<PAGE>
Filed Pursuant to Rule 497(e)
(File Nos.: 33-25716 811-5697)
[LOGO]
DEM INDEX FUND
A PORTFOLIO OF THE CHAPMAN FUNDS, INC.
INVESTOR SHARES
Supplement dated July 30, 1999
to the Prospectus dated February 17, 1999
THE INFORMATION SET FORTH UNDER THE CAPTION "FUND EXPENSES" IS REVISED BY
DELETING SUCH INFORMATION IN ITS ENTIRETY AND INSERTING IN LIEU THEREOF THE
FOLLOWING:
FUND EXPENSES
The following table lists the costs and expenses an investor
will incur either directly or indirectly as a stockholder of the Fund based on
an estimate of the Fund's operating expenses.
<TABLE>
<CAPTION>
<S> <C>
STOCKHOLDER TRANSACTION EXPENSES INVESTOR SHARES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.75%
Maximum Deferred Sales Load -0-%
Maximum Sales Load Imposed on Reinvested Dividends and
other Distributions -0-%
Redemption Fee
(as a percentage of amount redeemed) 1 -0-%
ANNUAL EXPENSES (as a percentage of net assets) 2
Management Fees (after fee waiver) 3 0.41%
12b-1 Fees (after Investor Share fee waiver) 4 0.00%
Other Expenses (after Investor Share expense 2.28%
limitation) 5
Total Fund Operating Expenses (after Investor Share 2.69%
expense limitation) 5
</TABLE>
- ----------------------
1 The Fund imposes a $9.00 charge only on redemptions by wire transfer.
2 See "MANAGEMENT."
<PAGE>
3 The Investment Advisor is entitled to a fee for investment advisory and
management services at an annual rate of up to .90% of the average
weekly net assets of the Fund attributable to Investor Shares. The
Investment Advisor has voluntarily limited such fee during the first
fiscal year of the Fund to an aggregate of .41% of average weekly net
assets. However, there is no guarantee that the Investment Advisor will
continue to voluntarily limit the amount of such fee beyond October 31,
1999.
4 The Distributor is entitled to a fee for stockholder servicing and
distribution services at an annual rate of up to a total of .75% (up to
.25% service fee and .50% distribution fee) of the average daily net
assets of the Fund attributable to Investor Shares. The Distributor has
voluntarily waived such fee during the first fiscal year of the Fund.
However, there can be no guarantee that the Distributor will continue
to voluntarily waive such fee beyond October 31, 1999.
5 The Investment Advisor has voluntarily agreed to limit the total annual
operating expenses of the Fund, solely attributable to Investor Shares,
to 2.69% of average daily net assets effective July 1, 1999 until at
least December 31, 2000. However, there is no guarantee that the
Investment Advisor will continue to voluntarily limit the total annual
operating expenses of the Fund attributable to the Investor Shares
beyond December 31, 2000. In the absence of the voluntary fee waivers
of the Investment Advisor and the Distributor and the Investment
Advisor's voluntary expense limitation, estimated Total Annual Fund
Operating Expenses would be 3.93% of estimated net assets.
The following example demonstrates the projected dollar amount of
total cumulative expenses that would be incurred over various periods with
respect to a hypothetical investment in the Fund. These amounts are based
upon payment by the Fund of operating expenses (excluding offering expenses)
at the levels set forth in the table above.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment
assuming a 5% annual return, reinvestment of all dividends and distributions
at net asset value and redemption at the end of each time period:
<TABLE>
<CAPTION>
Investor Shares
<S> <C>
1 Year $73
3 Years $127
</TABLE>
The purpose of the foregoing table is to assist the investor
in understanding the various costs and expenses that an investor in the Fund
will bear directly or indirectly. "Other Expenses" are based on estimated
amounts for the current fiscal year. In the absence of the voluntary fee waivers
of the Investment Advisor and the Distributor and the Investment Advisor's
voluntary expense limitation, the estimated expenses set forth in the table
above would be $85 and $162 for the one year and three year periods,
respectively. Long-term investors in the Fund could pay more in 12b-1 fees than
the economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc. (the "NASD") THIS EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OF THE FUND AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while the
examples assume a 5% annual return, the Fund's performance will vary and may
result in a return greater or less than 5%. For a further description of the
various costs and expenses incurred in the Fund's operation, see "MANAGEMENT."
<PAGE>
THE CAPTION "INVESTMENT OBJECTIVES--GENERAL" AND THE INFORMATION SET FORTH
THEREUNDER ARE REVISED BY DELETING THE SECOND PARAGRAPH OF SUCH SECTION IN ITS
ENTIRETY AND INSERTING IN LIEU THEREOF THE FOLLOWING:
An index is a group of securities whose overall performance
is used as a standard to measure investment performance. The DEM Index is
comprised of stocks of 100 companies from the universe (the "DEM Universe")
of companies that fit the DEM Profile ("DEM Companies"). These companies are
selected to reflect the market capitalization and industry classification
characteristics of the DEM Universe. The DEM Universe is a growing list of
DEM Companies identified by an affiliate of the Investment Advisor that
currently includes approximately 180 companies.
THE CAPTION "MANAGEMENT--THE INVESTMENT ADVISOR" AND THE INFORMATION SET FORTH
THEREUNDER ARE REVISED BY INSERTING AS THE THIRD PARAGRAPH OF SUCH SECTION THE
FOLLOWING:
The Investment Advisor has voluntarily agreed to limit the total annual
operating expenses of the Fund, solely attributable to the Investor Shares, to
2.69% of average daily net assets effective July 1, 1999 until at least December
31, 2000. However, there is no guarantee that the Investment Advisor will
continue to voluntarily limit the total annual operating expenses of the Fund
attributable to the Investor Shares beyond December 31, 2000.
Domestic Emerging Markets-Registered Trademark- and DEM-Registered Trademark-
are registered trademarks and the stylized C-Eagle Logo-TM-, DEM Profile-TM-,
DEM Universe-TM-, DEM Company-TM- DEM Index-TM- and DEM Multi-Manager-TM- are
trademarks of Nathan A. Chapman, Jr.
<PAGE>
[LOGO]
DEM INDEX FUND
A PORTFOLIO OF THE CHAPMAN FUNDS, INC.
INSTITUTIONAL SHARES
Supplement dated July 30, 1999
to the Prospectus dated February 17, 1999
THE INFORMATION SET FORTH UNDER THE CAPTION "FUND EXPENSES" IS REVISED BY
DELETING SUCH INFORMATION IN ITS ENTIRETY AND INSERTING IN LIEU THEREOF THE
FOLLOWING:
FUND EXPENSES
The following table lists the costs and expenses an investor
will incur either directly or indirectly as a stockholder of the Fund based on
an estimate of the Fund's operating expenses.
<TABLE>
<CAPTION>
STOCKHOLDER TRANSACTION EXPENSES INSTITUTIONAL SHARES
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) -0-%
Maximum Deferred Sales Load -0-%
Maximum Sales Load Imposed on Reinvested Dividends and
other Distributions -0-%
Redemption Fee
(as a percentage of amount redeemed) 1 -0-%
ANNUAL EXPENSES (as a percentage of net assets) 2
Management Fees (after fee waiver) 3 0.41%
12b-1 Fees 0.25%
Other Expenses (after Institutional Share expense 1.34%
limitation) 4
Total Fund Operating Expenses (after Institutional 2.00%
Share expense limitation) 4
</TABLE>
- ----------------------
(1) The Fund imposes a $9.00 charge only on redemptions by wire transfer.
(2) See "MANAGEMENT."
<PAGE>
(3) The Investment Advisor is entitled to a fee for investment advisory and
management services at an annual rate of up to .90% of the average
weekly net assets of the Fund attributable to Institutional Shares. The
Investment Advisor has voluntarily limited such fee during the first
fiscal year of the Fund to an aggregate of .41% of average weekly net
assets. However, there is no guarantee that the Investment Advisor will
continue to voluntarily limit the amount of such fee beyond October 31,
1999.
(4) The Investment Advisor has voluntarily agreed to limit the total annual
operating expenses of the Fund, solely attributable to Institutional
Shares, to 2.00% of average daily net assets effective July 1, 1999
until at least December 31, 2000. However, there is no guarantee that
the Investment Advisor will continue to voluntarily limit the total
annual operating expenses of the Fund attributable to the Institutional
Shares beyond December 31, 2000. In the absence of the voluntary fee
waiver of the Investment Advisor and the Investment Advisor's voluntary
expense limitation, estimated Total Annual Fund Operating Expenses
would be 2.94% of estimated net assets.
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in the Fund. These amounts are based upon
payment by the Fund of operating expenses (excluding offering expenses) at
the levels set forth in the table above.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment
assuming a 5% annual return, reinvestment of all dividends and distributions
at net asset value and redemption at the end of each time period:
<TABLE>
<CAPTION>
Institutional Shares
<S> <C>
1 Year $20
3 Years $63
</TABLE>
The purpose of the foregoing table is to assist the investor
in understanding the various costs and expenses that an investor in the Fund
will bear directly or indirectly. "Other Expenses" are based on estimated
amounts for the current fiscal year. In the absence of the voluntary fee waiver
of the Investment Advisor and the Investment Advisor's voluntary expense
limitation, the estimated expenses set forth in the table above would be $30
and $91 for the one year and three year periods, respectively. Long-term
investors in the Fund could pay more in 12b-1 fees than the economic equivalent
of the maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc. (the "NASD") THIS EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF FUTURE EXPENSES OF THE FUND AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN. Moreover, while the examples assume a 5% annual
return, the Fund's performance will vary and may result in a return greater or
less than 5%. For a further description of the various costs and expenses
incurred in the Fund's operation, see "MANAGEMENT."
THE CAPTION "INVESTMENT OBJECTIVES--GENERAL" AND THE INFORMATION SET FORTH
THEREUNDER ARE REVISED BY DELETING THE SECOND PARAGRAPH OF SUCH SECTION IN ITS
ENTIRETY AND INSERTING IN LIEU THEREOF THE FOLLOWING:
An index is a group of securities whose overall performance
is used as a standard to measure investment performance. The DEM Index is
comprised of stocks of 100 companies from the universe (the "DEM Universe")
of companies that fit the DEM Profile ("DEM Companies"). These companies are
selected to reflect the market capitalization and industry classification
characteristics of the DEM Universe. The DEM Universe is a growing list of
DEM Companies identified by an affiliate of the Investment Advisor that
currently includes approximately 180 companies.
<PAGE>
THE CAPTION "MANAGEMENT--THE INVESTMENT ADVISOR" AND THE INFORMATION SET FORTH
THEREUNDER ARE REVISED BY INSERTING AS THE THIRD PARAGRAPH OF SUCH SECTION THE
FOLLOWING:
The Investment Advisor has voluntarily agreed to limit the total annual
operating expenses of the Fund, solely attributable to the Institutional Shares,
to 2.00% of average daily net assets effective July 1, 1999 until at least
December 31, 2000. However, there is no guarantee that the Investment Advisor
will continue to voluntarily limit the total annual operating expenses of the
Fund attributable to the Institutional Shares beyond December 31, 2000.
Domestic Emerging Markets-Registered Trademark- and DEM-Registered Trademark-
are registered trademarks and the stylized C-Eagle Logo-TM-, DEM Profile-TM-,
DEM Universe-TM-, DEM Company-TM-DEM Index-TM- and DEM Multi-Manager-TM- are
trademarks of Nathan A. Chapman, Jr.
<PAGE>
DEM INDEX FUND
A PORTFOLIO OF THE CHAPMAN FUNDS, INC.
INVESTOR SHARES
INSTITUTIONAL SHARES
Supplement dated July 30, 1999
to the Statement of Additional Information dated February 17, 1999
THE INFORMATION SET FORTH UNDER THE CAPTION "MANAGEMENT--THE INVESTMENT ADVISOR"
IS REVISED BY INSERTING AS THE FIFTH, SIXTH AND SEVENTH PARAGRAPHS OF SUCH
SECTION THE FOLLOWING:
The Investment Advisor has voluntarily limited its total fees to the
annual rate of .41% of the value of the Fund's average weekly net assets during
the preceding month during the first fiscal year of the Fund. However, there is
no guarantee that the Investment Advisor will continue to voluntarily limit the
amount of such fee beyond October 31, 1999.
The Investment Advisor has voluntarily agreed to limit the total annual
operating expenses of the Fund, solely attributable to the Institutional Shares,
to 2.00% of average daily net assets effective July 1, 1999 until at least
December 31, 2000. However, there is no guarantee that the Investment Advisor
will continue to voluntarily limit the total annual operating expenses
attributable to the Institutional Shares beyond December 31, 2000.
The Investment Advisor has voluntarily agreed to limit the total annual
operating expenses of the Fund, solely attributable to the Investor Shares, to
2.69% of average daily net assets effective July 1, 1999 until at least December
31, 2000. However, there is no guarantee that the Investment Advisor will
continue to voluntarily limit the total annual operating expenses attributable
to the Investor Shares beyond December 31, 2000.
THE INFORMATION SET FORTH UNDER THE CAPTION "PERFORMANCE INFORMATION" IS REVISED
BY DELETING THE FIRST PARAGRAPH OF SUCH SECTION IN ITS ENTIRETY AND INSERTING IN
LIEU THEREOF THE FOLLOWING:
The performance of the Fund may be compared to the record of the
Standard & Poor's Corporation 500 Stock Index ("S&P 500 Stock Index"), the
Nasdaq Composite Index, the Russell 2000 Index, the Wilshire 5000 Equity Index,
the DEM Index, the DEM Universe of companies and returns quoted by Ibbotson
Associates. The S&P 500 Stock Index is a well known measure of the price
performance of 500 leading larger domestic stocks which represents
approximately 80% of the market capitalization of the United States equity
market. In comparison, the Nasdaq Composite Index is comprised of all stocks on
Nasdaq's National Market. The Nasdaq Composite Index has typically included
smaller, less mature companies representing 10% to 15% of the capitalization of
the entire domestic equity market. Both indices are unmanaged and capitalization
weighted. In general, the securities comprising the Nasdaq Composite Index are
more growth oriented and have a somewhat higher "beta" and P/E ratio than those
in the S&P 500 Stock Index. The Russell 2000 Index is a capitalization weighted
index which measures total return (and
<PAGE>
includes in such calculation dividend income and price appreciation). The
Russell 2000 is generally regarded as a measure of small capitalization
performance. It is a subset of the Russell 3000 Index. The Russell 3000 is
comprised of the 3000 largest U.S. companies. The Russell 2000 is comprised
of the smallest 2000 companies in the Russell 3000 Index. The Wilshire 5000
Index is a broad measure of market performance and represents the total
dollar value of all common stocks in the United States for which daily
pricing information is available. This index is also capitalization weighted
and captures total return. The DEM Universe is a growing list of companies
identified by the Investment Advisor that are controlled by African
Americans, Asian Americans, Hispanic/Latino Americans or women. The DEM Index
was created by the Investment Advisor and is comprised of 100 companies from
the DEM Universe that reflect the market capitalization and industry
classification characteristics of the DEM Universe. The DEM Index is weighted
by market capitalization and is intended as a performance measure of the DEM
Universe. The small company stock returns quoted by Ibbotson Associates are
based upon the smallest quintile of the NYSE, as well as similar
capitalization stocks on the American Stock Exchange and Nasdaq. This data
base is unmanaged and capitalization weighted.
Domestic Emerging Markets-Registered Trademark- and DEM-Registered Trademark-
are registered trademarks and the stylized C-Eagle Logo-TM-, DEM Profile-TM-,
DEM Universe-TM-, DEM Company-TM-DEM Index-TM- and DEM Multi-Manager-TM- are
trademarks of Nathan A. Chapman, Jr.
