<PAGE>
THE ANALYTIC SERIES FUND
(800) 374-2633
PROSPECTUS DATED OCTOBER 20, 1997
A NO-LOAD, OPEN-END FUND WITH NO SALES CHARGE OR REDEMPTION FEE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Highlights..................................... 3
Fund Expenses.................................. 6
Financial Highlights........................... 7
Investment Objectives and Policies............. 10
Investment Risks............................... 13
Who Should Invest.............................. 15
Implementation of Policies..................... 16
Management of the Fund......................... 31
Investment Adviser............................. 31
The Share Price of Each Portfolio.............. 35
<CAPTION>
PAGE
-----
<S> <C>
Dividends, Capital Gains and Taxes............. 36
General Information............................ 38
Yield, Total Return, and Other Calculations.... 39
SHAREHOLDER GUIDE.............................. 41
Opening an Account............................. 41
Purchasing Shares.............................. 41
Redeeming Shares............................... 43
Exchanging Shares.............................. 47
Withdrawal Plan................................ 48
</TABLE>
ABOUT THIS PROSPECTUS
This Prospectus sets forth concisely the information you should know about
the Fund before you invest. It should be retained for future reference. A
Statement of Additional Information containing additional information about the
Fund has been filed with the Securities and Exchange Commission. The Statement
of Additional Information is incorporated by reference into this Prospectus and
a copy may be obtained without charge by telephoning the Fund at (800) 374-2633.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS AND THE RELATED STATEMENT OF ADDITIONAL INFORMATION
IS OCTOBER 20, 1997
<PAGE>
THE ANALYTIC SERIES FUND
(800) 374-2633
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Analytic Series Fund, a Delaware business trust (the
AND POLICIES "Fund"), is a no-load, open-end diversified investment
company or "mutual fund" presently consisting of 3
separate Portfolios, each with a distinct investment
objective. The Portfolios are: the Analytic Short-Term
Government Portfolio ("SHORT-TERM GOVERNMENT
PORTFOLIO"), the Analytic Master Fixed Income Portfolio
("MASTER FIXED INCOME PORTFOLIO"), and the Analytic
Enhanced Equity Portfolio ("ENHANCED EQUITY PORTFOLIO").
The investment objective of the SHORT-TERM GOVERNMENT
PORTFOLIO is to provide a high level of income
consistent with both low fluctuations in market value
and low credit risk. At least 80% of the total assets of
the Portfolio will be invested in U.S. Government
securities and up to 20% may be invested in securities
of foreign issuers.
The investment objective of the MASTER FIXED INCOME
PORTFOLIO is to provide above-average total returns from
a diversified bond portfolio consisting primarily of
domestic government, corporate, and mortgage-related
fixed income securities. Up to 20% of the total assets
of the Portfolio may be invested in securities of
foreign issuers.
The investment objective of the ENHANCED EQUITY
PORTFOLIO is to provide above-average total returns from
a diversified equity portfolio which consists primarily
of domestic common stocks and related investments such
as options and futures. Up to 20% of the total assets of
the Portfolio may be invested in securities of foreign
issuers.
OPENING AN ACCOUNT Please complete and return the Account Registration. If
you need assistance in completing this form, please call
the Fund's sub-transfer agent at (800) 374-2633. There
is no minimum investment for tax deferred retirement
accounts; otherwise, the minimum initial investment is
$5,000 invested in any proportion among the Portfolios.
Shares may be purchased at net asset value per share,
without a sales charge, next determined after receipt of
a purchase order in good form.
</TABLE>
2
<PAGE>
HIGHLIGHTS
<TABLE>
<S> <C>
THREE SEPARATE PORTFOLIOS Investors may choose from any of the three Portfolios of
the Fund. The investment characteristics of each
Portfolio are summarized in the chart below.
PAGE 10
</TABLE>
PORTFOLIO SUMMARY
<TABLE>
<CAPTION>
MAY USE
MAY USE OPTIONS FOREIGN
PORTFOLIO PRIMARY INVESTMENTS AND FUTURES SECURITIES
- --------------------------- ------------------------------------------------------------ --------------- -------------
<S> <C> <C> <C>
Short-Term Government Shorter term U.S. Treasury & U.S. Government agency fixed Yes Yes
income securities, with an average duration of 1 to 3 years
Master Fixed Income Intermediate and longer term U.S. Government and high grade Yes Yes
corporate and mortgage-related fixed income securities
Enhanced Equity Publicly traded common stocks with average capitalization Yes Yes
typical of medium to large companies
</TABLE>
<TABLE>
<S> <C>
RISK CHARACTERISTICS The securities in the Portfolios are subject to various
risks, including interest rate risk, credit risk,
currency risk and equity risk. The following chart
summarizes the Adviser's opinion of the exposure of each
Portfolio to these risks and the expected price
fluctuations due to these and other risks, based on the
historical financial characteristics of the various
securities.
PAGE 13
</TABLE>
RISK SUMMARY
<TABLE>
<CAPTION>
INTEREST RATE
AND CURRENCY EXPECTED PORTFOLIO
PORTFOLIO CREDIT RISK EQUITY RISK RISK PRICE FLUCTUATIONS
- --------------------------- ---------------- -------------------- --------- ---------------------
<S> <C> <C> <C> <C>
Short-Term Government Low None Low Low to Moderate
Master Fixed Income High Low to Moderate Low Moderate to High
Enhanced Equity Low High Low High to Very High
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
INVESTMENT ADVISER Analytic-TSA Global Asset Management, Inc. (the
"Adviser"), 700 South Flower Street, Suite 2400, Los
Angeles, CA 90017, is the investment adviser of the
Fund. The Adviser is a wholly owned subsidiary of United
Asset Management Corporation, a holding company
described under "Management of the Fund" in the
Statement of Additional Information.
PAGE 31
DIVIDEND POLICY The Short-Term Government and Master Fixed Income
Portfolios declare a dividend each business day based on
their respective net investment incomes. These dividends
are paid on the first business day of each month. The
Enhanced Equity Portfolio declares and pays its net
investment income on the last business day of the
calendar quarter. All Portfolios distribute net realized
capital gains, if any, annually.
PAGE 36
TAXES Dividends and capital gains distributions paid by the
Fund's Portfolios are generally subject to federal,
state and local income taxes. However, depending on
provisions of your state's tax law, the portion of a
Portfolio's income derived from "full faith and credit"
U.S. Treasury obligations may be exempt from state and
local taxes. A sale of shares, whether by outright
redemption or exchange, is a taxable event and may
result in a capital gain or loss.
PAGE 36
PURCHASING SHARES Shares may be purchased by wire, mail, or exchange from
another Portfolio in the Fund, at net asset value per
share, without a sales charge, next determined after
receipt of a purchase order in good form. There is no
minimum initial or subsequent purchase of Portfolio
shares by tax deferred retirement plans (including IRA,
SEP-IRA and profit sharing and money purchase plans) or
Uniform Gifts to Minors Act accounts. For other
investors the minimum is $5,000 for an initial purchase,
in any proportion among the Portfolios, and there is no
minimum for subsequent purchases.
PAGE 41
REDEEMING SHARES Shares are redeemed without charge and redemptions may
be made by telephone, mail, or exchange to another
Portfolio in the Fund.
PAGE 43
ADMINISTRATIVE SERVICES UAM Fund Services, Inc., a wholly-owned subsidiary of
United Asset Management Corporation, is responsible for
performing
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
and overseeing all administrative, fund accounting,
dividend disbursing and transfer agent services for the
Fund. UAM Fund Services has subcontracted certain of
these services to Chase Global Funds Services Company,
an affiliate of The Chase Manhattan Bank. Chase Global
Funds Services Company will act as the Fund's
sub-dividend disbursing agent, sub-transfer agent and
sub-shareholder servicing agent.
PAGE 33
Shareholder inquiries should be addressed to the Fund's
sub-shareholder servicing agent at: Analytic Funds, P.O.
Box 2798, Boston, MA 02208; telephone (800) 374-2633.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
FUND EXPENSES The following table illustrates the expenses and fees
that a shareholder of the Fund will incur. However,
transaction fees may be charged if a broker-dealer or
other financial intermediary deals with the Fund on your
behalf (See "Shareholder Guide-- Purchasing Shares").
The "other" expenses set forth below are estimates for
the fiscal year ending December 31, 1997 and are
annualized based on each Portfolio's operations during
the semi-annual period ended June 30, 1997, except that
they have been restated where applicable to reflect the
current expense caps.
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM MASTER ENHANCED
GOVERNMENT FIXED INCOME EQUITY
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------- ----------- ------------ ---------
<S> <C> <C> <C>
Sales Load Imposed on Purchases........................................... None None None
Sales Load Imposed on Reinvested Dividends................................ None None None
Redemption Fees........................................................... None None None
Exchange Fees............................................................. None None None
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHORT-TERM MASTER ENHANCED
GOVERNMENT FIXED INCOME EQUITY
ANNUAL FUND OPERATING EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------- -------------- --------------- -------------
Management Fees (after expense reimbursement)*............................ 0.00% 0.45% 0.00%
12b-1 Fees................................................................ None None None
Other Expenses (after expense reimbursement)*............................. 0.60 0.45 1.00
--- --- ---
Total Fund Operating Expenses (after expense reimbursement)*.............. 0.60 % 0.90 % 1.00 %
</TABLE>
* AFTER REIMBURSEMENT OF EXPENSES. The Adviser has voluntarily agreed to
reimburse expenses of the Fund, including advisory fees (but excluding
interest, taxes, and extraordinary expenses) that exceed 0.60%, 0.90% and
1.00% of average daily net assets for the Short-Term Government, Master Fixed
Income and Enhanced Equity Portfolios, respectively, for the year ending
December 31, 1997. Without such reimbursement, it is estimated based on the
operations of each Portfolio during the semi-annual period ended June 30,
1997, adjusted in the case of the Master Fixed Income Portfolio for a decrease
in assets since June 30, 1997, that annual expenses for each Portfolio for the
year ending December 31, 1997 would be as follows:
<TABLE>
<CAPTION>
SHORT-TERM MASTER ENHANCED
GOVERNMENT FIXED INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- --------------- -------------
<S> <C> <C> <C>
Management Fees........................................................... 0.30% 0.45% 0.60%
Other Expenses............................................................ 4.24% 2.66% 1.07%
--- --- ---
Total Fund Operating Expenses............................................. 4.54% 3.11% 1.67%
</TABLE>
<TABLE>
<S> <C>
EXAMPLE The following example illustrates the expenses you would
pay on a $1,000 investment, assuming (1) a 5% annual
rate of return and (2) redemption at the end of each
period.
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Short-Term Government........................................................ $ 6 $ 19 $ 33 $ 75
Master Fixed Income.......................................................... 9 29 50 111
Enhanced Equity.............................................................. 10 32 55 122
</TABLE>
The purpose of the above information is to help an investor in the Fund to
understand the various fees and expenses an investor will bear directly or
indirectly. THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The financial statements in the tables below for each of the four years in
the period ended December 31, 1996, and the one month ended December 31, 1992,
have been audited by Deloitte & Touche LLP, independent auditors. Such financial
statements and the report of Deloitte & Touche LLP thereon are incorporated by
reference in the Statement of Additional Information. Also presented in the
tables below are unaudited semi-annual financial statements for the six-month
period ended June 30, 1997. Copies of the Fund's 1996 Annual Report to
Shareholders and 1997 Semi-Annual Report to Shareholders may be obtained, at no
charge, by telephoning the Fund at the telephone number appearing on the cover
page of this Prospectus.
SHORT-TERM GOVERNMENT PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
ENDED ENDED
JUNE 30, YEAR ENDED DECEMBER 31, DECEMBER
1997 ---------------------------------- 31,
(UNAUDITED) 1996 1995 1994 1993 1992
----------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.83 $ 9.98 $ 9.55 $ 10.03 $ 10.03 $ 10.00
----------- ------- ------- ------- ------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.27 0.62 0.56 0.48 0.53 0.05
Net realized and unrealized gains
(losses) on investments............. (0.06) (0.10) 0.43 (0.48) 0.00 0.03
----------- ------- ------- ------- ------- -----------
Total from investment operations.... 0.21 0.52 0.99 0.00 0.53 0.08
----------- ------- ------- ------- ------- -----------
LESS DISTRIBUTIONS:
From net investment income............ 0.27 0.66 0.56 0.48 0.53 0.05
Return of capital..................... 0.00 0.01 0.00 0.00 0.00 0.00
----------- ------- ------- ------- ------- -----------
Total distributions................. 0.27 0.67 0.56 0.48 0.53 0.05
----------- ------- ------- ------- ------- -----------
Net asset value, end of period.......... $ 9.77 $ 9.83 $ 9.98 $ 9.55 $ 10.03 $ 10.03
----------- ------- ------- ------- ------- -----------
----------- ------- ------- ------- ------- -----------
TOTAL RETURN............................ 2.20% 5.28% 10.65% 0.00% 5.37% 9.38%
----------- ------- ------- ------- ------- -----------
----------- ------- ------- ------- ------- -----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000)........ $ 1,049 $ 1,008 $27,880 $24,481 $26,097 $ 7,619
Ratio of expenses to average net
assets(1).............................. 4.54%+ 0.76% 0.82% 0.85% 0.75% 0.77%+
Ratio of net investment income to
average net assets..................... 5.56%+ 5.99% 5.76% 5.37% 4.91% 5.45%+
Portfolio turnover rate................. 0.00% 31.48% 10.15% 3.21% 85.69% 0.00%
</TABLE>
(1) Gross of Adviser reimbursed expenses. With expense reduction, such ratios
would have been 0.60%+, 0.56%, 0.50%, 0.45%, 0.45%, and 0.45%+ for the six
months ended June 30, 1997, for each of the years in the periods ended
December 31, 1996, and for the month ended December 31, 1992, respectively.
+ Annualized
7
<PAGE>
MASTER FIXED INCOME PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
ENDED ENDED
JUNE 30, YEAR ENDED DECEMBER 31, DECEMBER
1997 ----------------------------------- 31,
(UNAUDITED) 1996 1995 1994 1993 1992
----------- ------- ------- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.27 $ 10.41 $ 9.50 $10.26 $ 10.06 $10.00
----------- ------- ------- ------ ------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.28 0.58 0.61 0.64 0.67 0.04
Net realized and unrealized gains
(losses) on investment and option
transactions........................ 0.04 (0.01) 0.91 (0.75) 0.41 0.06
----------- ------- ------- ------ ------- -----------
Total from investment operations.... 0.32 0.57 1.52 (0.11) 1.08 0.10
----------- ------- ------- ------ ------- -----------
LESS DISTRIBUTIONS:
From net investment income............ 0.28 0.58 0.61 0.64 0.67 0.04
From net realized gains............... 0.00 0.12 0.00 0.01 0.21 0.00
In excess of net realized gains....... 0.00 0.01 0.00 0.00 0.00 0.00
----------- ------- ------- ------ ------- -----------
Total distributions................... 0.28 0.71 0.61 0.65 0.88 0.04
----------- ------- ------- ------ ------- -----------
Net asset value, end of period.......... $ 10.31 $ 10.27 $ 10.41 $ 9.50 $ 10.26 $10.06
----------- ------- ------- ------ ------- -----------
----------- ------- ------- ------ ------- -----------
TOTAL RETURN............................ 3.19% 5.69% 16.43% (1.04)% 10.94% 13.09%
----------- ------- ------- ------ ------- -----------
----------- ------- ------- ------ ------- -----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000)........ $31,038 $28,926 $24,868 $6,155 $ 8,066 $9,219
Ratio of expenses to average net
assets(1).............................. 0.90%+ 0.97% 1.03% 1.17% 1.04% 1.05%+
Ratio of net investment income to
average net assets..................... 5.61%+ 5.66% 5.99% 7.16% 6.39% 5.63%+
Portfolio turnover rate................. 10.56% 21.95% 31.82% 44.30% 105.39% 0.00%
Average commission rate(2).............. $0.0220 $0.0418 $0.0277
</TABLE>
(1) Gross of Adviser reimbursed expenses and expenses indirectly paid through
broker arrangements. With both expense reductions, such ratios would have
been 0.90%+, 0.72%, 0.69%, 0.60%, 0.60% and 0.60%+ for the six months ended
June 30, 1997, for each of the years in the periods ended December 31, 1996,
and for the month ended December 31, 1992, respectively.
(2) The formula for calculating the average commission rate is total commission
paid divided by the total shares purchased and sold. Each option contract is
100 shares.
+ Annualized
8
<PAGE>
ENHANCED EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS ONE MONTH
ENDED ENDED
JUNE 30, YEAR ENDED DECEMBER 31, DECEMBER
1997 ------------------------------------ 31,
(UNAUDITED) 1996 1995 1994 1993 1992
----------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.09 $ 12.94 $ 9.83 $ 10.15 $ 10.02 $ 10.00
----------- ------- ------- ------- ------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................. 0.07 0.21 0.23 0.28 0.40 0.01
Net realized and unrealized gains
(losses) on investments and
options............................. 1.94 2.74 3.22 (0.32) 0.62 0.02
----------- ------- ------- ------- ------- -----------
Total from investment
operations...................... 2.01 2.95 3.45 (0.04) 1.02 0.03
----------- ------- ------- ------- ------- -----------
LESS DISTRIBUTIONS:
From net investment income............ 0.06 0.21 0.23 0.28 0.40 0.01
From net realized gains............... 0.00 3.58 0.11 0.00 0.37 0.00
In excess of net realized gains....... 0.00 0.01 0.00 0.00 0.00 0.00
Return of capital..................... 0.00 0.00 0.00 0.00 0.12 0.00
----------- ------- ------- ------- ------- -----------
Total distributions................... 0.06 3.80 0.34 0.28 0.89 0.01
----------- ------- ------- ------- ------- -----------
Net asset value, end of period.......... $ 14.04 $ 12.09 $ 12.94 $ 9.83 $ 10.15 $ 10.02
----------- ------- ------- ------- ------- -----------
----------- ------- ------- ------- ------- -----------
TOTAL RETURN............................ 16.65% 22.95% 35.36% (0.37)% 10.07% 4.08%
----------- ------- ------- ------- ------- -----------
----------- ------- ------- ------- ------- -----------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ($000)........ $ 4,838 $ 3,519 $ 2,318 $ 1,511 $ 903 $12,823
Ratio of expenses to average net
assets(1).............................. 1.67%+ 1.51% 1.33% 1.35% 1.35% 1.07%+
Ratio of net investment income to
average net assets..................... 1.31%+ 1.53% 2.02% 3.24% 2.16% 1.66%+
Portfolio turnover rate................. 113.80% 179.47% 10.15% 24.75% 76.34% 25.20%
Average commission rate(2).............. $0.0272 $0.0658 $0.0431
</TABLE>
(1) Gross of Adviser reimbursed expenses and expenses paid indirectly through
broker arrangements.With both expense reductions, such ratios would have
been 1.00%+, 0.91%, 0.50%, 0.24%, 0.57%, and 0.70%+ for the six months ended
June 30, 1997, for each of the years in the periods ended December 31, 1996,
and for the month ended December 31, 1992, respectively.
(2) The formula for calculating the average commission rate is total commission
paid divided by the total shares purchased and sold. Each option contract is
100 shares.
+ Annualized
9
<PAGE>
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The investment objectives and policies of each Portfolio
AND POLICIES are listed below. The objectives are fundamental and may
not be changed without shareholder approval. However,
the investment policies, practices, and strategies
employed in pursuit of each Portfolio's objective are
not fundamental and may be changed without shareholder
approval. Because there are risks inherent in all
securities investments, there is no assurance that these
objectives will be achieved.
SHORT-TERM GOVERNMENT PORTFOLIO INVESTMENT OBJECTIVE:
The investment objective of the Short-Term Government
Portfolio is to provide a high level of income
consistent with both low fluctuations in market value
and low credit risk.
INVESTMENT POLICIES:
The Short-Term Government Portfolio seeks to achieve its
investment objective by investing primarily in U.S.
Treasury or U.S. Government agency securities to
minimize credit risk. To minimize fluctuations in market
value, the Portfolio is expected, under normal market
conditions, to maintain a dollar weighted average
maturity and weighted average duration between 1 and 3
years. Duration is the weighted average time to receipt
of both principal and interest payments of a debt
security and also a measure of the sensitivity of fixed
income related investments to interest rate changes.
Under normal market conditions, the Short-Term
Government Portfolio will invest at least 80% of its
total assets in U.S. Government securities. Subject to
certain additional limitations, the remainder of the
Portfolio's assets may be invested in other high grade
debt securities, securities of foreign governments and
supranational organizations considered to be of high
grade investment quality, currency-rate and interest
rate-related options and futures, and cash and cash
equivalents. The high grade investment standard for the
Fund includes only those securities with (i) over 1 year
original maturity and rated at the time of purchase a
minimum of A by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("Standard
& Poor's"), (ii) under 1 year original maturity and
rated at the time of purchase a minimum of Prime 1 by
Moody's or A-1 by Standard & Poor's, or (iii) unrated
securities determined by the Adviser at the time of
purchase to be equivalent to these ratings. See the
discussion of ratings under "Implementation of Policies"
below.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
The Portfolio may also invest in repurchase agreements
collateralized by U.S. Government securities. For
temporary defensive purposes, the Portfolio may reduce
the average duration to less than 1 year. See
"Implementation of Policies" for a description of these
investment practices of the Portfolio and the additional
limitations that may apply to some of the investments
described above.
MASTER FIXED INCOME PORTFOLIO INVESTMENT OBJECTIVE:
The investment objective of the Master Fixed Income
Portfolio is to provide above-average total returns from
a diversified bond portfolio consisting primarily of
U.S. Government, corporate, and mortgage-related fixed
income securities. For this purpose, "above average"
total returns means returns above the average long-term
total returns of other mutual funds with similar
investment policies and risk characteristics.
INVESTMENT POLICIES:
The Master Fixed Income Portfolio seeks to achieve its
objective by investing primarily in U.S. Treasury, U.S.
Government, and U.S. dollar denominated high grade
securities, including mortgage-related securities. The
weighted average duration of the Portfolio's fixed
income investments is generally expected, under normal
market conditions, to range between 3 and 10 years.
Under normal market conditions, the Master Fixed Income
Portfolio will invest at least 65% of its total assets
in U.S. dollar denominated, high grade, fixed income
debt securities. The high grade investment standard for
the Fund includes only those securities with (i) over 1
year original maturity and rated at the time of purchase
a minimum of A by Moody's or Standard & Poor's, (ii)
under 1 year original maturity and rated at the time of
purchase a minimum of Prime 1 by Moody's or A-1 by
Standard & Poor's, or (iii) unrated securities
determined by the Adviser at the time of purchase to be
equivalent to these ratings. See the discussion of
ratings under "Implementation of Policies" below.
Subject to certain additional limitations, under normal
market conditions, the remainder of the Portfolio's
assets may be invested in floating rate and other types
of debt securities, high grade non-U.S. dollar
denominated debt securities, below high grade fixed
income securities, convertible securities, "synthetic
convertible" positions, covered call and cash secured
put investments, preferred stock, and the shares of
other investment
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
companies which invest primarily in high grade debt
securities. The Portfolio may also invest in interest
and currency rate-related derivative securities. For
temporary defensive purposes, the Portfolio may retain
all or part of its assets in high grade, U.S. dollar
denominated debt securities or cash and cash
equivalents. See "Implementation of Policies" for a
description of these investment practices of the
Portfolio and the additional limitations that may apply
to some of the investments described above.
ENHANCED EQUITY PORTFOLIO INVESTMENT OBJECTIVE:
The investment objective of the Enhanced Equity
Portfolio is to provide above-average total returns from
a diversified equity portfolio which consists primarily
of common stocks and related investments such as options
and futures. For this purpose, "above average" total
returns means returns above the average long-term total
returns of other mutual funds with similar investment
policies and risk characteristics.
INVESTMENT POLICIES:
The Enhanced Equity Portfolio seeks to achieve its
objective by investing primarily in the publicly traded
common stocks of U.S. domiciled corporations and options
and futures that relate to such stocks. While the
Portfolio may invest in stocks of any market
capitalization, it is anticipated that the average
capitalization of the Portfolio's stocks will be typical
of medium to large companies (typically $15 billion or
higher). A company's market capitalization is the total
stock market value of its outstanding shares.
Under normal market conditions, the Enhanced Equity
Portfolio will invest at least 65% of its total assets
in common stocks of U.S. domiciled corporations and
equity-type investments that relate to U.S. domiciled
corporations. Equity-type investments include preferred
stock, warrants, and convertible securities. See
"Implementation of Policies" for a description of
certain additional limitations on the percentage of the
Portfolio that may be invested in some of the
equity-type investments.
Subject to certain additional limitations, the remainder
of the Portfolio's assets may be invested in foreign
equity and equity-type securities, equity related
options and futures contracts, debt securities of
investment grade or below, the shares of other
investment companies, and cash or cash equivalents
awaiting investment.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
For temporary defensive purposes, the Portfolio may
retain all or part of its assets in high grade, U.S.
dollar denominated debt securities or cash and cash
equivalents. See "Implementation of Policies" for a
description of these and other investment practices of
the Portfolio and the additional limitations that may
apply to some of the investments described above.
To manage the Portfolio, the Adviser is currently using
a proprietary model for investment in domestic common
stocks, based on work pioneered by Professor Robert A.
Haugen. As a result, the Adviser currently intends to
invest primarily in such stocks. See the Statement of
Additional Information for further information regarding
the application of this model.
INVESTMENT RISKS All of the Portfolios are expected to have fluctuations
in their net asset values. However, the Short-Term
Government Portfolio is expected to have the lowest
volatility of the three Portfolios and the Enhanced
Equity Portfolio is expected to have the highest.
CERTAIN INVESTMENT RISKS These fluctuations in value are associated with various
risks to which the securities in the Portfolios are
subject. These risks include, but are not limited to,
interest rate risk, credit risk, currency risk, and
equity risk. These risks are described below. In
addition, the trading practices of the Portfolios (such
as their use of mortgage-related securities, foreign
securities and options and futures strategies) will
expose them to additional risks, discussed below under
"Implementation of Policies" and in the Statement of
Additional Information.
Each Portfolio that holds fixed income securities is
subject to varying degrees of interest rate risk.
Interest rate risk is the potential for a decline in
bond prices due to rising interest rates. In general,
bond prices vary inversely with interest rates. When
interest rates rise, bond prices generally fall.
Conversely, when interest rates fall, bond prices
generally rise. The change in price depends on several
factors, including the bond's maturity date. In general,
bonds with longer maturities are more sensitive to
interest rates than bonds with shorter maturities.
Each Portfolio that holds fixed income securities is
also subject to varying degrees of credit risk. Credit
risk is the possibility that a bond issuer will fail to
make timely payments of interest or principal. The
credit risk to which a Portfolio is subject depends on
the quality of its investments. Reflecting their higher
risks, lower-quality bonds generally offer higher yields
than higher-quality bonds.
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Each Portfolio that holds foreign securities is subject
to currency risk. Currency risk is the potential for
changes in value because of changes in the exchange rate
between the currency in which principal and interest on
the security are payable and the U.S. dollar. Currency
fluctuations will affect the value of the Portfolios'
shares irrespective of the performance of its underlying
investments.
A Portfolio that holds common stocks and equity-type
investments is subject to equity risk. Equity risk is
the potential for price declines. The magnitude of this
risk associated with any particular investment can vary
widely depending on the business and financial condition
of the issuer, market conditions in general, the type of
investment, and the extent to which the position may be
hedged.
SHORT-TERM GOVERNMENT PORTFOLIO The Short-Term Government Portfolio should be subject to
relatively low interest rate and credit risk, but should
have no equity risk. Because of the short-term average
duration of this Portfolio, it is expected to exhibit
low to moderate price fluctuations as interest rates
change. The Portfolio's average duration and maturity
should also exhibit low to moderate fluctuations. With
respect to the Portfolio's primary investments, credit
risk should be negligible for its U.S. Treasury
securities, and only slightly higher for its U.S.
Government agency obligations (some of which are not
explicitly guaranteed by the U.S. Government). Risks
associated with the Portfolio's other investments, in
securities of foreign governments, mortgage-related
securities, options and futures contracts, and
repurchase agreements, are discussed under
"Implementation of Policies" below.
MASTER FIXED INCOME PORTFOLIO The Master Fixed Income Portfolio will have a higher
degree of both interest rate risk and credit risk than
the Short-Term Government Portfolio. With respect to its
primary investments, the Portfolio is expected to
exhibit moderate to high fluctuations as interest rates
change, because it will generally have significant
holdings of both intermediate-term and longer-term
bonds. The Portfolio will also have various credit risks
as a result of holding obligations of high grade
securities of non-governmental issuers. It will also
have low to moderate equity risk as a result of its
investment in convertible and synthetic convertible
security positions and covered call and cash secured put
investments. Risks associated with the Portfolio's other
investments, including convertible and synthetic
convertible positions, covered call and
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
cash secured put investments, non-investment grade fixed
income securities, foreign securities and interest and
currency-related derivative securities, are discussed
under "Implementation of Policies" below. Reflecting
these increased risks, the Portfolio will generally
offer higher yields than the Short-Term Government
Portfolio.
ENHANCED EQUITY PORTFOLIO The Enhanced Equity Portfolio is expected to be subject
primarily to equity risk, and to exhibit high to very
high price fluctuations, as is characteristic of common
stocks and equity funds in general. The price
fluctuations of this Portfolio can generally be expected
to be greater than either of the other Portfolios. The
Portfolio's use of options, futures contracts, foreign
and non-investment grade debt securities will also
expose it to certain additional risks, discussed under
"Implementation of Policies" below.
WHO SHOULD INVEST Because of potential fluctuations in the share price of
all of the Portfolios in the Fund, any of the Portfolios
may be inappropriate for short-term investors who
require maximum stability of principal. For example,
money market funds attempt to maintain a stable net
asset value and will provide more stability of principal
and less risk than the Portfolios. You should base your
selection of a Portfolio (or Portfolios) on your own
objectives, risk preferences, and time horizon. Both the
SHORT-TERM GOVERNMENT PORTFOLIO and the MASTER FIXED
INCOME PORTFOLIO are suitable for investors with common
stock holdings who are seeking a complementary fixed
income investment to create a more diversified and
balanced investment mix. The ENHANCED EQUITY PORTFOLIO
is suitable for long-term investors seeking the
generally higher average total returns that diversified
stock portfolios have provided historically, and who can
tolerate substantial price fluctuations and possible
significant loss in value of their investment.
The SHORT-TERM GOVERNMENT PORTFOLIO is designed for
investors who are seeking yields that are more durable
and usually higher than those available from money
market funds, and who can tolerate modest fluctuations
in the value of their investment.
The MASTER FIXED INCOME PORTFOLIO is designed for
investors seeking total returns from a broadly
diversified bond market investment with high grade
credit quality, and who can tolerate relatively larger
fluctuations in price. The yields from this Portfolio
are generally expected to be higher and the income
steadier than from a shorter maturity fund. However,
these
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
higher yields and steadier income levels come with
greater fluctuations in total return. BECAUSE OF THESE
RISKS, THE MASTER FIXED INCOME PORTFOLIO IS INTENDED TO
BE A LONG TERM INVESTMENT VEHICLE AND IS NOT DESIGNED TO
PROVIDE INVESTORS WITH A MEANS OF SPECULATING ON
SHORT-TERM INTEREST RATE MOVEMENTS.
The ENHANCED EQUITY PORTFOLIO is designed for investors
seeking the higher AVERAGE total returns that
diversified equity portfolios have provided over LONG
TERM time horizons. The share price of the Portfolio is
expected to be volatile, and investors should be able to
tolerate sudden, sometimes substantial fluctuations in
the value of their investments. Because of the risks
inherent in equity investing and the general wisdom of
diversification, investors should carefully consider
what portion of their investment assets should be
prudently allocated to equities. BECAUSE OF THESE RISKS,
THE ENHANCED EQUITY PORTFOLIO IS INTENDED TO BE A LONG
TERM INVESTMENT VEHICLE AND IS NOT DESIGNED TO PROVIDE
INVESTORS WITH A MEANS OF SPECULATING ON SHORT-TERM
STOCK MARKET MOVEMENTS.
IMPLEMENTATION OF POLICIES In addition to the investment policies described above
(and subject to certain restrictions described herein),
the Portfolios may invest in some or all of the
following securities and employ some or all of the
following investment techniques, some of which may
present special risks as described below. A more
complete discussion of these securities and investment
techniques and their associated risks is contained in
the Fund's Statement of Additional Information.
SHORT-TERM INVESTMENTS Each Portfolio may invest in short-term investments in
connection with its options and futures strategies
(discussed below) and during periods when, in the
opinion of the Adviser, attractive equity or longer
maturity fixed income investments are temporarily
unavailable or other circumstances or market conditions
warrant such investments. Under normal market
conditions, and excluding such short-term investments
that are made in connection with options and futures
contracts, no more than 20% of the MASTER FIXED INCOME
PORTFOLIO'S and 20% of the ENHANCED EQUITY PORTFOLIO'S
total assets, will be retained in cash and cash
equivalents. As a result of the collateral requirements
associated with options and futures contracts, the
percentage of each such Portfolio's total assets
invested in cash and cash equivalents may be as high as
35%. Such investments may include U.S. Treasury Bills
and other U.S. Government and Government agency
obligations with remaining maturities less than one
year; certificates of deposit; banker's acceptances;
commercial paper
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
rated at the time of purchase A-1 by Standard & Poor's
or P-1 by Moody's; shares of money market mutual funds;
and corporate, foreign and U.S. Government, and
supranational organization debt obligations with
remaining maturities less than one year and with debt
ratings by Standard & Poor's, Moody's or other
recognized rating agencies that are determined by the
Adviser at the time of purchase to be equivalent to a
cash equivalent rating of A-1/P-1. Such investments may
include securities which offer a variable or floating
rate of interest. In addition, and subject to a 5%
limitation, the MASTER FIXED INCOME PORTFOLIO and the
ENHANCED EQUITY PORTFOLIO may also invest in short-term
debt securities rated at the time of purchase A-2/P-2 or
equivalent.
GOVERNMENT SECURITIES Each Portfolio may purchase U.S. Government Securities.
U.S. Government Securities include (1) U.S. Treasury
bills (maturity of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury
bonds (generally maturities of greater than ten years);
and (2) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities which are
supported by the full faith and credit of the U.S.
Treasury (such as Government National Mortgage
Association ("GNMA") Certificates), the right of the
issuer to borrow an amount limited to a specific line of
credit from the U.S. Treasury, discretionary authority
of the U.S. Government to purchase certain obligations
of the agency or instrumentality, or the credit of the
instrumentality. Agencies and instrumentalities include:
Federal Land Banks, Farmers Home Administration, Federal
Farm Credit Banks, Federal Home Loan Banks, Federal
National Mortgage Association ("FNMA"), GNMA, Federal
Home Loan Mortgage Corporation ("FHLMC"), Student Loan
Marketing Association, Financing Corporation, Tennessee
Valley Authority, Resolution Funding Corporation, Farm
Credit Financial Assistance Corporation, Private Export
Funding Corporation, and others.
FLOATING RATE AND OTHER Each Portfolio may invest in securities which offer a
DEBT SECURITIES variable or floating rate of interest. Variable rate
securities provide for automatic establishment of a new
interest rate at fixed intervals (e.g., daily, monthly
or semi-annually). Floating rate securities provide for
automatic adjustment of the interest rate whenever some
specified interest rate index changes. The interest rate
on variable or floating-rate securities is ordinarily
determined by reference to or is a percentage of a
bank's prime rate, the 90-day U.S. Treasury bill rate,
or some other objective measure. Such obligations are
often secured by letters of credit or other credit
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
support arrangements provided by banks. Such obligations
frequently are not rated by credit rating agencies and,
if not so rated, the Fund may invest in them only if the
Adviser determines that, at the time of the investment,
the obligations are of comparable quality to the other
obligations in which a particular Portfolio may invest.
The Adviser will consider on an ongoing basis the
creditworthiness of the issuers of such instruments in
the Fund's Portfolios.
Each Portfolio may also from time to time invest in
zero-coupon, step-coupon and pay-in-kind securities.
These securities are debt securities that do not make
regular interest payments. Zero-coupon and step-coupon
securities are sold at a deep discount to their face
value. Pay-in-kind securities pay interest through the
issuance of additional securities. A Portfolio will not
purchase any security in one of these categories if, as
a result of such purchase, more than 5% of its net
assets would be invested in such category of securities.
REPURCHASE AGREEMENTS Each Portfolio may invest in repurchase agreements for
the purpose of managing its short-term cash. In a
repurchase agreement, the seller (a U.S. commercial bank
or recognized U.S. securities dealer) sells securities
to the Portfolio and agrees to repurchase the securities
at the Portfolio's cost plus interest within a specified
period (normally one to seven days). In these
transactions, which are the economic equivalents of
loans by the Portfolio, the securities purchased by the
Portfolio will at all times have a total value equal to
or in excess of the value of the repurchase obligation.
While repurchase agreements involve certain risks not
associated with direct investments in U.S. Government
securities, the Portfolio will follow procedures
designed to minimize such risks. These procedures
include effecting repurchase transactions only with
large, well-capitalized banks and certain reputable
broker-dealers. In addition, the Portfolio's repurchase
agreements will provide that the value of the collateral
underlying the repurchase agreement will always be at
least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement. In
the event of a default or bankruptcy by a seller, the
Portfolio will seek to liquidate such collateral.
However, to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds
from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the
Portfolio could suffer a loss.
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
MORTGAGE-RELATED SECURITIES Each Portfolio may invest in mortgage-related
securities. Mortgage-related securities are interests in
pools of mortgage loans made to U.S. residential home
buyers, including mortgage loans made by savings and
loan institutions, mortgage bankers, commercial banks,
and others. Mortgage-related securities not issued or
guaranteed by U.S. Government agencies or
instrumentalities are not considered U.S. Government
securities for purposes of the 80% test for such
securities in the SHORT-TERM GOVERNMENT PORTFOLIO. Pools
of mortgage loans are assembled as securities for sale
to investors by various governmental, government-related
and private organizations. The interest rates earned on
such securities may be fixed, in the case of pools of
fixed-rate mortgages, or variable, in the case of pools
of adjustable-rate mortgages. Each Portfolio may also
invest in debt securities which are secured with
collateral consisting of U.S. mortgage-related
securities, such as collateralized mortgage obligations,
and in other types of mortgage-related securities,
limited in the aggregate to 5% of each Portfolio's net
assets.
An example of a mortgage-related security is a GNMA
mortgage-backed certificate. Although the mortgage loans
in the pool underlying the certificate will have
maturities of up to 30 years, the actual average life of
a GNMA certificate will be substantially less because
the mortgages may be prepaid prior to maturity.
Prepayment rates vary widely and may be affected by
changes in mortgage interest rates. In periods of
falling interest rates, the rate of prepayment on higher
interest rate mortgages increases, thereby shortening
the average life of the GNMA certificate. Conversely,
when interest rates are rising, the rate of prepayment
decreases, thereby lengthening the actual average life
of the certificate. Reinvestment of prepayments may
occur at higher or lower rates than the original yield
on the certificates. Due to the possibility of
prepayment and the need to reinvest prepayments of
principal at current rates, GNMA certificates can be
less effective then typical non-callable bonds of
similar maturities at "locking in" higher yields during
periods of declining rates, although they may have
comparable risks of decline in value during periods of
rising interest rates. See "Investment Objectives and
Policies" in the Statement of Additional Information.
FOREIGN SECURITIES Each Portfolio may invest its assets directly in the
securities of foreign issuers and supranational
organizations ("foreign
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
securities"), or options and futures related to foreign
securities, subject to the following additional
limitations. Foreign securities may be denominated in
U.S. dollars or in a foreign currency.
The SHORT-TERM GOVERNMENT PORTFOLIO will limit its
foreign securities to (i) 20% of Portfolio total assets,
and (ii) high grade debt obligations issued or
guaranteed by foreign governments, agencies,
instrumentalities, or their political subdivisions, or
supranational agencies, and judged by the Adviser to
have a credit risk at the time of purchase comparable to
a domestic A or better credit rating.
The MASTER FIXED INCOME PORTFOLIO and the ENHANCED
EQUITY PORTFOLIO will limit their non-U.S. dollar
denominated foreign security investments to 20% of
Portfolio total assets, but have no percentage
limitation on the amount invested in foreign securities
which are U.S. dollar denominated, including investments
in foreign securities in domestic markets through
depository receipts. Foreign debt securities that these
two Portfolios purchase will generally be high grade as
the MASTER FIXED INCOME PORTFOLIO and the ENHANCED
EQUITY PORTFOLIO have adopted a 5% limitation on
non-investment grade securities (See "Non-Investment
Grade Securities").
Foreign debt securities that these two portfolios
purchase will generally be high grade as the MASTER
FIXED INCOME PORTFOLIO and the ENHANCED EQUITY PORTFOLIO
have adopted a 5% limitation on below high grade fixed
income securities and a 5% limitation on below high
grade convertible securities (See "Below High Grade
Securities"). Foreign investments involve risks which
are in addition to the risks inherent in domestic
investments. In many countries, there is less publicly
available information about issuers, including
governments, than is available in the reports and
ratings published about issuers in the United States. In
addition, foreign companies are not subject to uniform
accounting, auditing, and financial reporting standards.
The value of foreign investments may rise or fall
because of changes in currency exchange rates, and a
Portfolio may incur certain costs in converting
securities denominated in foreign currencies to U.S.
dollars. Dividends and interest on foreign securities
may be subject to foreign withholding taxes, which would
reduce a Portfolio's income without providing a tax
credit for Portfolio shareholders. Obtaining judgments,
when necessary, in foreign countries may be more
difficult and more expensive than in the United States.
Although each Portfolio intends to invest in securities
of foreign governments or issuers located in developed
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
nations which the Adviser considers as having stable and
friendly governments, there is the possibility of
expropriation, confiscatory taxation, nationalization,
currency blockage, or political or social instability
which could affect investments in those nations. These
factors are considered when making foreign security
investments and the Adviser would make such investments
when they are expected to provide higher income or
higher total returns to compensate for such increased
risks beyond those of domestic investments.
OPTIONS AND FUTURES STRATEGIES Each Portfolio may utilize various call option, put
option, and financial futures strategies in pursuit of
its objective. Option contracts, futures contracts, and
various other financial contracts are also known as
DERIVATIVE SECURITIES, because their values depend on
the values of a more basic UNDERLYING SECURITY (or
perhaps multiple underlying securities), which may be a
common stock, a fixed income or other debt security, a
foreign currency exchange rate, a stock index, or some
other financial instrument or index. The SHORT-TERM
GOVERNMENT PORTFOLIO will limit its use of derivative
securities to those which are primarily interest rate or
currency exchange rate related.
These techniques will be used to hedge against changes
in securities prices, interest rates, or foreign
currency exchange rates on securities held or intended
to be acquired by the Fund, to reduce the volatility of
the currency exposure associated with foreign
securities, or as an efficient means of adjusting
exposure to stock or bond markets, and not for
speculation.
A call option on securities gives the purchaser of the
option the right (but not the obligation) to buy from
the writer of the option the underlying securities at
the exercise price during the option period. Similarly,
a put option on securities gives the purchaser of the
option the right (but not the obligation) to sell to the
writer of the option the underlying securities at the
exercise price duringa the option period.
A financial futures contract is a commitment by both the
buyer and the seller of the contract to trade the
underlying financial instrument at a price and time
agreed upon when the contract is executed. The financial
instrument may be a stock index, bond index, interest
rate, foreign currency exchange rate, or other similar
instrument. The contract may include an option held by
the seller with regard to the specific underlying
instrument to be delivered from a class of instruments
and the specific day of
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
delivery within a delivery month. Options on futures
contracts are similar to options on securities, with the
futures contract playing the role of the underlying
security.
Options on indexes and currencies, and futures on
indexes, are similar to options and futures on
securities, with the underlying index or currency
playing the role of the underlying security, and with
the difference that at the end of the option or future
period there is generally a cash settlement between
buyers and sellers instead of delivery of the underlying
security.
Options may be traded on an exchange (EXCHANGE-TRADED
OPTIONS) or may be customized agreements between the
Portfolio and a counter-party, often a brokerage firm,
bank, or other financial institution. These customized
agreements are also known as "over-the-counter" or OTC
OPTIONS. Futures contracts are normally traded as
standardized contracts on exchanges. When firm
commitment type agreements similar to futures are traded
over-the-counter they are usually known as FORWARD
CONTRACTS. Exchange-traded options and futures have the
additional financial backing of an intermediary known as
a clearing corporation, whereas OTC options and forwards
have no such intermediary and are subject to the credit
risk that the counter-party will not fulfill its
obligations under the contract. While each Portfolio, to
the extent that it utilizes derivative securities,
intends to primarily utilize exchange-traded options and
futures, it may also utilize OTC options, currency
forward contracts, and other OTC derivative securities.
No Portfolio will invest, at the time of purchase, more
than 5% of its net assets in the purchase of OTC options
or invest more than 5% of its net assets in the purchase
of forward contracts.
Although options on securities and financial futures by
their terms call for actual delivery and acceptance of
securities, in many cases the contracts are closed out
before the expiration date by selling contracts that are
owned or by buying contracts that have been sold or
written. Like any security transaction, this may produce
a realized gain or loss to the Portfolio. Open positions
are valued whenever a Portfolio's assets are valued and
the Portfolio will have an unrealized gain or loss
depending on the difference between the current value of
the position and the opening value when the position was
entered.
WRITING COVERED PUT AND CALL OPTIONS ON SECURITIES OR
INDEXES
The Portfolios will not write UNCOVERED options or
utilize written options to create leverage, but instead
will write only COVERED CALLS and COVERED PUTS.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
Writing a covered call option on securities or indexes
means that the Portfolio will own at the time of selling
the option (1) the underlying security (or securities
convertible into the underlying security without
additional consideration), or (2) a call option on the
same security or index with the same or lesser exercise
price, or (3) a call option on the same security or
index with a greater exercise price, with the difference
between the exercise prices maintained as a segregated
account containing cash, U.S. Government securities or
other liquid high-grade debt securities, or (4) liquid
high-grade segregated debt securities equal to the
fluctuating market value of the optioned securities
which is marked-to-the-market daily, or (5) in the case
of an index, a portfolio of securities which correlates
with the index.
Writing a covered put option on securities or indexes
means that the Portfolio will, at the time of selling
the option (1) enter a short position in the underlying
security or index portfolio, or (2) purchase a put
option on the same security or index with the same or
greater exercise price , or (3) purchase a put option on
the same security or index with a lesser exercise price,
with the difference between the exercise prices
maintained as liquid high-grade segregated debt
securities, or (4) maintain the entire exercise price as
liquid high-grade segregated debt securities. No
Portfolio will write put options if as a result more
than 25% of the Portfolio's assets would be represented
by debt securities segregated for such put options.
The MASTER FIXED INCOME PORTFOLIO will only write an
"in-the-money" covered call option on common stock or an
"out-of-the-money" covered put option on common stock or
stock indexes. An in-the-money covered call option is an
investment in which the Portfolio purchases common stock
and sells a call option with an exercise price that is
below the market price of the stock at the time of the
option sale. An out-of-the-money covered put option is
an investment in which the Portfolio sells a put option
on a common stock or stock index with an exercise price
that is below the market price of the stock or index at
the time of the option sale and maintains the exercise
price as high-grade segregated debt securities.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES OR INDEXES
Each Portfolio may purchase put and call options on
securities or indexes in pursuit of its objective. The
Portfolio may, at the same time, have a long or COVERED
short position in the underlying security or index, and
may have written covered options on the
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
same security or index. Hence, the Portfolio's entire
position in a particular security may be complex,
consisting of a number of different option positions, a
possible position in the underlying security, and a
possible segregated debt securities holding.
CONVERTIBLE SECURITIES, SYNTHETIC CONVERTIBLE
INVESTMENTS, CERTAIN COVERED CALL AND CASH SECURED PUT
INVESTMENTS, AND WARRANTS
The MASTER FIXED INCOME PORTFOLIO and the ENHANCED
EQUITY PORTFOLIO may invest in securities which may be
exchanged for, converted into, or exercised to acquire a
predetermined number of shares of the issuer's common
stock at the option of the Portfolio during a specified
time period (such as convertible preferred stocks,
convertible debentures and warrants). A convertible
security is generally a fixed income security which is
senior to common stock in an issuer's capital structure,
but is usually subordinated to similar non-convertible
securities. No more than 5% of a Portfolio's total
assets will be invested in convertible securities rated
at the time of purchase lower than A or equivalent. See
"Investment Objective and Policies" in the Statement of
Additional Information and "Securities Ratings" below.
In general, the market value of a convertible security
is at least the higher of its "investment value" (i.e.,
its value as a fixed income security) or its "conversion
value" (i.e., its value upon conversion into its
underlying common stock). As a fixed income security, a
convertible security tends to increase in value when
interest rates decline and tends to decrease in value
when interest rates rise. However, the price of a
convertible security is also influenced by the market
value of the security's underlying common stock. The
price of a convertible security tends to increase as the
market value of the underlying stock rises, whereas it
tends to decrease as the market value of the underlying
stock declines. While no securities investment is
without some risk, investments in convertible securities
and synthetic convertible positions generally entail
less risk than investments in the common stock of the
same issuer.
Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the
warrants, potential price fluctuations as a result of
speculation or other factors, and failure of the price
of the underlying security to reach or have reasonable
prospects of reaching a level at which the
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
warrant can be prudently exercised (in which event the
warrant may expire without being exercised, resulting in
a loss of the Portfolio's entire investment therein).
The MASTER FIXED INCOME PORTFOLIO and the ENHANCED
EQUITY PORTFOLIO may each invest up to 35% of their
total assets in convertible securities, synthetic
convertible and certain combinations of covered call and
cash secured put investments. A synthetic convertible
investment is a combination investment in which the
Portfolio purchases both (i) high-grade cash equivalents
or a high grade debt obligation of an issuer or U.S.
Government securities and (ii) call options or warrants
on the common stock of the same or different issuer with
some or all of the anticipated interest income from the
associated debt obligation that is earned over the
holding period of the option or warrant. The Portfolios
may also write an "in-the-money" covered call option on
common stock or an "out-of-the-money" covered put option
on common stock or stock indexes. Convertible
securities, synthetic convertible and in-the-money
covered calls and out-of-the-money cash secured puts are
not taken into account when determining whether the
Portfolios have met the requirements that 65% of their
total assets be invested in fixed income and equity
securities (see "Investment Objectives and Policies"
above).
While providing a fixed income stream (generally higher
in yield than the income derivable from common stock but
lower than that afforded by a similar non-convertible
security), a convertible security also affords an
investor the opportunity, through its conversion
feature, to participate in the capital appreciation
attendant upon a market price advance in the convertible
security's underlying common stock. A synthetic
convertible position has similar investment
characteristics, but may differ with respect to credit
quality, time to maturity, trading characteristics, and
other factors. Because the Portfolio will create
synthetic convertible positions only out of high grade
fixed income securities, the credit rating associated
with a Portfolio's synthetic convertible investments is
generally expected to be higher than that of the average
convertible security, many of which are rated below high
grade. However, because the options used to create
synthetic convertible positions will generally have
expirations between one month and three years of the
time of purchase, the maturity of these positions will
generally be shorter than average for convertible
securities. Since the option component of a convertible
security or synthetic convertible
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
position is a wasting asset (in the sense of losing
"time value" as maturity approaches), a synthetic
convertible position may lose such value more rapidly
than a convertible security of longer maturity; however,
the gain in option value due to appreciation of the
underlying stock may exceed such time value loss, the
market price of the option component generally reflects
these differences in maturities, and the Adviser takes
such differences into account when evaluating such
positions. When a synthetic convertible position
"matures" because of the expiration of the associated
option, the Portfolio may extend the maturity by
investing in a new option with longer maturity on the
common stock of the same or different issuer. If the
Portfolio does not so extend the maturity of a position,
it may continue to hold the associated fixed income
security.
Covered call and cash secured put investments are
subject to the risks associated with common stocks and
options described above. While such investments have a
combined volatility similar to that of long-term
corporate bonds, the Adviser believes they provide
greater returns than investment in such bonds.
PURCHASE AND SALE OF FINANCIAL FUTURES, AND OPTIONS
ON FINANCIAL FUTURES
Each Portfolio may purchase or sell financial and other
futures contracts and options on financial and other
futures contracts in pursuit of its objective.
Futures contracts and their related options may be
purchased or sold for various reasons: to hedge
portfolio securities against adverse fluctuations, to
adjust the level of market exposure of a portfolio, to
facilitate trading, to reduce transactions costs, and/or
to seek higher investment returns when a futures or
option contract is attractively priced relative to a
typical Portfolio investment in the underlying security
or index or securities highly correlated to the
underlying index. As with all of the investment
strategies that a Portfolio may employ, there can be no
assurance that any such strategy will achieve its
objective.
A Portfolio's futures and related options transactions
will be conducted within the following limitations:
(i) When a Portfolio sells a futures contract, the value
of that contract will not exceed the total market value
of the portfolio securities being hedged;
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
(ii) A Portfolio will write only COVERED call and put
options on futures;
(iii) When a Portfolio purchases a futures contract it
will maintain the market value of the contract in liquid
high-grade segregated debt securities as described
above.
(iv) A Portfolio will not enter into futures and options
on futures contracts which would cause the aggregate sum
of the initial margins for such contracts and related
option premiums to exceed 5% of the Portfolio's net
assets; 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%.
CERTAIN RISK FACTORS ASSOCIATED WITH HEDGING STRATEGIES
When a Portfolio utilizes futures or options to hedge
the price fluctuations of securities it may own or want
to purchase, the Portfolio is exposed to the risk of
imperfect correlation between the futures or options and
the securities being hedged. That is, the prices of the
securities being hedged may not move in the same amount,
or even in the same direction, as the hedging
instrument. The Adviser will attempt to minimize this
risk by investing only in those contracts whose behavior
is expected to resemble the Portfolio securities being
hedged. However, if the Adviser's judgment about the
general direction of interest rates, market value,
volatility, and other economic factors is incorrect, the
Portfolio would have been better off without the use of
such hedging techniques. In addition, there is the risk
of a possible lack of a liquid secondary market and the
resultant inability to close a futures or option
position prior to its maturity or expiration date. If
the Adviser determines that the ability to close such a
position early is important to its investment strategy,
it will only enter such positions on an exchange with a
secondary market that it judges to be appropriately
active.
COVERED SHORT SALES To hedge against market risks, each Portfolio may make
covered short sales of securities in pursuit of its
objective. A covered short sale is a sale of borrowed
securities in which the Portfolio will (1) own at the
time of selling the securities, the underlying security
(or securities convertible into the underlying security
without additional consideration), or (2) own a call
option on the same security with the difference between
the exercise price and any margin required to be
deposited in connection with the short
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
sale at the broker maintained as liquid high-grade
segregated debt securities. Total segregated collateral
for short sales will not exceed 10% of a Portfolio's net
assets at any one time.
Until the fiscal year beginning January 1, 1998, in
order to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, a Portfolio
must derive less than 30% of its gross income from the
sale of securities it has held for less than three
months (the "three month gain rule"). The three month
gain rule may limit a Portfolio's ability to sell a
portfolio security short, or to terminate its short
position, at a time when the Adviser believes it would
be advantageous to do so. A Portfolio will not enter
into a short sale or purchase and deliver new securities
to terminate its short position if such action would
result in the taxation of Portfolio income at the
Portfolio level.
BELOW HIGH GRADE SECURITIES The SHORT-TERM GOVERNMENT PORTFOLIO may not purchase
securities rated below A ("high grade" securities) and
will sell securities whose ratings are downgraded to
below high grade. The MASTER FIXED INCOME PORTFOLIO and
the ENHANCED EQUITY PORTFOLIO may each invest up to 5%
of net assets in fixed income securities and up to 5% of
net assets in convertible securities rated lower than
the high grade investment standard employed by the Fund
(i.e., rated BBB or lower). The MASTER FIXED INCOME
PORTFOLIO and the ENHANCED EQUITY PORTFOLIO will not
necessarily sell particular securities whose ratings are
downgraded to below A, but will sell sufficient amounts
from the two classes of (i) below high grade fixed
income securities or (ii) below high grade convertible
securities to bring the total percentage of such
securities to 5% or less in each class. Ratings of
securities by rating agencies such as Standard & Poor's
and Moody's evaluate the safety of principal and
interest payments, not the market value risk associated
with changes in interest rates. Credit rating agencies
may fail to timely change such ratings to reflect
subsequent events. A debt security may be assigned a
lower rating or cease to be rated after its purchase by
the Fund. For additional descriptions of the risks of
these investments and the various rating grades, see the
Statement of Additional Information "Appendix --
Description of Bond Ratings".
INVESTMENTS IN SECURITIES OF OTHER Each of the Portfolios may purchase the securities of
INVESTMENT COMPANIES other investment companies. The SHORT-TERM GOVERNMENT
PORTFOLIO may invest up to 20% of its total assets in
such securities and the MASTER FIXED INCOME PORTFOLIO
and ENHANCED EQUITY PORTFOLIO may each invest up to 35%
of their respective total assets in such
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
securities. However, no Portfolio may own voting stock
of any one such investment company in an amount which,
when aggregated with such stock owned by all affiliated
persons of the Fund (as defined in the 1940 Act) exceeds
3% of the total outstanding voting stock of such
investment company.
Such transactions may in some cases raise a Portfolio's
transaction costs relative to a direct investment in the
same securities, but in some cases a Portfolio may
benefit from being able to acquire a diversified
investment in one purchase that could not be made
economically in a direct fashion. As other investment
companies pay management fees to their investment
advisers, shareholders of a Portfolio which purchases
such securities will bear the proportionate share of
such fees as well as the management fees paid by the
Portfolio. In addition, the 1940 Act provides that no
investment company in which the Fund invests is
obligated to redeem shares of such company owned by the
Fund in an amount exceeding 1% of such company's
outstanding shares during any period of less than thirty
days.
Investments in the securities of other investment
companies by each Portfolio are intended to (i) provide
an investment vehicle for each Portfolio's cash reserves
that the Portfolio does not want to commit to riskier
investments, (ii) facilitate each Portfolio's investment
strategies in which high-grade collateral is required,
or (iii) facilitate each Portfolio's investment
strategies by acquiring investments in portfolios of
securities more diversified or with specialized
characteristics that could not be efficiently acquired
directly. The SHORT-TERM GOVERNMENT PORTFOLIO will limit
its purchases of the securities of other investment
companies to those that invest primarily in the same
securities that the SHORT-TERM GOVERNMENT PORTFOLIO may
invest in directly.
LENDING OF SECURITIES Each Portfolio may lend its investment securities to
qualified institutional investors for the purpose of
realizing income. Loans of securities by the Portfolio
will be collateralized by cash, letters of credit, or
securities issued or guaranteed by the U.S. Government
or its agencies. The collateral will equal at least 100%
of the current market value of the loaned securities at
all times during which the securities are loaned by
marking to market daily, and such loans will not exceed
one-third of the total value of the Portfolio's
securities. Such loans involve risks of delay in
receiving additional collateral or in recovering the
securities loaned or even loss of rights in the
collateral should the borrower of the securities fail
financially. However, such securities lending
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
will be made only when, in the Adviser's judgment, the
income to be earned from the loans justifies the
attendant risks. Loans are subject to termination at the
option of the Fund or the borrower.
DELAYED DELIVERY TRANSACTIONS The Fund may purchase securities on a when-issued or
delayed delivery basis and sell securities on a delayed
delivery basis. These transactions involve a commitment
by the Fund to purchase or sell securities for a
predetermined price or yield, with payment and delivery
taking place more than seven days in the future, or
after a period longer than the customary settlement
period for that type of security. When delayed delivery
purchases are outstanding, the Fund will set aside and
maintain until the settlement date cash, U.S. Government
securities or liquid high grade debt obligations in an
amount sufficient to meet the purchase price. When
purchasing a security on a delayed delivery basis, the
Fund assumes the rights and risks of ownership of the
security, including the risk of price and yield
fluctuations, and takes such fluctuations into account
when determining its net asset value, but does not
accrue income on the security until delivery. When the
Fund sells a security on a delayed delivery basis, it
does not participate in future gains or losses with
respect to the security. If the other party to a delayed
delivery transaction fails to deliver or pay for the
security, the Fund could miss a favorable price or yield
opportunity or could suffer a loss. A Portfolio will not
invest more than 25% of its total assets in when-issued
and delayed delivery transactions.
PORTFOLIO TURNOVER A Portfolio will not attempt to achieve, nor will it be
limited to, a predetermined rate of portfolio turnover.
Turnover rate is the lesser of purchases or sales of
portfolio securities for a year, excluding all
securities with maturities of one year or less, divided
by the monthly average value of such securities. The
turnover rates of the ENHANCED EQUITY PORTFOLIO and the
MASTER FIXED INCOME PORTFOLIO are not expected to exceed
150%. The turnover of the SHORT-TERM GOVERNMENT
PORTFOLIO may be higher due to the short-term maturities
of the securities purchased, but is not expected to
exceed 300%. For the years ended December 31, 1996 and
1995, the portfolio turnover rates were 31.48% and
10.15% for the SHORT-TERM GOVERNMENT PORTFOLIO, 21.95%
and 31.82% for the MASTER FIXED INCOME PORTFOLIO, and
179.47% and 10.15% for the ENHANCED EQUITY PORTFOLIO.
While higher portfolio turnover (100% or more) can
involve correspondingly greater brokerage commissions
and other transaction costs than lower turnover, and
such commissions and costs must be borne by the
Portfolio and its shareholders, the brokerage
commissions
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
associated with the SHORT-TERM GOVERNMENT PORTFOLIO are
expected to be substantially less than the other
Portfolios as a percentage of assets, as short-term
fixed income securities generally trade on a net basis
or with a relatively small commission as a percentage of
the value of the security. High portfolio turnover may
also result in the realization of substantial net
short-term capital gains, and any distributions
resulting from such gains will be ordinary income for
federal income tax purposes. It is the Adviser's opinion
that such turnover is not expected to affect the
SHORT-TERM GOVERNMENT PORTFOLIO'S status as a regulated
investment company for federal tax purposes. See
"Dividends, Distributions and Taxes".
BORROWING Each Portfolio may borrow money from banks up to a limit
of 15% of the market value of its assets, but only for
temporary or emergency purposes. The Portfolio would
borrow money only to meet redemption requests prior to
the settlement of securities already sold or in the
process of being sold by the Portfolio. To the extent
that a Portfolio borrows money prior to selling
securities, the Portfolio may be leveraged; at such
times, the Portfolio may appreciate or depreciate in
value more rapidly than if it did not borrow. A
Portfolio will repay any money borrowed in excess of 5%
of the market value of its total assets prior to
purchasing securities.
INVESTMENT LIMITATIONS Each of the Portfolios has adopted certain additional
limitations designed to reduce its exposure to specific
situations. These limitations are fundamental policies
that cannot be changed without the approval of the
holders of a majority of the Portfolio's outstanding
shares, as defined in the Investment Company Act of
1940. See "Investment Limitations" in the Statement of
Additional Information.
MANAGEMENT OF THE FUND The Officers of the Fund manage its day to day
operations and are responsible to the Fund's Board of
Trustees.
INVESTMENT ADVISER Analytic-TSA Global Asset Management, Inc., 700 South
Flower Street, Suite 2400, Los Angeles, CA 90017, is the
Adviser of the Fund. The Adviser is a wholly owned
subsidiary of United Asset Management Corporation, a
holding company described under "Management of the Fund"
in the Statement of Additional Information.
The Adviser was founded in 1970 as Analytic Investment
Management, Inc. one of the first independent investment
counsel firms specializing in the creation and
continuous management of optioned equity and optioned
debt portfolios for
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
fiduciaries and other long term investors. It is one of
the oldest and largest independent investment management
firms in this specialized area. In January 1996, the
Adviser acquired and merged with TSA Capital Management
which emphasizes U.S. and global tactical asset
allocation, currency management, quantitative equity and
fixed income management, as well as option yield curve
strategies. The Adviser serves, among others, pension
and profit-sharing plans, endowments, foundations,
corporate investment portfolios, mutual savings banks,
and insurance companies, for which it manages in excess
of $1,000,000,000. It has also managed another
registered investment company since 1978.
Pursuant to an Investment Advisory Agreement with the
Fund, the Adviser, subject to the control and direction
of the Fund's Officers and Board of Trustees, manages
the Portfolios of the Fund in accordance with each
Portfolio's stated investment objective and policies and
makes investment decisions for the Fund.
SHORT-TERM GOVERNMENT AND MASTER FIXED INCOME PORTFOLIOS
Scott Barker, Greg McMurran and Bob Bannon have been the
portfolio managers for the Short-Term Government and
Master Fixed Income Portfolios since November 1996. Mr.
Barker has been a member of the portfolio management and
research team for the Adviser since August 1995. He
concurrently serves as a research analyst with Analysis
Group, Inc. with which he has been associated since
October 1993. Previously, he was with Xontech, Inc. for
six years as a scientific analyst. Mr. McMurran is the
Chief Investment Officer of the Adviser and has been
with the firm since October of 1976 as a portfolio
manager. Mr. Bannon is a managing director of the
Adviser specializing in the fixed income area. He
initially joined the firm in January 1996 when TSA
Capital Management merged with the Adviser. He was
formerly a managing director with TSA since April 1995.
Previously, he served as a senior bond strategist with
IDEA for four years. They are subject to the supervision
of the Adviser's investment management committee.
ENHANCED EQUITY PORTFOLIO
Dennis M. Bein, Harindra de Silva and Charles L. Dobson
have been the portfolio managers for the Enhanced Equity
Portfolio since November 1996. Mr. Bein has been a
member of the portfolio management and research team for
the Adviser since August 1995. He concurrently serves as
a senior associate for
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
Analysis Group, Inc. with which he has been associated
with since August 1990. Dr. de Silva is the President of
the Fund and of the Analytic Optioned Equity Fund and
serves as a managing director of the Adviser, which he
joined in May of 1995. He concurrently serves as a
principal of Analysis Group, Inc, which he joined in
March 1986. Mr. Dobson is the Executive Vice President
of the Fund and Analytic Optioned Equity Fund and has
been a portfolio manager of the Adviser since 1978. They
are subject to the supervision of the Adviser's
investment management committee.
MANAGEMENT FEES As compensation for furnishing investment advisory,
management, and other services, and costs and expenses
assumed, pursuant to the Investment Management Agreement
each Portfolio of the Fund pays the Adviser an annual
fee based on the average daily net assets of that
Portfolio. These annual fee schedules are:
Short-Term Government 0.30%
Master Fixed Income 0.45%
Enhanced Equity 0.60%
DISTRIBUTOR UAM Fund Distributors, Inc., a wholly-owned subsidiary
of United Asset Management Corporation, is the
distributor of the Fund's shares. Its principal office
is located at 211 Congress Street, Boston, Massachusetts
02110. Under a Distribution Agreement with the Fund (the
"Distribution Agreement"), the Distributor, as agent of
the Fund, has agreed to use its best efforts as sole
distributor of Fund shares. The Distributor does not
receive any fee or other compensation under the
Distribution Agreement. The Distribution Agreement
provides that the Fund will bear costs of registration
of its shares with the Securities and Exchange
Commission ("SEC") and various states as well as the
printing of its prospectuses, its Statement of
Additional Information and its reports to shareholders.
ADMINISTRATIVE SERVICES UAM Fund Services, Inc., a wholly-owned subsidiary of
United Asset Management Corporation, performs and
oversees all administrative, fund accounting, dividend
disbursing and transfer agent services to the Fund
pursuant to a Fund Administration Agreement with the
Fund (the "Administration Agreement"). For its services
UAM Fund Services receives a fee based on net assets.
UAM Fund Services' principal office is located at 211
Congress Street, Boston, Massachusetts 02110. UAM Fund
Services has subcontracted some of these services to
Chase
</TABLE>
33
<PAGE>
<TABLE>
<S> <C>
Global Funds Services Company, an affiliate of The Chase
Manhattan Bank. Chase Global Funds Services Company is
located at 73 Tremont Street, Boston, Massachusetts
02108.
Chase Global Funds Services Company is the Fund's sub-
dividend disbursing agent, sub-transfer agent and sub-
shareholder servicing agent. The shareholder servicing
phone number is (800) 374-2633. All other administrative
and accounting functions are performed by UAM Fund
Services.
EXPENSES In addition to management and service fees, each
Portfolio pays all costs and expenses of its operations,
including fees of Trustees not affiliated with the
Adviser, membership dues of trade associations,
custodian, legal and accounting fees, interest charges,
brokerage commissions, federal and state taxes,
prospectuses and shareholder reports, expenses of
shareholder meetings, and costs of registration and
qualification of the shares of the Portfolio under
various federal and state laws and maintaining and
updating such registrations and qualifications on a
current basis. Any shared expense of the Portfolios is
generally apportioned to each Portfolio based on its
relative total assets within the Fund unless some other
expense allocation method is determined by the Board of
Trustees to be more appropriate.
The Adviser has voluntarily agreed to reimburse annual
Portfolio expenses including advisory fees (but
excluding interest, taxes, and extraordinary expenses)
that exceed 0.60%, 0.90% and 1.00% of average daily net
assets for the SHORT-TERM GOVERNMENT, MASTER FIXED
INCOME and ENHANCED EQUITY PORTFOLIOS, respectively, for
the year ending December 31, 1997. During the first six
months of 1997, the ratios of operating expenses to
average net assets on an annualized basis in the
SHORT-TERM GOVERNMENT PORTFOLIO, MASTER FIXED INCOME
PORTFOLIO, and ENHANCED EQUITY PORTFOLIO, before expense
reimbursements, were 4.54%, 0.90% and 1.67%,
respectively. In calculating Portfolio expenses for
purposes of such reimbursement, any commission
reimbursement from broker-dealers will not be applied.
After December 31, 1997, the Adviser may voluntarily
waive all or a portion of its management fee and/ or
absorb certain expenses of a Portfolio. Any such waiver
or absorption will have the effect of lowering the
overall expense ratio for a Portfolio and increasing the
overall total return and yield to investors at the time
any such amounts were waived and/ or absorbed.
</TABLE>
34
<PAGE>
<TABLE>
<S> <C>
BROKERAGE Under the terms of the Investment Advisory Agreement,
the Adviser is authorized to employ broker-dealers to
execute orders for the purchase and sale of portfolio
securities and for other portfolio transactions who in
its best judgment can provide "best execution". In
determining the abilities of the broker-dealer to
provide execution of a particular portfolio transaction,
the Adviser will consider all relevant factors including
the execution capabilities required by the transaction
or transactions; the ability and willingness of the
broker-dealer to facilitate each transaction by
participation therein for its own account; the
familiarity with sources from or to whom particular
securities might be purchased or sold; the quality and
continuity of service rendered by the broker-dealer with
regard to a Portfolio's other transactions; and any
other factors relevant to the selection of a
broker-dealer for a particular and related transactions
of a Portfolio. Provided that best execution is
obtained, the Adviser may consider sales of the
Portfolios' shares and the provision of research
services to the Adviser as factors in the selection of
broker-dealers to execute portfolio transactions.
Fixed income securities are traded primarily in the
over-the-counter market. They are generally traded on a
net basis and do not normally involve either brokerage
commission or transfer taxes. The cost of executing such
portfolio transactions will primarily consist of dealer
spreads and underwriting commissions. The Fund will
always attempt to deal with dealers where better prices
and execution are available. Securities may also be
purchased directly from the issuer.
THE SHARE PRICE OF The share price or "net asset value" per share of each
EACH PORTFOLIO Portfolio is computed once daily at 4:30 P.M. Eastern
Time, after the close of trading of the New York Stock
Exchange and the various option exchanges, or such other
time as is determined by or under the direction of the
Board of Trustees, on each day in which there is a
sufficient degree of trading in the securities that
might materially affect the Portfolio's net asset value.
The Portfolios will not be priced on days when the New
York Stock Exchange is closed. In addition, the
SHORT-TERM GOVERNMENT and MASTER FIXED INCOME PORTFOLIOS
will not be priced on days when the bond market is
closed, such as certain bank holidays, even though the
New York Stock Exchange may be open. The share price is
calculated by dividing the total value of the
Portfolio's assets, less total liabilities, by the total
outstanding shares of the Portfolio. Expenses and
interest on portfolio securities are accrued daily.
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
Portfolio securities are valued based on market
quotations or, if not readily available, at fair market
value as determined in good faith under procedures
established by the Board of Trustees. Bonds and fixed
income securities may be valued on the basis of prices
provided by a pricing service when such prices are
believed by the Board to reflect fair market value. See
"Portfolio Valuation" in the Statement of Additional
Information.
DIVIDENDS, CAPITAL GAINS
AND TAXES
DISTRIBUTIONS Dividends consisting of net investment income are
declared and payable to shareholders of record daily by
both the SHORT-TERM GOVERNMENT and MASTER FIXED INCOME
PORTFOLIOS. Such dividends are paid on the first
business day of each month. Dividends consisting of net
investment income of the ENHANCED EQUITY PORTFOLIO are
declared and payable to shareholders of record on the
last business day of each calendar quarter. For the
purpose of calculating such dividends, net investment
income consists of income accrued on portfolio assets,
less accrued expenses. In addition, net realized capital
gains of all Portfolios, if any, are distributed
annually.
The Fund's dividend and capital gains distributions may
be reinvested in additional shares or received in cash.
See "Selecting a Distribution Option".
TAX STATUS OF THE FUND Each Portfolio of the Fund intends to qualify for
taxation as a "regulated investment company" under the
Internal Revenue Code (the "Code") so that it will not
be liable for federal income taxes on amounts
distributed to shareholders as dividends and capital
gains. However, the Code contains a number of complex
tests relating to qualification which a Portfolio might
not meet in any particular year. If a Portfolio did not
so qualify, it would be treated for tax purposes as an
ordinary corporation and receive no tax deduction for
payments made to shareholders.
TAXATION OF SHAREHOLDERS Distributions paid by each of the Portfolios from net
investment income are taxable to shareholders as
ordinary income, whether received in cash or reinvested
in additional shares. Long-term capital gains
distributions are taxable to shareholders as long-term
capital gains, regardless of how long such shareholders
have held their shares.
Any capital gain distribution paid by the Fund has the
effect of reducing the net asset value per share on the
reinvestment date by the amount of the distribution.
Therefore, a capital gain
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
distribution paid shortly after a purchase of shares by
a shareholder would represent, in substance, a partial
return of capital to the shareholder (to the extent it
is paid on the shares so purchased), even though it
would be subject to income taxes as discussed above.
Accordingly, prior to purchasing shares, a shareholder
should carefully consider the impact of dividends or
capital gains distributions which are expected to be or
have been announced.
For corporate investors, dividends paid by the
SHORT-TERM GOVERNMENT PORTFOLIO will generally not
qualify for the dividends received deduction, a minimal
amount of dividends paid by the MASTER FIXED INCOME
PORTFOLIO will qualify for the deduction, and some
fraction of dividends by the ENHANCED EQUITY PORTFOLIO
will qualify for such deduction. The Fund will notify
its shareholders annually of the tax status of its
dividends and capital gain distributions.
The sale of shares of the Fund is a taxable event and
may result in a capital gain or loss. A capital gain or
loss may be realized from an ordinary redemption of
shares or an exchange of shares between Portfolios of
the Fund.
Dividend distributions, capital gains distributions, and
capital gains or losses from redemptions and exchanges
may be subject to state and local taxes. However,
depending on provisions of your state's tax law, the
portion of a Portfolio's income derived from full faith
and credit U.S. Treasury and agency obligations may be
exempt from state and local taxes. The Fund will
indicate each year the portion of a Portfolio's income,
if any, that may qualify for this exemption.
The Fund is required to withhold 31% of taxable
dividends, capital gains distributions, and redemption
proceeds paid to shareholders who have not complied with
IRS taxpayer identification regulations. Such
withholding requirement may be avoided by certifying on
the Account Registration your proper Social Security or
Tax Identification Number and further certifying that
you are not subject to backup withholding. Dividends,
capital gains distributions, and redemption proceeds
paid to foreign shareholders will generally be subject
to withholding at the rate of 30% (or lower treaty
rate). You should consult your own tax adviser regarding
specific questions about federal, state, or local
taxation.
</TABLE>
37
<PAGE>
<TABLE>
<S> <C>
GENERAL INFORMATION The Fund is a Delaware business trust organized on
November 18, 1992. The Declaration of Trust permits the
Trustees to issue an unlimited number of shares of
beneficial interest. The Board of Trustees has the power
to designate one or more classes ("Portfolios") of
shares of beneficial interest and to classify or
reclassify any unissued shares with respect to such
classes. Presently the Fund is offering shares of the
three Portfolios described above.
SHARES OF BENEFICIAL INTEREST The shares of each Portfolio, when issued, are fully
paid and non-assessable, are redeemable at the option of
the holder, are fully transferable and have no
conversion or pre-emptive rights. Shares are also
redeemable at the option of the Fund under certain
circumstances (see "Redeeming Shares"). Each share of a
Portfolio is equal as to earnings, expenses and assets
of the Portfolio and, in the event of liquidation of the
Portfolio, is entitled to an equal portion of all of the
Portfolio's net assets. Shareholders of the Fund are
entitled to one vote for each full share held and
fractional votes for fractional shares held, and will
vote in the aggregate and not by Portfolio except as
otherwise required by law or when the Board of Trustees
determines that a matter to be voted upon affects only
the interest of the shareholders of a particular
Portfolio. Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in any
election of Trustees can, if they so choose, elect all
of the Trustees. While the Fund is not required, and
does not intend, to hold annual meetings of
shareholders, such meetings may be called by the
Trustees at their discretion, or upon demand by the
holders of 10% or more of the outstanding shares of any
Portfolio for the purpose of electing or removing
Trustees.
As of September 30, 1997, Prison Law Office held of
record more than 25% of the outstanding shares of the
ENHANCED EQUITY and SHORT-TERM GOVERNMENT PORTFOLIOS and
may be considered a controlling person of these
Portfolios under the 1940 Act.
SHARE CERTIFICATES All shares (including reinvested dividends and capital
gain distributions) are issued or redeemed in full and
fractional shares rounded to the third decimal place. No
share certificates will be issued. Instead, an account
will be established for each shareholder and all shares
purchased will be held in book-entry form by the Fund.
SHAREHOLDER SERVICES Shareholder inquiries should be addressed to the Fund's
sub-shareholder servicing agent at: Analytic Funds, P.O.
Box 2798, Boston, MA 02208; telephone (800) 374-2633.
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
CONFIRMATION AND STATEMENTS Whenever a transaction takes place in an account, a
confirmation statement will be sent to the shareholder
of such transaction. This confirmation statement will
include complete details of all transactions for the
calendar year to date. For purposes of confirming
dividend and/or capital gain distributions, shareholders
of the SHORT-TERM GOVERNMENT and MASTER FIXED INCOME
PORTFOLIOS may expect statements at least monthly, and
shareholders of the ENHANCED EQUITY PORTFOLIO may expect
statements at least quarterly.
FINANCIAL STATEMENTS The Fund will send to shareholders of each of the
Portfolios an unaudited semi-annual financial statement.
The annual financial statements of the Fund will be
audited by Deloitte & Touche LLP, independent public
accountants.
CUSTODIAN The Fund's custodian is The Chase Manhattan Bank.
ADDITIONAL INFORMATION This Prospectus, including the Statement of Additional
Information which has been incorporated by reference
herein, does not contain all the information set forth
in the Registration Statement filed by the Fund with the
SEC under the Securities Act of 1933. Copies of the
Registration Statement may be obtained at a reasonable
charge from the SEC or may be examined, without charge,
at the office of the SEC in Washington, D.C.
YIELD, TOTAL RETURN, AND OTHER From time to time the Fund may advertise the "yield",
CALCULATIONS "total return", and "average annual total return" of one
or more of the Portfolios. Yield and return calculations
are based on historical results, do not take into
account any federal or state income taxes which may be
payable, and are not intended to indicate future
performance.
The "30-day yield" of a Portfolio is calculated by
dividing net investment income per share earned during a
thirty-day period by the net asset value per share on
the last day of the period. Net investment income
includes interest and dividend income earned on the
Portfolio's securities after subtracting all expenses
that have been applied to all shareholder accounts. The
yield calculation assumes that net investment income
earned over thirty days is compounded monthly for six
months and then annualized. Methods used to calculate
advertised yields are standardized for all stock and
bond mutual funds.
"Total return" and "average annual total return" are
more comprehensive measures of the Portfolio's
historical performance than the "30-day yield". Total
return measures both
</TABLE>
39
<PAGE>
<TABLE>
<S> <C>
net investment income and the effect of realized and
unrealized appreciation or depreciation of the Portfolio
on a hypothetical shareholder, assuming reinvestment of
all distributions into new Portfolio shares.
Specifically, the total return for a stated period is
calculated by assuming a hypothetical investment in a
Portfolio at the beginning of a period; then, assuming
reinvestment of all distributions into new Portfolio
shares, the total return is calculated as the percentage
change in the total dollar value of the investment over
the period in question. Average annual total return
expresses this same total return as an annualized rate
which, if compounded annually over the same period,
would result in the same total return.
These standardized performance measures present
historical returns. In addition, the Fund may present
non-standardized measures which relate to the returns
and risk or variability of the returns of a Portfolio,
including "standard deviation of returns", "beta",
"alpha", and "duration". These measures are not
standardized, as they involve choices regarding the
length of historical measurement periods, the frequency
of such measurements, the choice of market benchmarks,
and other factors which are beyond the scope of current
SEC performance standards. Hence, these measures may not
be directly comparable among different funds or
different measurers of the same funds. These risk
measurements are also based on historical results and
are not intended to be an indication of future
performance.
The Fund may also include comparative performance
information in advertising or marketing shares.
</TABLE>
40
<PAGE>
SHAREHOLDER GUIDE
<TABLE>
<S> <C>
OPENING AN ACCOUNT To open a new account, either by mail or by wire,
complete and return a signed Account Registration.
Please indicate the Portfolio(s) you have chosen and the
respective amount(s) to be invested.
MINIMUM INVESTMENTS There is no minimum initial or subsequent purchase of
Portfolio shares by tax deferred retirement plans
(including IRA, SEP-IRA and profit sharing and money
purchase plans) or Uniform Gifts to Minors Act accounts.
For other investors the initial minimum purchase is
$5,000 invested in any proportion among the Portfolios
and there is no minimum for subsequent purchases.
PURCHASING SHARES Shares of the Portfolios are purchased directly from the
Fund with no sales charge or commission at the net asset
value per share next computed after an order and payment
are received by the Fund. Any order received after 1:00
P.M. Pacific Time will be processed at the next day's
closing net asset value. Shares of a Portfolio may be
purchased by customers of broker-dealers or other
financial intermediaries ("Service Agents") which have
established a shareholder servicing relationship with
the Fund on behalf of their customers. Service Agents
may impose additional or different conditions on
purchases or redemptions of Portfolio shares and may
charge transaction or other account fees. Each Service
Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding
additional or different purchase or redemption
conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for
information regarding these fees and conditions. Amounts
paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the subject
Portfolio's assets attributable to the Service Agent,
which would not be imposed if shares of the Portfolio
were purchased directly from the Fund or its
distributor. Service Agents may provide shareholder
services to their customers that are not available to a
shareholder dealing directly with the Fund.
Service Agents may enter confirmed purchase orders on
behalf of their customers. If shares of a Portfolio are
purchased in this manner, the Service Agent must receive
your investment order before the close of trading on the
New York Stock Exchange, and transmit it to the Fund's
Sub-Transfer Agent, Chase Global Funds Services Company,
prior to the close of their business day to receive that
day's share price. Proper payment for the order must
</TABLE>
41
<PAGE>
<TABLE>
<S> <C>
be received by the Sub-Transfer Agent no later than the
time when the Portfolio is priced on the following
business day. Service Agents are responsible to their
customers and the Fund for timely transmission of all
subscription and redemption requests, investment
information, documentation and money.
The Fund reserves the right to reject any purchase order
or to suspend or modify the continuous offering of its
shares.
BY MAIL Initial purchases of Fund shares may be made by mailing
FOR INITIAL INVESTMENTS, COMPLETE a completed and signed Account Registration Form
AND SIGN AN ACCOUNT REGISTRATION together with a check made payable to THE ANALYTIC
FORM. FOR SUBSEQUENT INVESTMENTS, SERIES FUND (REFERENCE PORTFOLIO NAME), to:
COMPLETE A MAIL REMITTANCE FORM. The Analytic Series Fund Street Address (overnight
mail)
P.O. Box 2798 73 Tremont Street
Boston, MA 02208 Boston, MA 02108
(800) 374-2633
For subsequent purchases, complete the Mail Remittance
Form (located on a statement) and return it to the above
address with a check made payable to THE ANALYTIC SERIES
FUND (REFERENCE PORTFOLIO NAME).
BY WIRE Before wiring funds, you must telephone the Fund's
TELEPHONE THE FUND'S SUB-TRANSFER sub-transfer agent at (800) 374-2633 with the sending
AGENT AT (800) 374-2633 BEFORE bank's name, date and amount being wired to insure
WIRING FUNDS. proper investment. There is no charge by the Fund for
wire purchases.
Federal funds wiring instructions are:
The Chase Manhattan Bank
ABA #021000021
The Analytic Series Fund -- (NAME OF PORTFOLIO)
CREDIT DDA 9102791614
ACCOUNT REGISTRATION: (YOUR NAME)
ACCOUNT #: (YOUR ACCOUNT NUMBER)
Please be sure your bank includes the name of the
Portfolio and your account's registration name and, in
the case of subsequent investments, the account number
assigned by the Fund.
NOTE: Federal funds wire purchase orders will be
accepted only when the Fund and Custodian Bank are open
for business.
FOR INITIAL PURCHASES ONLY: No purchases will be
processed until a completed and signed Account
Registration Form has been received.
</TABLE>
42
<PAGE>
<TABLE>
<S> <C>
BY EXCHANGE You may open an account for a new Portfolio or purchase
additional shares in any Portfolio by making an exchange
from an existing Portfolio account or from an existing
account in the Analytic Optioned Equity Fund. You may
not open an account by exchange unless you have
completed an account application.
If you open an account by exchange, the new account will
have identical registration and special instructions
(such as Distribution Option, Telephone Redemption
Instructions, Telephone Exchange Privileges, and
duplicate confirmation/ statements) as the existing
account.
For further information concerning exchanges, see
"EXCHANGING SHARES".
SELECTING A DISTRIBUTION OPTION You must select one of the three distribution options by
indicating so on the Account Registration:
AUTOMATIC REINVESTMENT OPTION--Both dividends and
capital gains distributions will be reinvested in
additional Portfolio shares. This option will be
selected for you automatically unless you specify one of
the other options.
CASH DIVIDEND OPTION--Your dividends will be paid in
cash and your capital gains distributions will be
reinvested in additional Portfolio shares.
ALL CASH OPTION--Dividends and capital gains
distributions will be paid in cash.
To change your option, written instructions with
signature(s) guaranteed must be received by the Fund's
sub-transfer agent 5 business days prior to the
effective date of the change. For further information
concerning signature guarantees, see "SIGNATURE
GUARANTEES".
REDEEMING SHARES Shares are redeemed without charge at the net asset
value per share next computed after instructions and
required documents are received in proper form. Any
instructions received after 4:00 P.M. Eastern Time will
be processed at the next day's net asset value. See the
discussions below, under "By Telephone", "By Mail" and
"By Exchange" for information regarding the required
documents. To be in "proper form" the documents must be
complete and executed by all required parties.
Any redemption may be more or less than your cost,
depending on the market value of the securities held by
the Portfolio. Payment will be made as promptly as
possible but in no event
</TABLE>
43
<PAGE>
<TABLE>
<S> <C>
later than 3 business days from the day the redemption
request is received. See "Redemption of Shares" in the
Statement of Additional Information for certain
restrictions that may apply.
BY TELEPHONE Provided that Telephone Redemption Privileges have been
established (by completing the "Telephone Redemption
Privileges" portion of the Account Registration or by
subsequent written instructions with signature(s)
guaranteed), a shareholder may redeem all or part of his
shares by calling the Fund's sub-transfer agent at (800)
374-2633.
No request for telephone redemption will be accepted
except where redemption proceeds are to be remitted to a
bank account that has been predesignated in writing. The
redemption proceeds will be wired by the Fund without
charge to the bank designated in the instructions. Any
changes to the telephone redemption instructions must be
in writing with signature(s) guaranteed.
The Fund's sub-transfer agent will employ procedures
designed to provide reasonable assurance that
instructions communicated by telephone are genuine and,
if it does not do so, it may be liable for any losses
due to unauthorized or fraudulent instructions. The
procedures employed by the sub-transfer agent include
requiring the following information at the time of the
telephone call:
Account number;
Registration of account; and
Social Security Number or Tax I.D.
NOTE: Neither the Fund nor the sub-transfer agent is
responsible for unauthorized telephone redemptions by a
person reasonably believed to be a shareholder unless
the sub-transfer agent has received written notice
canceling the telephone redemption authorization. The
Fund may change or discontinue the telephone redemption
privilege without notice. For your protection, the Fund
and its agents reserve the right to record all calls.
The Fund reserves the right to refuse a telephone
redemption if it believes it is advisable to do so.
Telephone redemptions may be difficult to implement
during periods of drastic economic or market changes,
which may result in an unusually high volume of
telephone calls. If a shareholder is unable to reach the
Fund's sub-transfer agent by telephone, shares may be
redeemed in writing as described below.
</TABLE>
44
<PAGE>
<TABLE>
<S> <C>
BY MAIL A shareholder may redeem all or part of his shares by
written request to the Fund's sub-transfer agent at the
address set forth under "Purchasing Shares--By Mail"
above. The written request must be endorsed by the
registered owner(s) exactly as the account is
registered, including any special capacity of the
registered owner(s). Where the owner(s) have not
arranged with the Fund for redemption proceeds to be
remitted to a predesignated bank account, the Fund
requires that the signature(s) be guaranteed.
Fiduciaries, corporations, and other entities may also
be required to furnish supporting documents.
BY EXCHANGE Shares may be redeemed by making an exchange into
another Analytic Series Fund Portfolio or for shares of
the Analytic Optioned Equity Fund. For more information,
see "EXCHANGING SHARES".
DELAYED PAYMENT In the event that the Fund is requested to redeem shares
for which it has not received good payment (e.g., cash
or cashier's check on a U.S. bank), it may delay the
mailing of a redemption check until such time as it is
determined that good payment has been collected for the
purchase of such shares. In addition, the Fund reserves
the right to delay the mailing of a redemption check
where the shares to be redeemed have been purchased by
check within 15 days prior to the date the redemption
request is received, unless the Fund has been advised
that the check used for investment has been cleared for
payment by the shareholder's bank. However, such delay
will not be longer than 15 days after the purchase date.
The Fund may suspend the redemption right or postpone
payment at times when the New York Stock Exchange is
closed or under certain other circumstances permitted by
the SEC.
PAYMENT-IN-KIND The Fund has made an election with the SEC 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 SEC.
Redemptions in excess of the above limits may be paid in
whole or in part in readily marketable investment
securities or in cash, as the Trustees may deem
advisable. However, payment will be made wholly in cash
unless the Trustees 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
</TABLE>
45
<PAGE>
<TABLE>
<S> <C>
forth under "The Share Price of Each Portfolio" and a
redeeming shareholder will normally incur brokerage
expenses if the shareholder converts these securities to
cash.
BACKUP WITHHOLDING The Fund is required to withhold 31% of redemptions paid
to shareholders who have not complied with IRS taxpayer
identification regulations. You may avoid this
withholding requirement by certifying on the Account
Registration your proper Social Security or Taxpayer
Identification Number and by further certifying that you
are not subject to backup withholding.
SIGNATURE GUARANTEES To protect the shareholder's account and the Fund from
fraud, signature guarantees are required for certain
redemptions. The purpose of signature guarantees is to
verify the identity of the party who has authorized the
redemption. A guarantor must be a commercial bank or
trust company; a broker or dealer, municipal securities
broker or dealer, or government securities broker or
dealer; a credit union; a national securities exchange,
registered securities association or clearing agency; or
a savings association. Signature guarantees are required
for:
any redemption request for an account where the owner(s)
have not arranged with the Fund for redemption proceeds
to be remitted to a predesignated bank account;
transfers or exchanges between accounts which are not
identically registered;
the addition of, or change in the address and wiring
instruction for, financial institutions designated to
receive redemptions sent directly into a shareholder's
account; and
redemptions involving disputed or deceased shareholder
accounts.
The Fund reserves the right to request additional
information from, and make reasonable inquiries of, any
eligible guarantor institution.
MINIMUM ACCOUNT BALANCE With the exception of qualified retirement plan
REQUIREMENT accounts, the Fund may liquidate any shareholder's
account whenever, due to redemptions, the value of the
account falls below the minimum account balance of
$1,000 and the shareholder fails to purchase sufficient
shares to bring the value of the account to $1,000
within 90 days after receiving written notice sent by
the Fund.
</TABLE>
46
<PAGE>
<TABLE>
<S> <C>
EXCHANGING SHARES Should your investment goals change, you may exchange
your shares between the Portfolios in the Fund or for
shares of the Analytic Optioned Equity Fund.
Exchanges are processed at the net asset value per share
next computed after the receipt of instructions in
proper form. Any instruction received after 4:00 P.M.
Eastern Time will be processed at the next day's net
asset value.
BY TELEPHONE Provided that Telephone Exchange Privileges have been
established (by completing the "Telephone Exchange
Privileges" portion of the Account Registration or by
subsequent written instructions with signature(s)
guaranteed), a shareholder may exchange all or part of
his shares by calling the Fund's sub-transfer agent at
(800) 374-2633.
The Fund's sub-transfer agent will employ procedures
designed to provide reasonable assurance that
instructions communicated by telephone are genuine and,
if it does not do so, it may be liable for any losses
due to unauthorized or fraudulent instructions. The
procedures employed by the sub-transfer agent include
requiring the following information at the time of the
telephone call:
Account number;
Registration of account; and
Social Security Number or Tax I.D.
NOTE: Neither the Fund nor the sub-transfer agent is
responsible for unauthorized telephone exchanges by a
person reasonably believed to be a shareholder unless
the sub-transfer agent has received written notice
canceling the telephone exchange authorization. The Fund
may change or discontinue the telephone exchange
privilege without notice. For your protection, the Fund
and its agents reserve the right to record all calls.
The Fund reserves the right to refuse a telephone
exchange if it believes it is advisable to do so.
Telephone exchanges may be difficult to implement during
periods of drastic economic or market changes, which may
result in an unusually high volume of telephone calls.
If a shareholder is unable to reach the Fund's
sub-transfer agent by telephone, shares may be exchanged
in writing as described below.
BY MAIL A shareholder may exchange all or part of his shares by
written request to the Fund's sub-transfer agent at the
address set forth under "Purchasing Shares--By Mail"
above. The written request
</TABLE>
47
<PAGE>
<TABLE>
<S> <C>
must be endorsed by the owner(s) exactly as the account
is registered, including any special capacity of the
registered owner(s). The Fund requires that the
signature(s) be guaranteed.
IMPORTANT EXCHANGE INFORMATION Before you make an exchange you should consider the
following:
Please read the prospectus of the Fund or of Analytic
Optioned Equity Fund before making an exchange.
An exchange is treated as a redemption and a purchase
and any gain or loss on the transaction is taxable.
Recently purchased shares may not be exchanged until
payment for the purchase has been collected. The Fund
reserves the right to defer honoring exchange requests
where shares to be exchanged have been purchased by
check within 15 days prior to the date of the exchange
request, unless the Fund has been advised that such
check has been cleared for payment by the shareholder's
bank.
Exchanges are accepted only if the registrations of the
accounts are identical.
The redemption and purchase price of shares redeemed by
exchange is the net asset value per share of the
respective Portfolios next computed after the Fund
receives instructions in proper form.
No exchange can be made unless the shares to be
purchased have been registered in the state of the
purchaser.
EXCHANGE PRIVILEGE LIMITATIONS The Fund's exchange privilege is not intended to afford
shareholders a way to speculate on short-term market
movements. Accordingly, in order to prevent excessive
use of the Exchange Privilege that may potentially
disrupt the management of the Fund and increase
transaction costs, the Fund may establish a policy of
limiting excessive exchange activity.
WITHDRAWAL PLAN A shareholder may establish a Withdrawal Plan under
which the shareholder receives a check monthly,
quarterly, or annually in a predetermined amount of not
less than $100. All income dividends and any realized
gain distributions attributable to the account will be
reinvested at net asset value on the payment dates, as
with other shareholder accounts, and shares of the
Portfolio(s) will be redeemed from the account in order
to make the required withdrawal payment. If a date is
not specified by the shareholder, then monthly
distributions under the Withdrawal Plan will be
processed on the first business day of the month,
</TABLE>
48
<PAGE>
<TABLE>
<S> <C>
quarterly distributions will be processed on the last
business day of the calendar quarter, and annual
distributions will be processed on the last business day
of the calendar year. The shareholder may change or
terminate his Withdrawal Plan instructions by notifying
the Fund in writing at the address set forth above under
"Purchasing Shares--By Mail" at least 5 business days
prior to the effective date of the change.
IMPORTANT WITHDRAWAL PLAN Withdrawal payments should not be considered dividends,
INFORMATION yield, or income on an investment, since portions of
each payment may consist of a return of capital.
Depending upon the size and frequency of payments and
fluctuations in value of the Fund's shares redeemed,
redemptions for the purpose of making Withdrawal Plan
disbursements may reduce or even exhaust a shareholder's
account.
</TABLE>
49
<PAGE>
<TABLE>
<S> <C>
OFFICERS AND TRUSTEES
CHAIRMAN OF THE
BOARD OF TRUSTEES.... Michael F. Koehn
TRUSTEE.............. Michael D. Butler
TRUSTEE.............. Robertson Whittemore
PRESIDENT............ Harindra de Silva
EXECUTIVE VICE
PRESIDENT AND
SECRETARY............ Charles L. Dobson
TREASURER............ Gregory M. McMurran
SENIOR VICE
PRESIDENT............ Angelo A. Calvello
SENIOR VICE
PRESIDENT............ Marie Nastasi Arlt
</TABLE>
INVESTMENT ADVISOR
Analytic-TSA Global Asset Management, Inc.
700 South Flower Street, Suite 2400
Los Angeles, CA 90017
TRANSFER AGENT, DIVIDEND DISBURSEMENT AGENT,
AND SHAREHOLDER RELATIONS SERVICING AGENT
UAM Fund Services, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208
CUSTODIAN
The Chase Manhattan Bank
1211 Avenue of the Americas
New York, NY 10036
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, CA 90071
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
1000 Wilshire Blvd.
Los Angeles, CA 90017
THE ANALYTIC SERIES FUND
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208
Phone: (800) 374-2633
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE
ADVISER. THIS PROSPECTUS DOES NOT CONSTITUTE ANY OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION.
- ---------------------------------------------------------------------
- -------------------------------------------------------------------
ANALYTICFUNDS
THE ANALYTIC
SERIES FUND
- ----------------------
ENHANCED EQUITY
MASTER FIXED INCOME
SHORT-TERM GOVERNMENT
PROSPECTUS
OCTOBER 20, 1997
MEMBER OF
100% NO-LOAD-TM-
MUTUAL FUND COUNCIL
- -------------------------------------------------------------------
- ----------------------------------------------------------------
