index
composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices _ an unmanaged
index composed of 400 industrial stocks, 40 financial stocks, 40 utilities
stocks and 20 transportation stocks. Comparisons of performance assume
reinvestment of dividend.
(c) The New York Stock Exchange composite or component indices _ unmanaged
indices of all industrial, utilities, transportation and finance stocks
listed on the New York Stock Exchange.
(d) Wilshire 5000 Equity index or its component indices _ represents the return
on the market value of all common equity securities for which daily pricing
is available. Comparisons of performance assume reinvestment of dividends.
(e) Lipper _ Mutual Fund Performance Analysis and Lipper _ Fixed Income Fund
Performance Analysis _ measure total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestments of all distributions,
exclusive of any applicable sales charges.
(f) Morgan Stanley Capital International EAFE Index and World Index _
respectively, arithmetic, market value-weighted averages of the performance
of over 900 securities listed on the stock exchanges of countries in
Europe, Australia and the Far East, and over 1,400 securities listed on the
stock exchanges of these continents, including North America.
(g) Goldman Sachs 100 Convertible Bond Index _ currently includes 67 bonds and
33 preferred. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The
index is priced monthly.
(h) Salomon Brothers GNMA Index _ includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.
(i) Salomon Brothers High Grade Corporate Bond Index _ consists of publicly
issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues with
maturities of 12 years or greater.
(j) Salomon Brothers Broad Investment Grade Bond _ is a market-weighted index
that contains approximately 4,700 individually priced investment grade
corporate bonds rated BBB or better, U.S. Treasury/agency issues and
mortgage pass through securities.
(k) Lehman Brothers LONG-TERM Treasury Bond _ is composed of all bonds covered
by the Lehman Brothers Treasury Bond Index with maturities of 10 years or
greater.
(l) The Lehman Brothers Government/Corporate Index is an unmanaged index
composed of a combination of the Government and Corporate Bond Indices. The
Government Index includes public obligations of the U.S. Treasury, issues
of Government agencies, and corporate debt backed by the U.S. Government.
The Corporate Bond Index includes fixed-rate nonconvertible corporate debt.
Also included are Yankee Bonds and nonconvertible debt issued by or
guaranteed by foreign or international governments and agencies. All issues
are investment grade (BBB) or higher, with maturities of at least one year
and outstanding par value of at least $100 million for U.S. Government
issues and $25 million for others. Any security downgraded during the month
is held in the index until month-end and then removed. All returns are
market value weighted inclusive of accrued income.
<PAGE>
(m) NASDAQ Industrial Index - is composed of more than 3,000 industrial issues.
It is a value-weighted index calculated on price change only and does not
include income.
(n) Value Line _ composed of over 1,600 stocks in the Value Line Investment
Survey.
(o) Russell 2000 _ composed of the 2,000 smallest stocks in the Russell 3000, a
market value weighted index of the 3,000 largest U.S. publicly-traded
companies.
(p) Composite indices _ 70% Standard & Poor's 500 Stock Index and 30% NASDAQ
Industrial Index; 35% Standard & Poor's 500 Stock Index and 65% Salomon
Brothers High Grade Bond Index; all stocks on the NASDAQ system exclusive
of those traded on an exchange, and 65% Standard & Poor's 500 Stock Index
and 35% Salomon Brothers High Grade Bond Index.
(q) CDA Mutual Fund Report published by CDA Investment Technologies, Inc. _
analyzes price, current yield, risk, total return and average rate of
return (average compounded growth rate) over specified time periods for the
mutual fund industry.
(r) Mutual Fund Source Book published by Morningstar, Inc. _ analyzes
price, yield, risk and total return for equity funds.
(s) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Wall Street Journal and Weisenberger Investment Companies
Service _ publications that rate fund performance over specified time
periods.
(t) Consumer Price Index (or Cost of Living Index), published by the
U.S. Bureau of Labor Statistics _ a statistical measure of change over time
in the price of goods and services in major expenditure groups.
(u) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates _
historical measure of yield, price and total return for common and small
company stock, long-term government bonds, U.S. Treasury bills and
inflation.
(v) Savings and Loan Historical Interest Rates _ as published by the
U.S. Savings & Loan League Fact Book.
(w) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill Lynch,
Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Fund's
Portfolios, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to the
formula used by the Fund to calculate its performance. In addition, there can be
no assurance that the Fund will continue this performance as compared to such
other averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." The Fund's Articles of Incorporation, as
amended, authorize the Directors to issue 3,000,000,000 shares of common stock,
$.001 par value. The Board of Directors has the power to designate one or more
series ("Portfolios") or classes of common stock and to classify or reclassify
any unissued shares with respect to such Portfolios, without further action by
shareholders. Currently, the Fund is offering shares of 29 Portfolios.
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of each TS&W
Portfolio's net investment income, if any, together with any net realized
capital gains in the amount and at the times that will avoid both income
(including capital gains) taxes on it and the imposition of the Federal excise
tax on undistributed income and capital gains. (See discussion under "Dividends,
Capital Gains Distributions and Taxes" in the Prospectus.) The amounts of any
income dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of such Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of the Portfolios at net asset value (as of the business
day following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.
Each Portfolio of the Fund will be treated as a separate entity (and hence
as a separate "regulated investment company") for Federal tax purposes. Any net
capital gains recognized by a Portfolio will be distributed to its investors
without need to offset (for Federal income tax purposes) such gains against any
net capital losses of another Portfolio.
FEDERAL TAXES
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities, and gains from the
sale of securities or foreign currencies or other income derived with respect to
its business of investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less than three
months must be limited to less than 30% of the Portfolio's annual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the TS&W Portfolios which had operations for
the fiscal period ended October 31, 1994 and the Financial Highlights for the
respective periods presented, which appear in the Portfolios' 1994 Annual Report
to Shareholders, and the reports thereon of Price Waterhouse LLP, independent
accountants, also appearing therein, are incorporated by reference into this
Statement of Additional Information. An Annual Report may be obtained, without
charge, by writing the Fund or by calling The Regis Service Center at 1-800-638-
7983.
<PAGE>
APPENDIX _ DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF RATINGS FOR BOND AND PREFERRED SECURITIES
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of
its highest bond ratings: AAA _ judged to be the best quality; carry the
smallest degree of investment risk: AA _ judged to be of high quality by all
standards; A _ possess many favorable investment attributes and are to be
considered as higher medium grade obligations; BAA _ considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA _ highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA _ also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A _ regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
_ regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to investors such
as the TS&W Limited Volatility Portfolio. Most issuers or poolers provide
guarantees of payments regardless of whether or not the mortgagor actually makes
the payment. The guarantees made by issuers or poolers are supported by various
forms of credit, collateral, guarantees or insurance, including individual loan,
title, pool and hazard insurance purchased by the issuer. There can be no
assurance that the private issuers can meet their obligations under the
policies. Mortgage-backed securities issued by private issuers, whether or not
such securities are subject to guarantees, may entail greater risk. If there is
no guarantee provided by the issuer, mortgage-backed securities purchased by the
TS&W Limited Volatility Portfolio will be rated investment grade by Moody's or
S&P.
UNDERLYING MORTGAGES
Pools consist of whole mortgage loans or participants in loans. The
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, the TS&W Limited Volatility Portfolio may purchase pools
of variable rate mortgages (VRM), growing equity mortgages (GEM), graduated
payment mortgages (GPM) and other types where the principal and interest payment
procedures vary. VRMs are mortgages which reset the mortgage's interest rate on
pools of VRMs. GPM and GEM pools maintain constant interest rates with varying
levels of principal repayment over the life of the mortgage. These different
interest and principal payment procedures should not impact a Portfolio's net
asset value since the prices at which these securities are valued each day will
reflect the payment procedure.
All poolers apply standards for qualification to local lending institutions
which originate mortgages for the pools. Poolers also establish credit standards
and underwriting criteria for individual mortgages included in the pools. In
addition, many mortgages included in pools are insured through private mortgage
insurance companies.
AVERAGE LIFE
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayment is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to assume that
prepayments will
<PAGE>
result in a 12-year average life. Pools of mortgages with other maturities of
different characteristics will have varying assumptions for average life.
RETURNS ON MORTGAGE-BACKED SECURITIES
Yields on mortgage-backed pass-through securities are typically quoted on
the maturity of the underlying instruments and the associated average life
assumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment thus affecting the yields of
the Portfolios. The compounding effect from reinvestment of monthly payments
received by a Portfolio will increase its yield to shareholders compared to
bonds that pay interest semiannually.
ABOUT MORTGAGE-BACKED SECURITIES
Interests in pools of mortgage-backed 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 mortgage
loans net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments resulting from the sale of the
underlying residential property, refinancing or foreclosure net of fees or costs
which may be incurred. Some mortgage-backed securities are described as
"modified pass-through". These securities entitle the holders to receive all
interest and principal payments owed on the mortgages in the pool, net of
certain fees, regardless of whether or not the mortgagors actually make the
payment.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interests in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal.
The Federal National Mortgage Association (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
residential mortgages from a list of approved seller/services 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.
The principal government guarantor of mortgage-backed securities is the
Government National Mortgage Association (GNMA). 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 approved institutions and backed by pools of FHA-insured or
VA-guaranteed mortgages.
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. 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 guarantees of payments in the former pools. However, timely payment
of interest and principal of these pools is supported by various forms of
insurance or guarantees including individual loan, title, pool and hazard
insurance purchased by the issuer. The insurance and guarantees are issued by
governmental entities, private insurers and the mortgage poolers. There can be
no assurance that the private insurers can meet their obligations under the
policies. Mortgage-backed securities purchased for the TS&W Limited Volatility
Portfolio will, however, be rated investment grade by Moody's or S&P.
The TS&W Limited Volatility Portfolio expects that governmental or private
entities may create mortgage loan pools offering pass-through investments in
addition to those described above. The mortgages underlying these securities may
be alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payment may vary or whose terms to maturity may be shorter
than previously customary. As new types of mortgage-backed securities are
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developed and offered to investors, the TS&W Limited Volatility Portfolio will,
consistent with its investment objective and policies, consider making
investments in such new types of securities.
III. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and
U.S. Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
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 or
instrumentality issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as GNMA, are, in effect,
backed by the full faith and credit of the United States through provisions in
their charters that they may make "indefinite and unlimited" drawings on the
U.S. Treasury, if needed, to service its debt. Debt from certain other agencies
and instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, is not guaranteed by the United States, but those
institutions are protected by the discretionary authority of the U.S. Treasury
to purchase certain amounts of their securities to assist the institution in
meeting its debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System and the FHLMC, are federally chartered
institutions under government supervision, but their debt securities are backed
only by the credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
IV. DESCRIPTION OF COMMERCIAL PAPER
Each Portfolio may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by S&P.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with the Portfolios'
investment in variable amount master demand notes, the Adviser's investment
management staff will monitor, on an ongoing basis, the earning power, cash flow
and other liquidity ratios of the issuer and the borrower's ability to pay
principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating 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 the
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appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to completion and customer
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 issuer of obligations which may be present or may arise as
a result of public interest questions and preparations to meet such obligations.
V. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may increase or decrease periodically.
Frequently, dealers selling variable rate certificates of deposit to the
Portfolios will agree to repurchase such instruments, at a Portfolio's option,
at par on or near the coupon dates. The dealers' obligations to repurchase these
instruments are subject to conditions imposed by various dealers. Such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolios are also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A bankers' acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.
VI. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, the Fund's Portfolios may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and may incur costs in connection with conversions between various
currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its Portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable, the
non-recoverable portion of foreign withholding taxes will reduce the income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.
