<PAGE>
Securities Act File No. 333-44193
Investment Company Act of 1940 File No. 811-08605
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 12 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 14 /X/
UAM FUNDS, INC. II
(Exact Name of Registrant as specified in Charter)
c/o UAM Fund Services, Inc.
211 Congress Street, 4th Floor
Boston, Massachusetts, 02110
Registrant's Telephone Number (617) 542-5440
(Address of Principal Executive Offices)
Gary L. French, Treasurer
UAM Fund Services, Inc.
211 Congress Street, 4th Floor
Boston, Massachusetts, 02110
(Name and Address of Agent for Service)
COPIES TO:
Audrey C. Talley, Esq.
Drinker, Biddle & Reath, LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA
19103-6996
It is proposed that this filing become effective (check appropriate box):
[ ] Immediately upon filing pursuant to Paragraph (b)
[X] on May 1, 2000 pursuant to Paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to Paragraph (a)(2)
[ ] on (date) pursuant to Paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
PART A
UAM FUNDS, INC. II
The prospectus of the following funds is included in this Post-Effective
Amendment No. 12.
. Analytic Defensive Equity Fund
. Analytic Enhanced Equity Fund
. Analytic International Fund
. Analytic Master Fixed Income Fund
. Analytic Short-Term Government Fund
<PAGE>
UAM Funds
Funds for the Informed Investorsm
Analytic Funds
Institutional Class Prospectus May 1, 2000
Analytic Defensive Equity Fund
Analytic Enhanced Equity Fund
Analytic International Fund
Analytic Master Fixed Income Fund
Analytic Short-Term Government Fund
[LOGO OF UAM(R)]
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE>
Table Of Contents
<TABLE>
<S> <C>
Fund Summary................................................................ 1
What are the Objectives of the Funds?...................................... 1
What are the Principal Investment Strategies of the Funds?................. 1
What are the Principal Risks of the Funds?................................. 5
How Have the Funds Performed?.............................................. 7
What are the Fees and Expenses of the Funds?............................... 10
Investing with the UAM Funds................................................ 12
Buying Shares.............................................................. 12
Redeeming Shares........................................................... 13
Exchanging Shares.......................................................... 15
Transaction Policies....................................................... 15
Account Policies........................................................... 17
Additional Information About the Funds...................................... 20
Other Investment Practices and Strategies.................................. 20
Investment Management...................................................... 21
Shareholder Servicing Arrangements......................................... 22
Financial Highlights........................................................ 23
Defensive Equity Fund...................................................... 23
Enhanced Equity Fund....................................................... 24
International Fund......................................................... 24
Master Fixed Income Fund................................................... 25
Short-Term Government Fund................................................. 26
</TABLE>
<PAGE>
Fund Summary
WHAT ARE THE OBJECTIVES OF THE FUNDS?
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Listed below are the investment objectives of the funds. Except for the
International Fund, a fund may not change its investment objective without
shareholder approval. The International Fund may change its investment ob-
jective without shareholder approval.
Enhanced Equity Fund
The Enhanced Equity Fund seeks above-average total returns through invest-
ments in equity securities.
Defensive Equity Fund
The Defensive Equity Fund seeks to obtain a greater long-term total return
and smaller fluctuations in quarterly total return from a diversified,
hedged common stock fund than would be realized from the same fund
unhedged.
International Fund
The International Fund seeks above-average total returns through invest-
ments in equity securities of companies located in economies outside the
United States.
Master Fixed Income Fund
The Master Fixed Income Fund seeks above average total returns through in-
vestments in a diversified bond fund consisting primarily of U.S. govern-
ment, corporate, and mortgage-related fixed income securities.
Short-Term Government Fund
The Short-Term Government Fund seeks to provide a high level of income
consistent with both low fluctuations in market value and low credit risk.
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE FUNDS?
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In What Securities do the Funds Invest?
Enhanced Equity Fund
The Enhanced Equity Fund normally seeks to achieve its objective by in-
vesting at least 65% of its total assets in equity securities of
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corporations whose securities are traded in the U.S. While the fund may
invest in companies of any size, it usually invests in medium to large
capitalization companies (typically over $2 billion at the time of pur-
chase).
Equity securities represent an ownership interest, or the right to acquire
an ownership interest, in an issuer. Different types of equity securities
provide different voting and dividend rights and priority in case of the
bankruptcy of the issuer. Equity securities include common stocks, pre-
ferred stocks, convertible securities, rights and warrants.
Defensive Equity Fund
Through its proprietary investment process, the adviser attempts to create
a well-diversified and significantly hedged portfolio by investing in a
combination of stocks, debt securities and options. The Defensive Equity
Fund normally seeks to achieve its objective by investing at least 65% of
its total assets, and at least 80% of its total assets (taken at current
value) excluding cash, cash equivalents and U.S. government securities, in
equity securities. The fund may use options, which are agreements that
give an investor the right to buy or sell an asset at an agreed upon price
in the future, to protect its investments against changes resulting from
market conditions (a practice called "hedging"). The adviser bases its
hedging decisions on estimates of the fair value and expected contribution
made by an option to the overall expected return of the fund.
International Fund
The International Fund normally seeks to achieve its objective by invest-
ing at least 65% of its total assets in equity securities of companies lo-
cated outside the United States, including American Depositary Receipts,
European Depositary Receipts and other similar global instruments. The
fund does not intend to invest in securities of emerging markets. The fund
may also engage in over-the-counter swap contracts and foreign currency
exchange contracts to protect the fund against a change in the price of an
investment or currency. Swaps are contracts that obligate two parties to
exchange, or swap, a series of cash flows at specified dates. Foreign cur-
rency exchange contracts are agreements to buy or sell a specific amount
of currency at a predetermined price in the future. While the fund may in-
vest in companies of any size, it usually invests in medium to large com-
panies.
Master Fixed Income Fund
Normally, the Master Fixed Income Fund seeks to achieve its objective by
investing at least 65% of its total assets in U.S. dollar denominated in-
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vestment-grade debt securities. A debt security is an interest bearing se-
curity that corporations and governments use to borrow money from invest-
ors. The issuer of a debt security promises to pay interest at a stated
rate, which may be variable or fixed, and to repay the amount borrowed at
maturity (the date when the issuer must repay the amount it borrowed
(principal) from investors). The fund may invest in a variety of types of
debt securities, including those issued by corporations and the U.S. gov-
ernment and its agencies, mortgage-backed and asset-backed securities, mu-
nicipal notes and bonds, commercial paper and certificates of deposit.
An investment grade debt securities is one that a nationally recognized
statistical rating agency, such as Moody's Investors Service or Standard &
Poor's Rating Group, has rated in its top four rating categories at the
time of purchase. If a security is not rated or is rated under a different
system, the adviser may determine that it is of investment-grade. The ad-
viser may retain securities that are downgraded, if it believes that keep-
ing those securities is warranted.
The fund expects to maintain a duration consistent with the intermediate
sector of the bond market. Duration is a calculation that seeks to measure
the price sensitivity of a debt security, or a fund that invests in debt
securities, to changes in interest rates.
The fund may also buy and sell options on a variety of investments, in-
cluding equity or debt securities, indexes and registered investment com-
panies in order to enhance its returns. In addition, the fund may use syn-
thetic corporate bonds, which may be created by purchasing a treasury se-
curity and selling an equity put option.
Short-Term Government Fund
The Short-Term Government Fund normally invests at least 80% of its total
assets in U.S. government securities. The fund may invest the remainder of
its assets in investment-grade debt securities. The fund expects to invest
in debt securities with maturities of three years or less.
How Does the Adviser Select Securities for the Funds?
Enhanced Equity, Defensive Equity and International Funds
The adviser selects equity securities for these funds using a proprietary
system that ranks stocks according to a mathematical model. The adviser's
system seeks to determine a security's intrinsic (true) value by evaluat-
ing variables, such as relative valuation, price momentum, company funda-
mentals, liquidity and risk. Using its system, the adviser believes it can
assemble a portfolio of securities that is style and sector neutral to
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achieve a level of diversification and risk similar to that of its invest-
ment universe, which is primarily stocks in the S&P 500 Index for the De-
fensive Equity Fund and the Enhanced Equity Fund and large capitalization
international stocks for the International Fund. "Style neutral" means a
fund is similar to its investment universe in terms of exposure to quanti-
fiable characteristics such as average market capitalization. A fund is
"sector neutral" when its exposure to specified economic sectors (such as
technology or utilities) is similar to that of its investment universe.
The adviser also believes that by using its system a fund can consistently
outperform traditional strategies that focus on a single style, such as
value or growth.
The adviser begins the stock selection process by ranking stocks according
to their one-month expected return. The adviser then uses a process called
"portfolio optimization" to select securities that it believes will:
. Maximize expected returns for the fund;
. Minimize expected volatility relative to its benchmark; and
. Diversify the assets of the fund among the various countries, indus-
tries, sectors, and individual securities.
The adviser monitors the stocks held by a fund on a real-time basis for
developments in terms of news events (such as lawsuits or takeover bids)
and significant changes in fundamental factors. The adviser sells a secu-
rity when it believes the incremental return from the sale exceeds the as-
sociated transaction costs.
A fund may also use futures contracts, which are agreements that enable an
investor to buy or sell an asset at an agreed upon price in the future,
and options on futures contracts for a variety of purposes, including:
. To reduce transaction costs;
. To manage cash flows;
. To maintain full market exposure, which means to adjust the character-
istics of its investments to more closely approximate those of its
benchmark (in the case of the International Fund, this means adjusting
its exposure to the various countries represented in its benchmark);
and
. To enhance returns.
Master Fixed Income Fund and Short-Term Government Fund
The adviser constructs each fund to match its benchmark with respect to
duration, maturity and quality. In addition, the adviser tries to add
value
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over the benchmark by using a disciplined quantitative, computer driven,
approach to forecast short-term interest rates and shifts in the yield
curve of U.S. Treasury securities.
A fund may also use futures contracts, which are agreements that enable an
investor to buy or sell an asset at an agreed upon price in the future,
and options on futures contracts for a variety of purposes, including:
. To protect the value of its investments against changes resulting from
market conditions;
. To reduce transaction costs;
. To manage cash flows; and
. To enhance returns.
WHAT ARE THE PRINCIPAL RISKS OF THE FUNDS?
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As with all mutual funds, at any time, your investment in a fund may be
worth more or less than the price that you originally paid for it. There
is also a possibility that a fund will not achieve its goal. This could
happen because its strategy failed to produce the intended results or be-
cause the adviser did not implement the fund's strategy properly. The
funds' shares are not bank deposits and are not guaranteed, endorsed or
insured by any financial institution, government authority or the FDIC.
You may lose money by investing in a fund.
Enhanced Equity, Defensive Equity and International Funds
As with all equity funds, the risks that could affect a value of the
funds' shares and the total return on your investment include the possi-
bility that the equity securities held by a fund will experience sudden,
unpredictable drops in value or long periods of decline in value. This may
occur because of factors that affect the securities markets generally,
such as adverse changes in economic conditions, the general outlook for
corporate earnings, interest rates or investor sentiment. Equity securi-
ties may also lose value because of factors affecting an entire industry
or sector, such as increases in production costs, or factors directly re-
lated to a specific company, such as decisions made by its management.
This risk is greater for small and medium sized companies, which tend to
be more vulnerable to adverse developments than larger companies.
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Enhanced Equity, Defensive Equity, International, Master Fixed Income and
Short-Term Government Funds
Derivatives, a category of securities that includes futures contracts, op-
tions, swaps and forward foreign currency exchange contracts, are finan-
cial instruments whose value is based on an underlying asset or economic
factor. There are various factors that affect the fund's ability to
achieve its objectives with derivatives. Successful use of a derivative
depends on the degree to which prices of the underlying assets correlate
with price movements in the derivatives it buys or sells. A fund could be
negatively affected if the change in market value of its securities fails
to correlate perfectly with the values of the derivatives it purchased or
sold.
The lack of a liquid secondary market for a derivative may prevent a fund
from closing its derivative positions and could adversely impact its abil-
ity to achieve its objectives and to realize profits or limit losses.
Since derivatives may be purchased for a fraction of their value, a rela-
tively small price movement in a derivative may result in an immediate and
substantial loss or gain to a fund. Derivatives are often more volatile
than other investments and a fund may lose more in a derivative than it
originally invested in it.
International Fund
Investing in foreign securities can be riskier and more volatile than in-
vesting in domestic securities. Adverse political and economic develop-
ments or changes in the value of foreign currency can make it harder for
the fund to sell its securities and could reduce the value of your shares.
Differences in tax and accounting standards and difficulties in obtaining
information about foreign companies can negatively affect investment deci-
sions.
Master Fixed Income and Short-Term Government Funds
As with most funds that invest in debt securities, changes in interest
rates are one of the most important factors that could affect the value of
your investment. Rising interest rates tend to cause the prices of debt
securities (especially those with longer maturities) and a fund's share
price to fall. Rising interest rates may also cause investors to pay off
mortgage-backed and asset-backed securities later than anticipated, forc-
ing a fund to keep its money invested at lower rates. Falling interest
rates, however, generally cause investors to pay off mortgage-backed and
asset-backed securities earlier than expected, forcing a fund to reinvest
the money at a lower interest rate.
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The credit rating or financial condition of an issuer may also affect the
value of a debt security. Generally, the lower the quality rating of a se-
curity, the greater the risk that the issuer will fail to pay interest
fully and return principal in a timely manner. If an issuer defaults or be-
comes unable to honor its financial obligations, the security may lose some
or all of its value. The issuer of an investment-grade security is more
likely to pay interest and repay principal than an issuer of a lower rated
bond. Adverse economic conditions or changing circumstances, however, may
weaken the capacity of the issuer to pay interest and repay principal.
HOW HAVE THE FUNDS PERFORMED?
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The following information illustrates some of the risks of the funds. The
bar chart shows how a fund's performance has varied from year to year. The
average annual return table compares a fund's average annual returns to
those of a broad-based securities market index. There is no bar chart or
table for the International Fund because it does not have a full calendar
year of operations. Returns are based on past results and are not an indi-
cation of future performance.
Defensive Equity Fund
Calendar Year Returns
During the periods shown in the chart for the fund, the highest return for
a quarter was 16.32% (quarter ending 12/31/98) and the lowest return for a
quarter was -7.38% (quarter ending 9/30/90).
Average Annual Returns For Periods Ended 12/31/99
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
-----------------------------------------------
<S> <C> <C> <C>
Defensive Equity Fund 21.35% 21.24% 13.34%
-----------------------------------------------
S&P 500 Index 21.04% 28.55% 18.20%
</TABLE>
7
<PAGE>
Enhanced Equity Fund
Calendar Year Returns
During the periods shown in the chart for the fund, the highest return for
a quarter was 20.49% (quarter ending 12/31/98) and the lowest return for a
quarter was -8.00% (quarter ending 09/30/98).
Average Annual Returns for Periods Ended 12/31/99
<TABLE>
<CAPTION>
Since
1 Year 5 Years 7/1/93*
---------------------------------------------
<S> <C> <C> <C>
Enhanced Equity Fund 20.06% 29.02% 22.33%
---------------------------------------------
S&P 500 Index 21.04% 28.55% 22.46%
</TABLE>
* Beginning of operations. Index comparisons begin on 6/30/93.
Master Fixed Income Fund
Calendar Year Returns
During the periods shown in the chart for the fund, the highest return for
a quarter was 5.40% (quarter ending 06/30/95) and the lowest return for a
quarter was -2.76% (quarter ending 03/31/94).
Average Annual Returns for Periods Ended 12/31/99
<TABLE>
<CAPTION>
Since
1 Year 5 Years 7/1/93*
-------------------------------------------------------------------------
<S> <C> <C> <C>
Master Fixed Income Fund -2.00% 6.61% 5.45%
-------------------------------------------------------------------------
Lehman Brothers Government/ Corporate Bond Index -2.15% 7.60% 5.70%
</TABLE>
* Beginning of operations. Index comparisons begin on 6/30/93.
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Short-Term Government Fund
Calendar Year Returns
During the periods shown in the chart for the fund, the highest return for
a quarter was 3.84% (quarter ending 09/30/98) and the lowest return for a
quarter was -0.97% (quarter ending 03/31/94).
Average Annual Returns for Periods Ended 12/31/99
<TABLE>
<CAPTION>
Since
1 Year 5 Years 7/1/93*
-----------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Government Fund 2.54% 6.18% 5.07%
-----------------------------------------------------------------
Merrill Lynch 1 to 3 Year Treasury Index 3.06% 6.50% 5.38%
</TABLE>
* Beginning of operations. Index comparisons begin on 6/30/93.
WHAT ARE THE FEES AND EXPENSES OF THE FUNDS?
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Shareholder Transaction Fees (fees paid directly from your investment)
The funds are no-load investments, which means there are no fees or charges
to buy or sell their shares, to reinvest dividends or to exchange into
other UAM Funds.
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Annual Fund Operating Expenses (expenses that are deducted from fund assets)
The funds do have annual operating expenses and as a shareholder you pay
them indirectly. This table describes the fees and expenses that you may
pay if you buy and hold shares of a fund.
<TABLE>
<CAPTION>
Defensive Enhanced Master Short-Term
Equity Equity Int'l Fixed Income Government
Fund Fund Fund+ Fund Fund
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management Fee 0.60% 0.60% 1.00% 0.45% 0.30%
------------------------------------------------------------------------
Other Expenses 0.58% 0.51% 0.69% 2.30% 2.75%
------------------------------------------------------------------------
Total Annual Fund
Operating Expenses* 1.18% 1.11% 1.69% 2.75% 3.05%
</TABLE>
+ The International Fund has estimated its "Other Expenses" for the fiscal
year ended 12/31/00. The International Fund based its estimates on the
assumption that its average daily net assets were $25 million.
* "Total Annual Fund Operating Expenses" presented in the table above may
be higher than the expenses you would actually pay as a shareholder in a
fund. This is due to the fact that the adviser has voluntarily agreed to
limit the total expenses (excluding interest, taxes, brokerage commis-
sions and extraordinary expenses) of the funds to the extent necessary
to keep them from exceeding the amount presented in the table below, ex-
pressed as a percentage of the fund's average daily net assets. The ad-
viser may change or cancel its expense limitation at any time. In addi-
tion, "Other Expenses" do not take into account any expense offset ar-
rangement a fund may have that would reduce its custodian fee based on
the amount of cash the fund maintains with its custodian. This would
also have the effect of reducing the fund's expenses.
<TABLE>
<CAPTION>
Enhanced Defensive Master Short-Term
Equity Equity Int'l Fixed Income Gov't
Fund Fund Fund Fund Fund
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expense Limit 0.99% 0.99% 1.30% 0.80% 0.60%
</TABLE>
Example
This example can help you to compare the cost of investing in a fund to
the cost of investing in other mutual funds. The example assumes you in-
vest $10,000 in the fund for the periods shown and then redeem all of your
shares at the end of those periods. The example also assumes that you
earned a 5% return on your investment each year, that you reinvested all
of your dividends and distributions and that you paid the total expenses
stated above (which do not reflect any expense limitations) throughout the
period of your investment. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
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<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------
<S> <C> <C> <C> <C>
Defensive Equity Fund $120 $375 $ 649 $1,432
------------------------------------------------------------
Enhanced Equity Fund $113 $353 $ 612 $1,352
------------------------------------------------------------
International Fund $172 $533 $ 918 $1,998
------------------------------------------------------------
Master Fixed Income Fund $278 $853 $1,454 $3,080
------------------------------------------------------------
Short-Term Government Fund $308 $942 $1,601 $3,365
</TABLE>
11
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Investing with the UAM Funds
BUYING SHARES
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By Mail
You can open an account with the UAM Funds by sending a check or money or-
der and your account application to the UAM Funds. You should make your
check or money order payable to the "UAM Funds." The UAM Funds do not ac-
cept third-party checks. You can add to an existing account by sending a
check and, if possible, the "Invest by Mail" stub that accompanied your
statement to the UAM Funds. Be sure your check identifies clearly your
name, your account number and the UAM Fund into which you want to invest.
Regular Mail Address
UAM Funds
PO Box 219081
Kansas City, MO 64121
Express Mail Address
UAM Funds
210 West 10th Street
Kansas City, MO 64105
By Wire
To open an account by wire, first call 1-877-826-5465 for an account num-
ber and wire control number. Next, send your completed account application
to the UAM Funds. Finally, wire your money using the wiring instructions
set forth below. To add to an existing account by wire, call 1-877-826-
5465 to get a wire control number and wire your money to the UAM Funds.
Wiring Instructions
United Missouri Bank
ABA # 101000695
UAM Funds
DDA Acct. # 9870964163
Ref: fund name/account number/
account name/wire control number
By Automatic Investment Plan (Via Automated Clearing House or ACH)
You may not open an account via ACH. However, once you have established an
account, you can set up an automatic investment plan by mailing a com-
pleted application to the UAM Funds. To cancel or change a
12
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plan, write to the UAM Funds. Allow up to 15 days to create the plan and 3
days to cancel or change it.
Minimum Investments
You can open an account with the funds with a minimum initial investment
of $2,500 ($500 for individual retirement accounts (IRAs) and $250 for
Spousal IRAs). You can buy additional shares for as little as $100.
Fund Codes
The reference information below will be helpful to you when you contact
the UAM Funds to purchase or exchange shares, check daily NAVs or get ad-
ditional information.
<TABLE>
<CAPTION>
Trading CUSIP
Symbol Number Fund Code
--------------------------------------------------------
<S> <C> <C> <C>
Enhanced Equity Fund ANEEX 90255P206 791
--------------------------------------------------------
Defensive Equity Fund ANDEX 90255P107 794
--------------------------------------------------------
International Fund None 90255P503 795
--------------------------------------------------------
Master Fixed Income Fund ANFIX 90255P305 792
--------------------------------------------------------
Short-Term Government Fund ANSTX 90255P404 793
</TABLE>
Rights Reserved by the UAM Funds
At any time and without notice, the UAM Funds may:
. Stop offering shares;
. Reject any purchase order; or
. Bar an investor engaged in a pattern of excessive trad-
ing from buying shares. (Excessive trading can hurt per-
formance by disrupting management and by increasing ex-
penses.)
REDEEMING SHARES
- -------------------------------------------------------------------------------
By Mail
Send a letter to the UAM Funds specifying:
. The fund name;
. The account number;
. The dollar amount or number of shares you wish to re-
deem;
. The account name(s); and
. The address.
13
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All registered share owner(s) in the exact name(s) and any special capac-
ity in which they are registered must sign the letter.
Certain shareholders may need to include additional documents to redeem
shares. Please see the Statement of Additional Information (SAI) if you
need more information.
Regular Mail Address
UAM Funds
PO Box 219081
Kansas City, MO 64121
By Telephone
You may redeem shares over the phone by calling 1-877-826-5465. To partic-
ipate in this service and to receive your redemptions by wire, you must
complete the appropriate sections of the account application and mail it
to the UAM Funds.
Online
You can redeem shares on the Internet at www.uam.com. For login informa-
tion, including your personal identification number (PIN), please call 1-
877-826-5465.
By Systematic Withdrawal Plan (Via ACH)
If your account balance is at least $10,000, you may transfer as little as
$100 per month from your UAM Funds account to another financial institu-
tion. To participate in this service, you must complete the appropriate
sections of the account application and mail it to the UAM Funds.
Payment of Redemption Proceeds
Redemption proceeds can be mailed to your account address, sent to your
bank by ACH transfer or wired to your bank account (provided that your
bank information is already on file). The UAM Funds will pay for all
shares redeemed within seven days after they receive a redemption request
in proper form.
The UAM Funds may require that a bank or member firm of a national securi-
ties exchange guarantee signatures. A notary public cannot guarantee a
signature. Signature guarantees are for the protection of shareholders.
Before they grant a redemption request, the UAM Funds may require a share-
holder to furnish additional legal documents to insure proper authoriza-
tion.
14
<PAGE>
If you redeem shares that were purchased by check, you will not receive
your redemption proceeds until the check has cleared, which may take up to
15 days from the purchase date. You may avoid these delays by paying for
shares with a certified check, bank check or money order.
Rights Reserved by the UAM Funds
At any time, the UAM Funds may change or eliminate any of the redemption
methods described above, except redemption by mail. The UAM Funds may sus-
pend your right to redeem if:
. Trading on the New York Stock Exchange is restricted; or
. The Securities and Exchange Commission allows the UAM Funds to delay re-
demptions.
EXCHANGING SHARES
- -------------------------------------------------------------------------------
At no charge, you may exchange shares of one UAM Fund for shares of the
same class of any other UAM Fund by writing to or calling the UAM Funds.
You can also exchange shares of the UAM Funds on the Internet at
www.uam.com. For login information, including your personal identification
number (PIN), please call 1-877-826-5465. Before exchanging your shares,
please read the prospectus of the UAM Fund for which you want to exchange.
You may obtain any UAM Fund prospectus by calling 1-877-826-5465. You may
only exchange shares between accounts with identical registrations (i.e.,
the same names and addresses).
Rights Reserved by the UAM Funds
The UAM Funds may:
. Modify or cancel the exchange program at any time on 60 days' written
notice to shareholders;
. Reject any request for an exchange; or
. Limit or cancel a shareholder's exchange privilege, especially when an
investor is engaged in a pattern of excessive trading.
TRANSACTION POLICIES
- -------------------------------------------------------------------------------
Calculating Your Share Price
You may buy, sell or exchange shares of a UAM Fund on each day the New
York Stock Exchange is open at a price equal to its net asset value per
share (NAV) next computed after it receives and accepts your order.
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<PAGE>
NAVs are calculated as of the close of trading on the New York Stock Ex-
change (generally 4:00 p.m. Eastern Time). Therefore, to receive the NAV
on any given day, the UAM Funds must accept your order before the close of
trading on the New York Stock Exchange that day. Otherwise, you will re-
ceive the NAV that is calculated at the close of trading on the following
business day.
Since securities that are traded on foreign exchanges may trade on days
when the New York Stock Exchange is closed, the value of a UAM Fund may
change on days when you are unable to purchase or redeem shares.
The UAM Funds calculate their NAVs by adding the total value of their as-
sets, subtracting their liabilities and then dividing the result by the
number of shares outstanding. The UAM Funds use current market prices to
value their investments. However, the UAM Funds may value investments at
fair value when market prices are not readily available or when events oc-
cur that make established valuation methods (such as stock exchange clos-
ing prices) unreliable. The UAM Funds will determine an investment's fair
value according to methods established by their Boards. The UAM Funds
value debt securities that are purchased with remaining maturities of 60
days or less at amortized cost, which approximates market value. The UAM
Funds may use a pricing service to value some of their assets, such as
debt securities or foreign securities.
Buying or Selling Shares through a Financial Intermediary
You may buy or sell shares of the UAM Funds through a financial intermedi-
ary (such as a financial planner or adviser). Generally, to buy or sell
shares at the NAV of any given day your financial intermediary must re-
ceive your order before the close of trading on the NYSE that day. Your
financial intermediary is responsible for transmitting all purchase and
redemption requests, investment information, documentation and money to
the UAM Funds on time. Your financial intermediary may charge additional
transaction fees for its services.
Certain financial intermediaries have agreements with the UAM Funds that
allow them to enter confirmed purchase or redemption orders on behalf of
clients and customers. Under this arrangement, the financial intermediary
must send your payment to the UAM Funds by the time they price their
shares on the following business day. If your financial intermediary fails
to do so, it may be responsible for any resulting fees or losses.
In-Kind Transactions
Under certain conditions and at the UAM Funds' discretion, you may pay for
shares of a UAM Fund with securities instead of cash. In addition, the
16
<PAGE>
UAM Funds may pay all or part of your redemption proceeds with securities
instead of cash.
Telephone Transactions
The UAM Funds will employ reasonable procedures to confirm that instruc-
tions communicated by telephone are genuine. The UAM Funds will not be re-
sponsible for any loss, liability, cost or expense for following instruc-
tions received by telephone that it reasonably believes to be genuine.
ACCOUNT POLICIES
- -------------------------------------------------------------------------------
Small Accounts
The UAM Funds may redeem your shares without your permission if the value
of your account falls below 50% of the required minimum initial invest-
ment. This provision does not apply:
. To retirement accounts and certain other accounts; or
. When the value of your account falls because of market fluctuations
and not your redemptions.
The UAM Funds will notify you before liquidating your account and allow
you 60 days to increase the value of your account.
Distributions
Normally, the Enhanced Equity and Defensive Equity Funds distribute their
net investment income quarterly. The International Fund normally distrib-
utes its net investment income annually. The Master Fixed Income and
Short-Term Government Funds accrue dividends daily and pay them monthly to
shareholders. In addition, the funds distribute their net capital gains
once a year. A fund will automatically reinvest dividends and distribu-
tions in additional shares, unless you elect on your account application
to receive them in cash.
Federal Taxes
The following is a summary of the federal income tax consequences of in-
vesting in the funds. This summary does not apply to shares held in an in-
dividual retirement account or other tax-qualified plan, which are not
subject to current tax. Transactions relating to shares held in such ac-
counts may, however, be taxable at some time in the future. You should al-
ways consult your tax advisor for specific guidance regarding the tax ef-
fect of your investment in the UAM Funds.
17
<PAGE>
Taxes on Distributions
The distributions of the funds will generally be taxable to shareholders
as ordinary income or capital gains. You will be subject to income tax on
these distributions regardless of whether they are paid in cash or rein-
vested in additional shares. The amount of tax you may pay on a distribu-
tion will be based on the amount of time a fund held its investments, not
how long you held your shares. Dividends and distributions of short-term
capital gains (capital gains relating to securities held for twelve months
or less) are generally taxable at the same rate as ordinary income. Dis-
tributions of long-term capital gains (capital gains relating to securi-
ties held for more than twelve months) are generally taxable as long-term
capital gains. Once a year UAM Funds will send you a statement showing the
types and total amount of distributions you received during the previous
year.
You should note that if you purchase shares just before a distribution,
the purchase price would reflect the amount of the upcoming distribution.
In this case, you would be taxed on the entire amount of the distribution
received, even though, as an economic matter, the distribution simply con-
stitutes a return of your investment. This is known as "buying into a div-
idend" and should be avoided.
If a fund invests in foreign securities, it may be subject to foreign
withholding taxes with respect to dividends or interest the fund received
from sources in foreign countries. A fund may elect to treat some of those
taxes as a distribution to shareholders, which would allow shareholders to
offset some of their U.S. federal income tax.
Taxes on Exchanges and Redemptions
When you exchange or redeem shares in a fund, you may recognize a capital
gain or loss for federal tax purposes. This gain or loss will be based on
the difference between the cost of your shares (tax basis) and the amount
you receive for them. To aid in computing your tax basis, you should keep
your account statements for the periods during which you held shares.
Generally, your gain or loss will be long-term or short-term depending on
whether your holding period exceeds 12 months. However, any loss you real-
ize on shares held for less six months or less will be treated as a long-
term capital loss to the extent of any long-term capital gain distribu-
tions you received on the shares.
Backup Withholding
By law, a fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.
18
<PAGE>
State and Local Taxes
You may also have to pay state and local taxes on distributions and re-
demptions. However, state taxes may not apply to portions of distributions
that are attributable to interest on federal securities. As mentioned
above, you should always consult your tax advisor for specific guidance
regarding the tax effect of your investment in a fund.
19
<PAGE>
Additional Information About the Funds
OTHER INVESTMENT PRACTICES AND STRATEGIES
- -------------------------------------------------------------------------------
In addition to their principal investment strategies, the funds may use
the investment strategies described below. They may also employ investment
practices that this prospectus does not describe, such as repurchase
agreements, when-issued and forward commitment transactions, lending of
securities, borrowing and other techniques. For more information concern-
ing any of the funds' investment practices and their risks, you should
read the SAI.
Borrowing
A fund can borrow money from banks and others as a temporary measure for
emergency purposes, to facilitate redemption requests or for other pur-
poses that are consistent with its investment objective and strategies.
Each fund other than the International Fund may borrow up to 10% of its
total assets. The International Fund may borrow up to 33 1/3% of its total
assets.
Foreign Securities
The Defensive Equity Fund, the Enhanced Equity Fund, the Master Fixed In-
come Fund and the Short-Term Government Fund may each invest up to 20% of
its total assets in foreign securities. As described above foreign securi-
ties can be riskier and more volatile than domestic securities. For more
information, see the "Fund Summary" above and the SAI.
Short-Term Investing
At times, the adviser may decide to invest up to 100% of a fund's assets
in a variety of high-quality, short-term debt securities, such as U.S.
government securities. The adviser may invest in these types of securities
for temporary defensive purposes, to earn a return on uninvested assets or
to meet redemptions. The adviser may temporarily adopt a defensive posi-
tion to reduce changes in the value of the shares of a fund that may re-
sult from adverse market, economic, political or other developments.
When the adviser pursues a temporary defensive strategy, a fund may not
profit from favorable developments that it would have otherwise profited
from if it were pursuing its normal strategies. Likewise, these strategies
may prevent a fund from achieving its stated objectives.
20
<PAGE>
Portfolio Turnover
The Defensive Equity Fund and the Enhanced Equity Fund may buy and sell
investments relatively often because they may need to adjust their hold-
ings in response to market volatility. Such a strategy often involves
higher expenses, including brokerage commissions, and may increase the
amount of capital gains (and, in particular, short-term gains) realized by
a fund. Shareholders must pay tax on such capital gains.
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
Investment Adviser
Analytic Investors, Inc., a California corporation located at 700 South
Flower St., Suite 2400, Los Angeles, CA 90017, is the investment adviser
to each of the funds. The adviser manages and supervises the investment of
each fund's assets on a discretionary basis. The adviser, an affiliate of
United Asset Management Corporation, was founded in 1970 as one of the
first independent investment counsel firms specializing in the creation
and continuous management of optioned equity and optioned debt portfolios
for fiduciaries and other long-term investors. The adviser serves pensions
and profit-sharing plans, endowments, foundations, corporate investment
portfolios, mutual savings banks and insurance companies.
Before March 31, 1999, Pilgrim Baxter & Associates, Ltd. was the funds'
investment adviser, and Analytic Investors was the sub-adviser to each
fund other than the International Fund. The funds pay Analytic Investors
at the same rates they paid Pilgrim Baxter, which are set forth in the ta-
ble below and are expressed as a percentage of average net assets. In ad-
dition, Analytic Investors has voluntarily agreed to limit the total ex-
penses of each fund to the amounts listed in the table below. To maintain
these expense limits, the adviser may waive a portion of its management
fee and/or reimburse certain expenses of the funds (excluding interest,
taxes, brokerage and extraordinary expenses). Each fund expects its fee
waiver/expense reimbursement arrangement to remain in effect for the cur-
rent fiscal year; however, the adviser, at its option, may end such ar-
rangements at any time.
<TABLE>
<CAPTION>
Enhanced Defensive Master Short-term
Equity Equity Fixed Income Government
Fund Fund Int'l Fund Fund Fund
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Management fees 0.60% 0.60% 1.00% 0.45% 0.30%
-----------------------------------------------------------------------
Expense Limits 0.99% 0.99% 1.30% 0.80% 0.60%
</TABLE>
21
<PAGE>
Portfolio Managers
Teams of the adviser's investment professionals manage the investments of
the funds. For more information on the composition of those teams, includ-
ing biographies of some of their members, please see the SAI.
SHAREHOLDER SERVICING ARRANGEMENTS
- -------------------------------------------------------------------------------
Brokers, dealers, banks, trust companies and other financial representa-
tives may receive compensation from the funds or their service providers
for providing a variety of services. This section briefly describes how
the financial representatives may get paid.
For providing certain services to their clients, financial representatives
may be paid a fee based on the assets of a fund that are attributable to
the financial representative. These services may include record keeping,
transaction processing for shareholders' accounts and certain shareholder
services not currently offered to shareholders that deal directly with a
fund. In addition, your financial representatives may charge you other ac-
count fees for buying or redeeming shares of a fund or for servicing your
account. Your financial representative should provide you with a schedule
of its fees and services.
A fund may pay all or part of the fees paid to financial representatives.
Periodically, the funds' board reviews these arrangements to ensure that
the fees paid are appropriate to the services performed. A fund does not
pay these service fees on shares purchased directly. In addition, the ad-
viser and its affiliates may, at their own expense, pay financial repre-
sentatives for these services.
The adviser and its affiliates may, at their own expense, pay financial
representatives for distribution and marketing services performed with re-
spect to a fund. The adviser may pay its affiliated companies for distri-
bution and marketing services performed with respect to a fund.
22
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the fi-
nancial performance of a fund for the fiscal periods indicated. Certain
information contained in the table reflects the financial results for a
single share. The total returns in the table represent the rate that an
investor would have earned on an investment in a fund assuming all divi-
dends and distributions were reinvested. PricewaterhouseCoopers LLP has
audited this information. The financial statements and the unqualified
opinion of PricewaterhouseCoopers LLP are included in the annual report of
the funds, which is available upon request by calling the UAM Funds at 1-
877-826-5465.
DEFENSIVE EQUITY FUND*
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $11.77 $12.41 $13.71 $12.64 $10.60
-----------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income 0.10 0.05 0.12 0.19 0.23
Net Realized and Unrealized
Gain 2.33 3.05 2.49 1.78 2.04
-----------------------------------------------------------------------------
Total From Investment
Operations 2.43 3.10 2.61 1.97 2.27
-----------------------------------------------------------------------------
Distributions:
Net Investment Income (0.08) (0.05) (0.12) (0.19) (0.23)
Net Realized Gain (Loss) (2.13) (3.69) (3.79) (0.71) -
In Excess of Realized Gain (0.17) - - - -
-----------------------------------------------------------------------------
Total Distributions (2.38) (3.74) (3.91) (0.90) (0.23)
-----------------------------------------------------------------------------
Net Asset Value, End of
Period $11.82 $11.77 $12.41 $13.71 $12.64
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Total Return 21.35% 28.89% 19.11% 15.66% 21.52%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $70,842 $56,021 $46,286 $52,484 $42,648
Ratio of Expenses to Average
Net Assets 1.04% 1.38% 1.30% 1.23% 1.22%
Ratio of Net Investment
Income to Average Net Assets 0.74% 0.40% 0.75% 1.43% 1.87%
Portfolio Turnover Rate 360% 299% 75% 43% 32%
</TABLE>
+ You can find the text for this footnote on page 26.
23
<PAGE>
ENHANCED EQUITY FUND+
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $10.90 $8.43 $7.43 $7.95 $6.04
----------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income (Loss) 0.10 0.06 0.09 0.13 0.14
Net Realized and Unrealized
Gain (Loss) 2.06 3.07 2.12 1.69 1.98
----------------------------------------------------------------------------
Total From Investment
Operations 2.16 3.13 2.21 1.82 2.12
----------------------------------------------------------------------------
Distributions:
Net Investment Income (0.10) (0.06) (0.09) (0.13) (0.14)
In Excess of Investment Income - (0.01) (0.01) - -
Net Realized Capital Gains (0.61) (0.59) (1.10) (2.20) (0.07)
In Excess of Realized Gain (0.04) - (0.01) (0.01) -
----------------------------------------------------------------------------
Total Distributions (0.75) (0.66) (1.21) (2.34) (0.21)
----------------------------------------------------------------------------
Net Asset Value, End of Period $12.31 $10.90 $8.43 $7.43 $7.95
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Return 20.06% 37.82% 29.86% 22.95% 35.36%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $145,185 $33,889 $7,331 $3,519 $2,318
Ratio of Expenses to Average
Net Assets 0.99% 1.26% 1.00% 0.91% 0.50%
Ratio of Net Investment Income
(Loss) to Average Net Assets 1.08% 0.78% 1.17% 1.53% 2.02%
Portfolio Turnover Rate 261% 297% 189% 179% 10%
</TABLE>
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, 1999#
---------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
---------------------------------------------------------------
Income from Investment Operations:
Net Investment Income 0.01
Net Realized and Unrealized Gain 1.25
---------------------------------------------------------------
Total From Investment Operations 1.26
---------------------------------------------------------------
Distributions:
Net Investment Income -
Net Realized Capital Gains (0.01)
---------------------------------------------------------------
Total Distributions (0.01)
---------------------------------------------------------------
Net Asset Value, End of Period $11.25
---------------------------------------------------------------
---------------------------------------------------------------
Total Return 12.67%@
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $1,658
Ratio of Expenses to Average Net Assets 1.30%*
Ratio of Net Investment Income to Average Net Assets 0.66%*
Portfolio Turnover Rate 5%@
+ You can find the text for this footnote on page 26.
24
<PAGE>
MASTER FIXED INCOME FUND+
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $9.81 $10.00 $11.62 $11.78 $10.75
----------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income (Loss) 0.48 0.51 0.67 0.66 0.69
Net Realized and Unrealized
Gain (Loss) (0.67) (0.14) 0.46 (0.01) 1.03
----------------------------------------------------------------------------
Total From Investment
Operations (0.19) 0.37 1.13 0.65 1.72
----------------------------------------------------------------------------
Distributions:
Net Investment Income (0.48) (0.51) (0.67) (0.66) (0.69)
In Excess of Investment Income (0.01) - - - -
Net Realized Capital Gains - (0.05) (1.98) (0.14) -
In Excess of Realized Gains - - (0.10) (0.01) -
----------------------------------------------------------------------------
Total Distributions (0.49) (0.56) (2.75) (0.81) (0.69)
----------------------------------------------------------------------------
Net Asset Value, End of Period $9.13 $9.81 $10.00 $11.62 $11.78
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Return (2.00)% 3.80% 10.04% 5.69% 16.43%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $4,523 $4,954 $5,712 $28,926 $24,868
Ratio of Expenses to Average
Net Assets 0.87% 1.07% 0.90% 0.72% 0.69%
Ratio of Net Investment Income
to Average Net Assets 5.13% 5.06% 5.60% 5.66% 5.99%
Portfolio Turnover Rate 81% 98% 40% 22% 32%
</TABLE>
+ You can find the text for this footnote on page 26.
25
<PAGE>
SHORT-TERM GOVERNMENT FUND+
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $10.10 $9.97 $9.99 $10.14 $9.70
-----------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income 0.56 0.56 0.56 0.63 0.57
Net Realized and Unrealized Gain
(Loss) (0.31) 0.14 (0.02) (0.10) 0.44
-----------------------------------------------------------------------------
Total From Investment Operations 0.25 0.70 0.54 0.53 1.01
-----------------------------------------------------------------------------
Distributions:
Net Investment Income (0.56) (0.56) (0.56) (0.67) (0.57)
In Excess of Investment Income - (0.01) - - -
Net Realized Gain - - - (0.01) -
-----------------------------------------------------------------------------
Total Distributions (0.56) (0.57) (0.56) (0.68) (0.57)
-----------------------------------------------------------------------------
Net Asset Value, End of Period $9.79 $10.10 $9.97 $9.99 $10.14
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Total Return 2.54% 7.10% 5.54% 5.28% 10.65%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Ratios and Supplemental Data
Net Assets, End of Period
(Thousands) $3,729 $5,259 $2,978 $1,008 $27,880
Ratio of Expenses to Average Net
Assets 0.69% 0.84% 0.60% 0.56% 0.50%
Ratio of Net Investment Income to
Average Net Assets 5.68% 5.43% 5.57% 5.99% 5.76%
Portfolio Turnover Rate 62% 25% 34% 31% 10%
</TABLE>
* Annualized
@ Not annualized
# For the period from September 30, 1999 (commencement of operations) to
December 31, 1999.
* The information set forth in this table for the periods prior to August
31, 1998 is the financial data of the Defensive Equity Portfolio of Ana-
lytic Optioned Equity Fund, Inc. Analytic Defensive Equity Fund acquired
the assets and assumed the liabilities of the Defensive Equity Portfolio
of Analytic Optioned Equity Fund, Inc. on August 31, 1998. The net asset
values at the beginning of each period and the changes in net asset val-
ues including the net asset values at the end of each period through the
date of reorganization have been restated to reflect the conversion ra-
tio of 0.95328 on the date of reorganization for the Analytic Defensive
Equity Fund.
+ The information set forth in these tables for the periods prior to July
27, 1998 is the financial data of the Enhanced Equity Fund, Master Fixed
Income Fund and Short-Term Government Fund, each a series of a predeces-
sor company, The Analytic Series Fund, Inc., Analytic Enhanced Equity
Fund, Analytic Master Fixed Income Fund and Analytic Short-Term Govern-
ment Fund acquired the assets and assumed the liabilities of the En-
hanced Equity Fund, Master Fixed Income Fund and Short-Term Government
Fund of the Analytic Series Fund, Inc. on July 27, 1998. The net asset
value at the beginning of each period and the changes in net asset val-
ues including the net asset values at the end of each period through the
date of reorganization have been restated to reflect the conversion ra-
tios on the date of reorganization as follows: 0.61425 for the Analytic
Enhanced Equity Fund, 1.1312 for the Analytic Master Fixed Income Fund
and 1.0162 for the Analytic Short-Term Government Fund.
26
<PAGE>
Analytic Funds
Investors who want more information about a fund should read the fund's
annual/semi-annual reports and the fund's SAI. The annual/semi-annual re-
ports of a fund provide additional information about its investments. In
the annual report, you will also find a discussion of the market condi-
tions and investment strategies that significantly affected the perfor-
mance of the fund during the last fiscal year. The SAI contains additional
detailed information about the fund and is incorporated by reference into
(legally part of) this prospectus.
Investors can receive free copies of the SAI, shareholder reports and
other information about the UAM Funds and can make shareholder inquiries
by writing to or calling:
UAM Funds
PO Box 219081
Kansas City, MO 64121
(Toll free) 1-877-UAM-LINK (826-5465)
www.uam.com
You can review and copy information about the funds (including the SAI) at
the Securities and Exchange Commission's Public Reference Room in Washing-
ton, D.C. You can get information on the operation of the Public Reference
Room by calling the Securities and Exchange Commission at 1-202-942-8090.
Reports and other information about the fund are available on the EDGAR
Database on the Securities and Exchange Commission's Internet site at
http://www.sec.gov. You may obtain copies of this information, after pay-
ing a duplicating fee, by electronic request at the following E-mail ad-
dress: [email protected], or by writing the Securities and Exchange Com-
mission's Public Reference Section, Washington, D.C. 20549-0102.
Investment Company Act of 1940 file number: 811-08605.
[UAM LOGO]
<PAGE>
PART B
UAM FUNDS, INC. II
The statement of additional information for the following funds is included in
this Post-Effective Amendment No. 12.
. Analytic Defensive Equity Fund
. Analytic Enhanced Equity Fund
. Analytic International Fund
. Analytic Master Fixed Income Fund
. Analytic Short-Term Government Fund
<PAGE>
UAM Funds, Inc. II
PO Box 219081
Kansas City, MO 64121
(Toll free) 1-877-UAM-LINK (826-5465)
Analytic Funds
Analytic Defensive Equity Fund
Analytic Enhanced Equity Fund
Analytic International Fund
Analytic Master Fixed Income Fund
Analytic Short-Term Government Fund
Institutional Class Shares
Statement of Additional Information
May 1, 2000
This statement of additional information (SAI) is not a prospectus. However,
you should read it in conjunction with the prospectus of the portfolios dated
May 1, 2000, as supplemented from time to time. You may obtain a prospectus
for the portfolios by contacting the UAM Funds at the address listed
above.
<PAGE>
The audited financial statements of the portfolios and the related report of
PricewaterhouseCoopers LLP, independent accountants of the portfolios, are
incorporated herein by reference in the section called "Financial Statements."
No other portions of the annual reports are incorporated by reference.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
<S> <C>
Description of Permitted Investments................................ 1
What Investment Strategies May the Portfolios Use?................. 1
Debt Securities.................................................... 3
Derivatives........................................................ 11
Equity Securities.................................................. 20
Foreign Securities................................................. 23
Investment Companies............................................... 27
Repurchase Agreements.............................................. 27
Restricted Securities.............................................. 28
Securities Lending................................................. 28
Short Sales........................................................ 28
When-Issued, Forward Commitment and Delayed Delivery Transactions.. 29
Investment Policies of the Portfolios............................... 30
Fundamental Investment Policies.................................... 30
Non-Fundamental Investment Policies................................ 32
Management Of The Fund.............................................. 34
Principal Shareholders.............................................. 36
Investment Advisory and Other Services.............................. 36
Investment Adviser................................................. 36
Distributor........................................................ 42
Shareholder Servicing Arrangements................................. 42
Administrative Services............................................ 42
Custodian.......................................................... 45
Independent Public Accountant...................................... 45
Code of Ethics..................................................... 45
Brokerage Allocation and Other Practices............................ 45
Selection of Brokers............................................... 45
Simultaneous Transactions.......................................... 46
Brokerage Commissions.............................................. 46
Capital Stock and Other Securities.................................. 47
The Fund........................................................... 47
Description Of Shares And Voting Rights............................ 47
Purchase, Redemption and Pricing of Shares.......................... 48
Net Asset Value Per Share.......................................... 49
Purchase of Shares................................................. 49
Redemption of Shares............................................... 50
Exchange Privilege................................................. 52
Transfer Of Shares................................................. 53
Performance Calculations............................................ 53
Total Return....................................................... 53
Yield.............................................................. 54
Comparisons........................................................ 55
Financial Statements................................................ 55
Glossary............................................................ 55
Bond Ratings........................................................ 57
Moody's Investors Service, Inc..................................... 57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Standard & Poor's Ratings Services................................. 59
Duff & Phelps Credit Rating Co..................................... 61
Fitch IBCA Ratings................................................. 62
Comparative Benchmarks.............................................. 64
</TABLE>
<PAGE>
Description of Permitted Investments
WHAT INVESTMENT STRATEGIES MAY THE PORTFOLIOS USE?
- --------------------------------------------------------------------------------
As noted in the prospectus, in addition to its principal investment
strategies, a portfolio may use the securities and investment strategies
listed below in seeking their objectives. This SAI describes each of these
investments/strategies and their risks. The portfolios may not notify
shareholders before employing new strategies, unless it expects such
strategies to become principal strategies. The investments that are
italicized are principal strategies and you can find more information on these
techniques in the portfolios' prospectus. You can find more information
concerning the limits on a portfolio's ability to use these investments in
"What Are the Investment Strategies of the Funds?" In addition, since the
description of permitted investments contained in this SAI is a combined
description of investment strategies of all of the UAM Funds, certain matters
described herein may not apply to a portfolio.
Defensive Equity Fund
. Equity securities.
. Futures.
. Investment company securities.
. Options.
. Repurchase agreements.
. Restricted securities.
. Securities lending.
. Short-term debt securities
. When-issued securities.
Enhanced Equity Fund
. Equity securities.
. Futures.
. Investment company securities.
. Options.
. Repurchase agreements.
. Restricted securities.
. Securities lending.
. Short-term debt securities
. When-issued securities.
1
<PAGE>
International Fund
. Equity securities.
. Foreign securities.
. Forward currency exchange contracts.
. Futures.
. Investment companies.
. Options.
. Repurchase agreements.
. Restricted securities.
. Securities lending.
. Short-term investments.
. Swaps.
. When-issued securities.
Master Fixed Income Fund
. Convertible securities.
. Debt securities.
. Futures.
. Investment company securities.
. Options.
. Repurchase agreements.
. Restricted securities.
. Securities lending.
. When-issued securities.
Short-Term Government Fund
. Debt securities.
. Futures.
. Investment company securities.
. Options.
. Repurchase agreements.
. Restricted securities.
. Securities lending.
. When-issued securities.
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DEBT SECURITIES
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Corporations and governments use debt securities to borrow money from
investors. Most debt securities promise a variable or fixed rate of return
and repayment of the amount borrowed at maturity. Some debt securities, such
as zero-coupon bonds, do not pay current interest and are purchased at a
discount from their face value.
Types of Debt Securities
U.S. Government Securities
U.S. government securities are securities that the U.S. Treasury has issued
(treasury securities) and securities that a federal agency or a government-
sponsored entity has issued (agency securities). Treasury securities include
treasury bills, which have initial maturities of less than one year, treasury
notes, which have initial maturities of one to ten years and treasury bonds,
which have initial maturities of at least ten years and certain types of
mortgage-backed securities that are described under "Mortgage-Backed
Securities" and "Other Asset-Backed Securities." This SAI discusses mortgage-
backed treasury and agency securities in detail in the "Mortgage-Backed
Securities" and "Other Asset-Backed Securities."
The full faith and credit of the U.S. government supports treasury securities.
Unlike treasury securities, the full faith and credit of the U.S. government
generally do not back agency securities. Agency securities are typically
supported in one of three ways:
. by the right of the issuer to borrow from the U.S. Treasury;
. by the discretionary authority of the U.S. government to buy the
obligations of the agency; or
. by the credit of the sponsoring agency.
While U.S. government securities are guaranteed as to principal and interest,
their market value is not guaranteed. U.S. government securities are subject
to the same interest rate and credit risks as other fixed income securities.
However, since U.S. government securities are of the highest quality, the
credit risk is minimal. The U.S. government does not guarantee the net asset
value of the assets of a portfolio.
Corporate Bonds
Corporations issue bonds and notes to raise money for working capital or for
capital expenditures such as plant construction, equipment purchases and
expansion. In return for the money loaned to the corporation by investors,
the corporation promises to pay investors interest, and repay the principal
amount of the bond or note.
Mortgage-Backed Securities
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Mortgage-backed securities are interests in pools of mortgage loans that
various governmental, government-related and private organizations assemble as
securities for sale to investors. Unlike most debt securities, which pay
interest periodically and repay principal at maturity or on specified call
dates, mortgage-backed securities make monthly payments that consist of both
interest and principal payments. In effect, these payments are a "pass-
through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Since homeowners usually have the option of paying either part or
all of the loan balance before maturity, the effective maturity of a mortgage-
backed security is often shorter than is stated.
Governmental entities, private insurers and the mortgage poolers may insure or
guarantee the timely payment of interest and principal of these pools through
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance and letters of credit. The adviser will consider
such insurance and guarantees and the creditworthiness of the issuers thereof
in determining whether a mortgage-related security meets its investment
quality standards. It is possible that the private insurers or guarantors will
not meet their obligations under the insurance policies or guarantee
arrangements.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable.
Government National Mortgage Association (GNMA)
GNMA is the principal governmental guarantor of mortgage-related securities.
GNMA is a wholly owned corporation of the U.S. government and it falls within
the Department of Housing and Urban Development. Securities issued by GNMA are
treasury securities, which means the full faith and credit of the U.S.
government backs them. GNMA guarantees the timely payment of principal and
interest on securities issued by institutions approved by GNMA and backed by
pools of FHA-insured or VA-guaranteed mortgages. GNMA does not guarantee the
market value or yield of mortgage-backed securities or the value of a
portfolio's shares. To buy GNMA securities, a portfolio may have to pay a
premium over the maturity value of the underlying mortgages, which the
portfolio may lose if prepayment occurs.
Federal National Mortgage Association (FNMA)
FNMA is a government-sponsored corporation owned entirely by private
stockholders. FNMA is regulated by the Secretary of Housing and Urban
development. FNMA purchases conventional mortgages from a list of approved
sellers and service providers, including state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit
unions and mortgage bankers. Securities issued by FNMA are agency securities,
which means FNMA, but not the U.S. government, guarantees their timely payment
of principal and interest.
Federal Home Loan Mortgage Corporation (FHLMC)
FHLMC is a corporate instrumentality of the U.S. government whose stock is
owned by the twelve Federal Home Loan Banks. Congress created FHLMC in 1970
to increase the availability of mortgage credit for residential housing. FHLMC
issues Participation Certificates (PCs) which represent interests in
conventional mortgages. Like FNMA, FHLMC guarantees the timely payment of
interest and ultimate collection of principal, but PCs are not backed by the
full faith and credit of the U.S. government.
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Commercial Banks, Savings And Loan Institutions, Private Mortgage Insurance
Companies, Mortgage Bankers and other Secondary Market Issuers
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional mortgage loans. In addition to
guaranteeing the mortgage-related security, such issuers may service and/or
have originated the underlying mortgage loans. Pools created by these issuers
generally offer a higher rate of interest than pools created by GNMA, FNMA &
FHLMC because they are not guaranteed by a government agency.
Risks of Mortgage-Backed Securities
Yield characteristics of mortgage-backed securities differ from those of
traditional debt securities in a variety of ways. For example, payments of
interest and principal are more frequent (usually monthly) In addition to
risks associated with changes in interest rates described in "Factors
Affecting the Value of Debt Securities," a variety of economic, geographic,
social and other factors, such as the sale of the underlying property,
refinancing or foreclosure, can cause investors to repay the loans underlying
a mortgage-backed security sooner than expected. If the prepayment rates
increase, a portfolio may have to reinvest its principal at a rate of interest
that is lower than the rate on existing mortgage-backed securities.
Other Asset-Backed Securities
These securities are interests in pools of a broad range of assets other than
mortgages, such as automobile loans, computer leases and credit card
receivables. Like mortgage-backed securities, these securities are pass-
through. In general, the collateral supporting these securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments with interest rate fluctuations.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the
benefit of any security interest in the related assets, which raises the
possibility that recoveries on repossessed collateral may not be available to
support payments on these securities. For example, credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which allow debtors
to reduce their balances by offsetting certain amounts owed on the credit
cards. Most issuers of asset-backed securities backed by automobile
receivables permit the servicers of such receivables to retain possession of
the underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related asset-backed securities. Due
to the quantity of vehicles involved and requirements under state laws, asset-
backed securities backed by automobile receivables may not have a proper
security interest in all of the obligations backing such receivables.
To lessen the effect of failures by obligors on underlying assets to make
payments, the entity administering the pool of assets may agree to ensure the
receipt of payments on the underlying pool occurs in a timely fashion
("liquidity protection"). In addition, asset-backed securities may obtain
insurance, such as guarantees, policies or letters of credit obtained by the
issuer or sponsor from third parties, for some or all of the assets in the
pool ("credit support").
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Delinquency or loss more than that anticipated or failure of the credit
support could adversely affect the return on an investment in such a security.
A portfolio may also invest in residual interests in asset-backed securities,
which is the excess cash flow remaining after making required payments on the
securities and paying related administrative expenses. The amount of residual
cash flow resulting from a particular issue of asset-backed securities depends
in part on the characteristics of the underlying assets, the coupon rates on
the securities, prevailing interest rates, the amount of administrative
expenses and the actual prepayment experience on the underlying assets.
Collateralized Mortgage Obligations (CMOs)
CMOs are hybrids between mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, CMOs usually pay interest and prepay principal
monthly. While whole mortgage loans may collateralize CMOs, mortgage-backed
securities guaranteed by GNMA, FHLMC, or FNMA and their income streams more
typically collateralize them.
A REMIC is a CMO that qualifies for special tax treatment under the Internal
Revenue Code of 1986, as amended, and invests in certain mortgages primarily
secured by interests in real property and other permitted investments.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Each class of CMO or REMIC certificate, often referred to as a
"tranche," is issued at a specific interest rate and must be fully retired by
its final distribution date. Generally, all classes of CMOs or REMIC
certificates pay or accrue interest monthly. Investing in the lowest tranche
of CMOs and REMIC certificates involves risks similar to those associated with
investing in equity securities.
Short-Term Investments
To earn a return on uninvested assets, meet anticipated redemptions, or for
temporary defensive purposes, a portfolio may invest a portion of its assets
in the short-term securities listed below, U.S. government securities and
investment-grade corporate debt securities. Unless otherwise specified, a
short-term debt security has a maturity of one year or less.
Bank Obligations
A portfolio will only invest in a security issued by a commercial bank if the
bank:
. has total assets of at least $1 billion, or the equivalent in other
currencies;
. is a U.S. bank and a member of the Federal Deposit Insurance
Corporation; and
. is a foreign branch of a U.S. bank and the adviser believes the security
is of an investment quality comparable with other debt securities that
the portfolio may purchase.
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Time Deposits
Time deposits are non-negotiable deposits, such as savings accounts or
certificates of deposit, held by a financial institution for a fixed term with
the understanding that the depositor can withdraw its money only by giving
notice to the institution. However, there may be early withdrawal penalties
depending upon market conditions and the remaining maturity of the obligation.
A portfolio may only purchase time deposits maturing from two business days
through seven calendar days.
Certificates of Deposit
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or savings and loan association for a definite
period of time and earning a specified return.
Banker's Acceptance
A banker's acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with an international commercial transaction
(to finance the import, export, transfer or storage of goods).
Commercial Paper
Commercial paper is a short-term obligation with a maturity ranging from 1 to
270 days issued by banks, corporations and other borrowers. Such investments
are unsecured and usually discounted. A portfolio may invest in commercial
paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's, or, if not
rated, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P. See "Bond Ratings" for a description
of commercial paper ratings.
Stripped Mortgage-Backed Securities
Stripped mortgage-backed securities are derivative multiple-class mortgage-
backed securities. Stripped mortgage-backed securities usually have two
classes that receive different proportions of interest and principal
distributions on a pool of mortgage assets. Typically, one class will receive
some of the interest and most of the principal, while the other class will
receive most of the interest and the remaining principal. In extreme cases,
one class will receive all of the interest ("interest only" or "IO" class)
while the other class will receive the entire principal sensitive to the rate
of principal payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments may
adversely affect the yield to maturity of IOs. Slower than anticipated
prepayments of principal may adversely affect the yield to maturity of a PO.
The yields and market risk of interest only and principal only stripped
mortgage-backed securities, respectively, may be more volatile than those of
other fixed income securities, including traditional mortgage-backed
securities.
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Yankee Bonds
Yankee bonds are dollar-denominated bonds issued inside the United States by
foreign entities. Investment in these securities involve certain risks which
are not typically associated with investing in domestic securities. See
"FOREIGN SECURITIES".
Zero Coupon Bonds
These securities make no periodic payments of interest, but instead are sold
at a discount from their face value. When held to maturity, their entire
income, which consists of accretion of discount, comes from the difference
between the issue price and their value at maturity. The amount of the
discount rate varies depending on factors including the time remaining until
maturity, prevailing interest rates, the security's liquidity and the issuer's
credit quality. The market value of zero coupon securities may exhibit greater
price volatility than ordinary debt securities because a stripped security
will have a longer duration than an ordinary debt security with the same
maturity. A portfolio's investments in pay-in-kind, delayed and zero coupon
bonds may require it to sell certain of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.
These securities may include treasury securities that have had their interest
payments ("coupons") separated from the underlying principal ("corpus") by
their holder, typically a custodian bank or investment brokerage firm. Once
the holder of the security has stripped or separated corpus and coupons, it
may sell each component separately. The principal or corpus is then sold at a
deep discount because the buyer receives only the right to receive a future
fixed payment on the security and does not receive any rights to periodic
interest (cash) payments. Typically, the coupons are sold separately or
grouped with other coupons with like maturity dates and sold bundled in such
form. The underlying treasury security is held in book-entry form at the
Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered
securities which are owned ostensibly by the bearer or holder thereof), in
trust on behalf of the owners thereof. Purchasers of stripped obligations
acquire, in effect, discount obligations that are economically identical to
the zero coupon securities that the Treasury sells itself.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record keeping system. Under a Federal Reserve program
known as "STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities," a portfolio can record its beneficial ownership of the coupon or
corpus directly in the book-entry record-keeping system.
Terms to Understand
Maturity
Every debt security has a stated maturity date when the issuer must repay the
amount it borrowed (principal) from investors. Some debt securities, however,
are callable, meaning the issuer can repay the principal earlier, on or after
specified dates (call dates). Debt securities are most likely to be called
when interest rates are falling because the issuer can refinance at a lower
rate, similar to a homeowner refinancing a mortgage. The effective maturity
of a debt security is usually its nearest call date.
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A portfolio that invests in debt securities has no real maturity. Instead, it
calculates its weighted average maturity. This number is an average of the
stated maturity of each debt security held by a portfolio, with the maturity
of each security weighted by the percentage of the assets of the portfolio it
represents.
Duration
Duration is a calculation that seeks to measure the price sensitivity of a
debt security, or a portfolio that invests in debt securities, to changes in
interest rates. It measures sensitivity more accurately than maturity because
it takes into account the time value of cash flows generated over the life of
a debt security. Future interest payments and principal payments are
discounted to reflect their present value and then are multiplied by the
number of years they will be received to produce a value expressed in years --
the duration. Effective duration takes into account call features and sinking
fund prepayments that may shorten the life of a debt security.
An effective duration of 4 years, for example, would suggest that for each 1%
reduction in interest rates at all maturity levels, the price of a security is
estimated to increase by 4%. An increase in rates by the same magnitude is
estimated to reduce the price of the security by 4%. By knowing the yield and
the effective duration of a debt security, one can estimate total return based
on an expectation of how much interest rates, in general, will change. While
serving as a good estimator of prospective returns, effective duration is an
imperfect measure.
Factors Affecting the Value of Debt Securities
The total return of a debt instrument is composed of two elements: the
percentage change in the security's price and interest income earned. The
yield to maturity of a debt security estimates its total return only if the
price of the debt security remains unchanged during the holding period and
coupon interest is reinvested at the same yield to maturity. The total return
of a debt instrument, therefore, will be determined not only by how much
interest is earned, but also by how much the price of the security and
interest rates change.
Interest Rates
The price of a debt security generally moves in the opposite direction from
interest rates (i.e., if interest rates go up, the value of the bond will go
down, and vice versa).
Prepayment Risk
This risk effects mainly mortgage-backed securities. Unlike other debt
securities, falling interest rates can hurt mortgage-backed securities, which
may cause your share price to fall. Lower rates motivate people to pay off
mortgage-backed and asset-backed securities earlier than expected. A
portfolio may then have to reinvest the proceeds from such prepayments at
lower interest rates, which can reduce its yield. The unexpected timing of
mortgage and asset-backed prepayments caused by the variations in interest
rates may also shorten or lengthen the average maturity of a portfolio. If
left unattended, drifts in the average maturity of a portfolio can have the
unintended effect of increasing or reducing the effective duration of the
portfolio, which may adversely affect the expected performance of the
portfolio.
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Extension Risk
The other side of prepayment risk occurs when interest rates are rising.
Rising interest rates can cause a portfolio's average maturity to lengthen
unexpectedly due to a drop in mortgage prepayments. This would increase the
sensitivity of a portfolio to rising rates and its potential for price
declines. Extending the average life of a mortgage-backed security increases
the risk of depreciation due to future increases in market interest rates. For
these reasons, mortgage-backed securities may be less effective than other
types of U.S. government securities as a means of "locking in" interest rates.
Credit Rating
Coupon interest is offered to investors of debt securities as compensation for
assuming risk, although short-term treasury securities, such as 3-month
treasury bills, are considered "risk free." Corporate securities offer higher
yields than treasury securities because their payment of interest and complete
repayment of principal is less certain. The credit rating or financial
condition of an issuer may affect the value of a debt security. Generally,
the lower the quality rating of a security, the greater the risks that the
issuer will fail to pay interest and return principal. To compensate investors
for taking on increased risk, issuers with lower credit ratings usually offer
their investors a higher "risk premium" in the form of higher interest rates
above comparable treasury securities.
Changes in investor confidence regarding the certainty of interest and
principal payments of a corporate debt security will result in an adjustment
to this "risk premium." Since an issuer's outstanding debt carries a fixed
coupon, adjustments to the risk premium must occur in the price, which effects
the yield to maturity of the bond. If an issuer defaults or becomes unable to
honor its financial obligations, the bond may lose some or all of its value.
A security rated within the four highest rating categories by a rating agency
is called investment-grade because its issuer is more likely to pay interest
and repay principal than an issuer of a lower rated bond. Adverse economic
conditions or changing circumstances, however, may weaken the capacity of the
issuer to pay interest and repay principal. If a security is not rated or is
rated under a different system, the adviser may determine that it is of
investment-grade. The adviser may retain securities that are downgraded, if
it believes that keeping those securities is warranted.
Debt securities rated below investment-grade (junk bonds) are highly
speculative securities that are usually issued by smaller, less credit worthy
and/or highly leveraged (indebted) companies. A corporation may issue a junk
bond because of a corporate restructuring or other similar event. Compared
with investment-grade bonds, junk bonds carry a greater degree of risk and are
less likely to make payments of interest and principal. Market developments
and the financial and business condition of the corporation issuing these
securities influences their price and liquidity more than changes in interest
rates, when compared to investment-grade debt securities. Insufficient
liquidity in the junk bond market may make it more difficult to dispose of
junk bonds and may cause a portfolio to experience sudden and substantial
price declines. A lack of reliable, objective data or market quotations may
make it more difficult to value junk bonds accurately.
Rating agencies are organizations that assign ratings to securities based
primarily on the rating agency's assessment of the issuer's financial
strength. The portfolios currently use ratings compiled by Moody's Investor
Services ("Moody's"), Standard and Poor's Ratings Services ("S&P"), Duff &
Phelps Rating Co. and Fitch IBCA. Credit ratings are only an agency's opinion,
not an absolute standard of quality, and they do not reflect an evaluation of
market risk. The section "Bond Ratings" contains further information
concerning the ratings of certain rating agencies and their significance.
The adviser may use ratings produced by ratings agencies as guidelines to
determine the rating of a security at the time a portfolio buys it. A rating
agency may change its credit ratings at any time. The adviser monitors the
rating of the
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security and will take appropriate actions if a rating agency reduces the
security's rating. A portfolio is not obligated to dispose of securities whose
issuers subsequently are in default or which are downgraded below the above-
stated ratings.
DERIVATIVES
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Derivatives are financial instruments whose value is based on an underlying
asset, such as a stock or a bond, an underlying economic factor, such as an
interest rate or a market benchmark, such as an index. A portfolio can use
derivatives to gain exposure to various markets in a cost efficient manner, to
reduce transaction costs or to remain fully invested. A portfolio may also
invest in derivatives to protect it from broad fluctuations in market prices,
interest rates or foreign currency exchange rates. Investing in derivatives
for these purposes is known as "hedging." When hedging is successful, the
portfolio will have offset any depreciation in the value of its portfolio
securities by the appreciation in the value of the derivative position.
Although techniques other than the sale and purchase of derivatives could be
used to control the exposure of the portfolio to market fluctuations, the use
of derivatives may be a more effective means of hedging this exposure.
Types of Derivatives
Futures
A futures contract is an agreement between two parties whereby one party sells
and the other party agrees to buy a specified amount of a financial instrument
at an agreed upon price and time. The financial instrument underlying the
contract may be a stock, stock index, bond, bond index, interest rate, foreign
exchange rate or other similar instrument. Agreeing to buy the underlying
financial information is called buying a futures contract or taking a long
position in the contract. Likewise, agreeing to sell the underlying financial
instrument is called selling a futures contract or taking a short position in
the contract.
Futures contracts are traded in the United States on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for such trading
and regulated by the Commodity Futures Trading Commission, a federal agency.
These contract markets standardize the terms, including the maturity date and
underlying financial instrument, of all futures contracts.
Unlike other securities, the parties to a futures contract do not have to pay
for or deliver the underlying financial instrument until some future date (the
delivery date). Contract markets require both the purchaser and seller to
deposit "initial margin" with a futures broker, known as a futures commission
merchant, or a custodian bank when they enter into the contract. Initial
margin deposits are typically equal to a percentage of the contract's value.
After they open a
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futures contract, the parties to the transaction must compare the purchase
price of the contract to its daily market value. If the value of the futures
contract changes in such a way that a party's position declines, that party
must make additional "variation margin" payments so that the margin payment is
adequate. On the other hand, the value of the contract may change in such a
way that there is excess margin on deposit, possibly entitling the party that
has a gain to receive all or a portion of this amount. This process is known
as "marking to the market."
Although the actual terms of a futures contract may call for the actual
delivery of and payment for the underlying security, in many cases the parties
may close the contract early by taking an opposite position in an identical
contract. If the sale price upon closing out the contract is less than the
original purchase price, the person closing out the contract will realize a
loss. If the sale price upon closing out the contract is more than the
original purchase price, the person closing out the contract will realize a
gain. The opposite is also true. If the purchase price upon closing out the
contract is more than the original sale price, the person closing out the
contract will realize a loss. If the purchase price upon closing out the
contract is less than the original sale price, the person closing out the
contract will realize a gain.
A portfolio may incur commission expenses when it opens or closes a futures
position.
Options
An option is a contract between two parties for the purchase and sale of a
financial instrument for a specified price (known as the "strike price" or
"exercise price") at any time during the option period. Unlike a futures
contract, an option grants a right (not an obligation) to buy or sell a
financial instrument. Generally, a seller of an option can grant a buyer two
kinds of rights: a "call" (the right to buy the security) or a "put" (the
right to sell the security). Options have various types of underlying
instruments, including specific securities, indices of securities prices,
foreign currencies, interest rates and futures contracts. Options may be
traded on an exchange (exchange-traded-options) or may be customized
agreements between the parties (over-the-counter or "OTC options"). Like
futures, a financial intermediary, known as a clearing corporation,
financially backs exchange-traded options. However, OTC options have no such
intermediary and are subject to the risk that the counter-party will not
fulfill its obligations under the contract.
Purchasing Put and Call Options
When the portfolio purchases a put option, it buys the right to sell the
instrument underlying the option at a fixed strike price. In return for this
right, the portfolio pays the current market price for the option (known as
the "option premium"). The portfolio may purchase put options to offset or
hedge against a decline in the market value of its securities ("protective
puts") or to benefit from a decline in the price of securities that it does
not own. The portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying securities decreased below the exercise
price sufficiently to cover the premium and transaction costs. However, if the
price of the underlying instrument does not fall enough to offset the cost of
purchasing the option, a put buyer would lose the premium and related
transaction costs.
Call options are similar to put options, except that the portfolio obtains the
right to purchase, rather than sell, the underlying instrument at the option's
strike price. The portfolio would normally purchase call options in
anticipation of an increase in the market value of securities it owns or wants
to buy. The portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying instrument exceeded the exercise price
plus the premium paid and related transaction costs. Otherwise, the portfolio
would realize a loss equal to the premium paid and relating transaction costs
of buying the call option.
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The purchaser of an option may terminate its position by:
. Allowing it to expire and losing its entire premium;
. Exercising the option and either selling (in the case of a put option) or
buying (in the case of a call option) the underlying instrument at the
strike price; or
. Closing it out in the secondary market at its current price.
Selling (Writing) Put and Call Options
When a portfolio writes a call option it assumes an obligation to sell
specified securities to the holder of the option at a specified price if the
option is exercised at any time before the expiration date. Similarly, when a
portfolio writes a put option it assumes an obligation to purchase specified
securities from the option holder at a specified price if the option is
exercised at any time before the expiration date. A portfolio may terminate
its position in an exchange-traded put option before exercise by buying an
option identical to the one it has written. Similarly, it may cancel an over-
the-counter option by entering into an offsetting transaction with the
counter-party to the option.
The portfolio could try to hedge against an increase in the value of
securities it would like to acquire by writing a put option on those
securities. If security prices rise, the portfolio would expect the put
option to expire and the premium it received to offset the increase in the
security's value. If security prices remain the same over time, the
portfolio would hope to profit by closing out the put option at a lower price.
If security prices fall, the portfolio may lose an amount of money equal to
the difference between the value of the security and the premium it received.
Writing covered put options may deprive the portfolio of the opportunity to
profit from a decrease in the market price of the securities it would like to
acquire.
The characteristics of writing call options are similar to those of writing
put options, except that call writers expect to profit if prices remain the
same or fall. The portfolio could try to hedge against a decline in the value
of securities it already owns by writing a call option. If the price of that
security falls as expected, the portfolio would expect the option to expire
and the premium it received to offset the decline of the security's value.
However, the portfolio must be prepared to deliver the underlying instrument
in return for the strike price, which may deprive it of the opportunity to
profit from an increase in the market price of the securities it holds.
A portfolio is permitted only to write covered options. A portfolio can cover
a call option by owning:
. The underlying security (or securities convertible into the underlying
security without additional consideration), index, interest rate, foreign
currency or futures contract;
. A call option on the same security or index with the same or lesser
exercise price;
. A call option on the same security or index with a greater exercise price
and segregating cash or liquid securities in an amount equal to the
difference between the exercise prices;
. Cash or liquid securities equal to at least the market value of the
optioned securities, interest rate, foreign currency or futures contract;
or
. In the case of an index, a portfolio of securities that corresponds to the
index.
A portfolio can cover a put option by:
. Entering into a short position in the underlying security;
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. Purchasing a put option on the same security, index, interest rate, foreign
currency or futures contract with the same or greater exercise price;
. Purchasing a put option on the same security, index, interest rate, foreign
currency or futures contract with a lesser exercise price and segregating
cash or liquid securities in an amount equal to the difference between the
exercise prices; or
. Maintaining the entire exercise price in liquid securities.
Options on Securities Indices
Options on securities indices are similar to options on securities, except
that the exercise of securities index options requires cash settlement
payments and does not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect price fluctuations
in a group of securities or segment of the securities market rather than price
fluctuations in a single security.
Options on Futures
An option on a futures contract provides the holder with the right to buy a
futures contract (in the case of a call option) or sell a futures contract (in
the case of a put option) at a fixed time and price. Upon exercise of the
option by the holder, the contract market clearing house establishes a
corresponding short position for the writer of the option (in the case of a
call option) or a corresponding long position (in the case of a put option).
If the option is exercised, the parties will be subject to the futures
contracts. In addition, the writer of an option on a futures contract is
subject to initial and variation margin requirements on the option position.
Options on futures contracts are traded on the same contract market as the
underlying futures contract.
The buyer or seller of an option on a futures contract may terminate the
option early by purchasing or selling an option of the same series (i.e., the
same exercise price and expiration date) as the option previously purchased or
sold. The difference between the premiums paid and received represents the
trader's profit or loss on the transaction.
The portfolio may purchase put and call options on futures contracts instead
of selling or buying futures contracts. The portfolio may buy a put option on
a futures contract for the same reasons it would sell a futures contract. It
also may purchase such put options in order to hedge a long position in the
underlying futures contract. The portfolio may buy call options on futures
contracts for the same purpose as the actual purchase of the futures
contracts.
A portfolio may write a call option on a futures contract to hedge against a
decline in the prices of the instrument underlying the futures contracts. If
the price of the futures contract at expiration were below the exercise price,
a portfolio would retain the option premium, which would offset, in part, any
decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the purchase
of the futures contracts, except that, if the market price declines, a
portfolio would pay more than the market price for the underlying instrument.
The premium received on the sale of the put option, less any transaction
costs, would reduce the net cost to a portfolio.
Combined Positions
A portfolio may purchase and write options in combination with each other, or
in combination with futures or forward contracts, to adjust the risk and
return characteristics of the overall position. For example, the portfolio
could construct a combined position whose risk and return characteristics are
similar to selling a futures contract by purchasing a put option and writing a
call option on the same underlying instrument. Alternatively, the portfolio
could write a call option
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at one strike price and buy a call option at a lower price to reduce the risk
of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
Forward Foreign Currency Exchange Contracts
A forward foreign currency contract involves an obligation to purchase or sell
a specific amount of currency at a future date or date range at a specific
price. In the case of a cancelable forward contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified fee.
Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. Unlike futures contracts, forward
contracts:
. Do not have standard maturity dates or amounts (i.e., the parties to the
contract may fix the maturity date and the amount).
. Are traded in the inter-bank markets conducted directly between currency
traders (usually large commercial banks) and their customers, as opposed to
futures contracts which are traded only on exchanges regulated by the CFTC.
. Do not require an initial margin deposit.
. May be closed by entering into a closing transaction with the currency
trader who is a party to the original forward contract, as opposed to a
commodities exchange.
Foreign Currency Hedging Strategies
A "settlement hedge" or "transaction hedge" is designed to protect a portfolio
against an adverse change in foreign currency values between the date a
security is purchased or sold and the date on which payment is made or
received. Entering into a forward contract for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction for
a fixed amount of U.S. dollars "locks in" the U.S. dollar price of the
security. A portfolio may also use forward contracts to purchase or sell a
foreign currency when it anticipates purchasing or selling securities
denominated in foreign currency, even if it has not yet selected the specific
investments.
A portfolio may use forward contracts to hedge against a decline in the value
of existing investments denominated in foreign currency. Such a hedge,
sometimes referred to as a "position hedge," would tend to offset both
positive and negative currency fluctuations, but would not offset changes in
security values caused by other factors. A portfolio could also hedge the
position by selling another currency expected to perform similarly to the
currency in which a portfolio's investment is denominated. This type of hedge,
sometimes referred to as a "proxy hedge," could offer advantages in terms of
cost, yield, or efficiency, but generally would not hedge currency exposure as
effectively as a direct hedge into U.S. dollars. Proxy hedges may result in
losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities that a portfolio owns or intends to
purchase or sell. They simply establish a rate of exchange that one can
achieve at some future point in time. Additionally, these techniques tend to
minimize the risk of loss due to a decline in the value of the hedged currency
and to limit any potential gain that might result from the increase in value
of such currency.
A portfolio may enter into forward contracts to shift its investment exposure
from one currency into another. Such transactions may call for the delivery of
one foreign currency in exchange for another foreign currency, including
currencies in which its securities are not then denominated. This may include
shifting exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes known
as a "cross-hedge," will tend to reduce or eliminate exposure to the currency
that is sold, and increase exposure to the currency that is purchased. Cross-
hedges protect against losses resulting from a decline in the hedged currency,
but will cause a portfolio to assume the risk of fluctuations in the value of
the currency it purchases. Cross hedging transactions also involve the risk of
imperfect correlation between changes in the values of the currencies
involved.
It is difficult to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, a portfolio may have to purchase additional foreign currency on
the spot market if the
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market value of a security it is hedging is less than the amount of foreign
currency it is obligated to deliver. Conversely, a portfolio may have to sell
on the spot market some of the foreign currency it received upon the sale of a
security if the market value of such security exceeds the amount of foreign
currency it is obligated to deliver.
Swaps, Caps, Collars and Floors
Swap Agreements
A swap is a financial instrument that typically involves the exchange of cash
flows between two parties on specified dates (settlement dates), where the
cash flows are based on agreed-upon prices, rates, indices, etc. The nominal
amount on which the cash flows are calculated is called the notional amount.
Swaps are individually negotiated and structured to include exposure to a
variety of different types of investments or market factors, such as interest
rates, foreign currency rates, mortgage securities, corporate borrowing rates,
security prices or inflation rates.
Swap agreements may increase or decrease the overall volatility of the
investments of a portfolio and its share price. The performance of swap
agreements may be affected by a change in the specific interest rate,
currency, or other factors that determine the amounts of payments due to and
from a portfolio. If a swap agreement calls for payments by a portfolio, a
portfolio must be prepared to make such payments when due. In addition, if the
counter-party's creditworthiness declined, the value of a swap agreement would
be likely to decline, potentially resulting in losses.
Generally, swap agreements have a fixed maturity date that will be agreed upon
by the parties. The agreement can be terminated before the maturity date only
under limited circumstances, such as default by one of the parties or
insolvency, among others, and can be transferred by a party only with the
prior written consent of the other party. A portfolio may be able to
eliminate its exposure under a swap agreement either by assignment or by other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party. If the counter-party is unable to
meet its obligations under the contract, declares bankruptcy, defaults or
becomes insolvent, a portfolio may not be able to recover the money it
expected to receive under the contract.
A swap agreement can be a form of leverage, which can magnify a portfolio's
gains or losses. In order to reduce the risk associated with leveraging, a
portfolio will cover its current obligations under swap agreements according
to guidelines established by the SEC. If a portfolio enters into a swap
agreement on a net basis, it will segregate assets with a daily value at least
equal to the excess, if any, of a portfolio's accrued obligations under the
swap agreement over the accrued amount a portfolio is entitled to receive
under the agreement. If a portfolio enters into a swap agreement on other than
a net basis, it will segregate assets with a value equal to the full amount of
a portfolio's accrued obligations under the agreement.
Equity Swaps -- In a typical equity index swap, one party agrees to pay
another party the return on a stock, stock index or basket of stocks in return
for a specified interest rate. By entering into an equity index swap, for
example, the index receiver can gain exposure to stocks making up the index of
securities without actually purchasing those stocks. Equity index swaps
involve not only the risk associated with investment in the securities
represented in the index, but also the risk that the performance of such
securities, including dividends, will not exceed the return on the interest
rate that a portfolio will be committed to pay.
Interest Rate Swaps -- Interest rate swaps are financial instruments that
involve the exchange on one type of interest rate for another type of interest
rate cash flow on specified dates in the future. Some of the different types
of interest rate swaps are "fixed-for floating rate swaps," "termed basis
swaps" and "index amortizing swaps." Fixed-for floating
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rate swap involve the exchange of fixed interest rate cash flows for floating
rate cash flows. Termed basis swaps entail cash flows to both parties based on
floating interest rates, where the interest rate indices are different. Index
amortizing swaps are typically fixed-for floating swaps where the notional
amount changes if certain conditions are met.
Like a traditional investment in a debt security, a portfolio could lose money
by investing in an interest rate swap if interest rates change adversely. For
example, if a portfolio enters into a swap where it agrees to exchange a
floating rate of interest for a fixed rate of interest, a portfolio may have
to pay more money than it receives. Similarly, if a portfolio enters into a
swap where it agrees to exchange a fixed rate of interest for a floating rate
of interest, a portfolio may receive less money than it has agreed to pay.
Currency Swaps -- A currency swap is an agreement between two parties in which
one party agrees to make interest rate payments in one currency and the other
promises to make interest rate payments in another currency. A portfolio may
enter into a currency swap when it has one currency and desires a different
currency. Typically the interest rates that determine the currency swap
payments are fixed, although occasionally one or both parties may pay a
floating rate of interest. Unlike an interest rate swap, however, the
principal amounts are exchanged at the beginning of the contract and returned
at the end of the contract. Changes in foreign exchange rates and changes in
interest rates, as described above may negatively affect currency swaps.
Caps, Collars and Floors
Caps and floors have an effect similar to buying or writing options. In a
typical cap or floor agreement, one party agrees to make payments only under
specified circumstances, usually in return for payment of a fee by the other
party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level. The seller of an interest rate floor is obligated to make
payments to the extent that a specified interest rate falls below an agreed-
upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Risks of Derivatives
While transactions in derivatives may reduce certain risks, these transactions
themselves entail certain other risks. For example, unanticipated changes in
interest rates, securities prices or currency exchange rates may result in a
poorer overall performance of a portfolio than if it had not entered into any
derivatives transactions. Derivatives may magnify a portfolio's gains or
losses, causing it to make or lose substantially more than it invested.
When used for hedging purposes, increases in the value of the securities a
portfolio holds or intends to acquire should offset any losses incurred with a
derivative. Purchasing derivatives for purposes other than hedging could
expose a portfolio to greater risks.
Correlation of Prices
A portfolio's ability to hedge its securities through derivatives depends on
the degree to which price movements in the underlying index or instrument
correlate with price movements in the relevant securities. In the case of
poor
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correlation, the price of the securities a portfolio is hedging may not move
in the same amount, or even in the same direction as the hedging instrument.
The adviser will try to minimize this risk by investing only in those
contracts whose behavior it expects to resemble a portfolio securities it is
trying to hedge. However, if a portfolio's prediction of interest and
currency rates, market value, volatility or other economic factors is
incorrect, a portfolio may lose money, or may not make as much money as it
expected.
Derivative prices can diverge from the prices of their underlying instruments,
even if the characteristics of the underlying instruments are very similar to
the derivative. Listed below are some of the factors that may cause such a
divergence:
. current and anticipated short-term interest rates, changes in volatility of
the underlying instrument, and the time remaining until expiration of the
contract;
. a difference between the derivatives and securities markets, including
different levels of demand, how the instruments are traded, the imposition
of daily price fluctuation limits or trading of an instrument stops; and
. differences between the derivatives, such as different margin requirements,
different liquidity of such markets and the participation of speculators in
such markets.
Derivatives based upon a narrower index of securities, such as those of a
particular industry group, may present greater risk than derivatives based on
a broad market index. Since narrower indices are made up of a smaller number
of securities, they are more susceptible to rapid and extreme price
fluctuations because of changes in the value of those securities.
While currency futures and options values are expected to correlate with
exchange rates, they may not reflect other factors that affect the value of
the investments of a portfolio. A currency hedge, for example, should protect
a yen-denominated security from a decline in the yen, but will not protect a
portfolio against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of a portfolio's foreign-denominated
investments changes in response to many factors other than exchange rates, it
may not be possible to match the amount of currency options and futures to the
value of a portfolio's investments precisely over time.
Lack of Liquidity
Before a futures contract or option is exercised or expires, a portfolio can
terminate it only by entering into a closing purchase or sale transaction.
Moreover, a portfolio may close out a futures contract only on the exchange
the contract was initially traded. Although a portfolio intends to purchase
options and futures only where there appears to be an active market, there is
no guarantee that such a liquid market will exist. If there is no secondary
market for the contract, or the market is illiquid, a portfolio may not be
able to close out its position. In an illiquid market, a portfolio may:
. have to sell securities to meet its daily margin requirements at a time
when it is disadvantageous to do so;
. have to purchase or sell the instrument underlying the contract;
. not be able to hedge its investments; and
. not be able to realize profits or limit its losses.
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Derivatives may become illiquid (i.e., difficult to sell at a desired time and
price) under a variety of market conditions. For example:
. an exchange may suspend or limit trading in a particular derivative
instrument, an entire category of derivatives or all derivatives, which
sometimes occurs because of increased market volatility;
. unusual or unforeseen circumstances may interrupt normal operations of an
exchange;
. the facilities of the exchange may not be adequate to handle current
trading volume;
. equipment failures, government intervention, insolvency of a brokerage firm
or clearing house or other occurrences may disrupt normal trading activity;
or
. investors may lose interest in a particular derivative or category of
derivatives.
Management Risk
If the adviser incorrectly predicts stock market and interest rate trends, a
portfolio may lose money by investing in derivatives. For example, if a
portfolio were to write a call option based on its adviser's expectation that
the price of the underlying security would fall, but the price were to rise
instead, a portfolio could be required to sell the security upon exercise at a
price below the current market price. Similarly, if a portfolio were to write
a put option based on the adviser's expectation that the price of the
underlying security would rise, but the price were to fall instead, a
portfolio could be required to purchase the security upon exercise at a price
higher than the current market price.
Volatility and Leverage
The prices of derivatives are volatile (i.e., they may change rapidly,
substantially and unpredictably) and are influenced by a variety of factors,
including:
. actual and anticipated changes in interest rates;
. fiscal and monetary policies; and
. national and international political events.
Most exchanges limit the amount by which the price of a derivative can change
during a single trading day. Daily trading limits establish the maximum
amount that the price of a derivative may vary from the settlement price of
that derivative at the end of trading on the previous day. Once the price of
a derivative reaches this value, a portfolio may not trade that derivative at
a price beyond that limit. The daily limit governs only price movements
during a given day and does not limit potential gains or losses. Derivative
prices have occasionally moved to the daily limit for several consecutive
trading days, preventing prompt liquidation of the derivative.
Because of the low margin deposits required upon the opening of a derivative
position, such transactions involve an extremely high degree of leverage.
Consequently, a relatively small price movement in a derivative may result in
an immediate and substantial loss (as well as gain) to a portfolio and it may
lose more than it originally invested in the derivative.
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If the price of a futures contract changes adversely, a portfolio may have to
sell securities at a time when it is disadvantageous to do so to meet its
minimum daily margin requirement. A portfolio may lose its margin deposits if
a broker-dealer with whom it has an open futures contract or related option
becomes insolvent or declares bankruptcy.
EQUITY SECURITIES
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Types of Equity Securities
Common Stocks
Common stocks represent units of ownership in a company. Common stocks
usually carry voting rights and earn dividends. Unlike preferred stocks,
which are described below, dividends on common stocks are not fixed but are
declared at the discretion of the company's board of directors.
Preferred Stocks
Preferred stocks are also units of ownership in a company. Preferred stocks
normally have preference over common stock in the payment of dividends and the
liquidation of the company. However, in all other respects, preferred stocks
are subordinated to the liabilities of the issuer. Unlike common stocks,
preferred stocks are generally not entitled to vote on corporate matters.
Types of preferred stocks include adjustable-rate preferred stock, fixed
dividend preferred stock, perpetual preferred stock, and sinking fund
preferred stock. Generally, the market values of preferred stock with a fixed
dividend rate and no conversion element varies inversely with interest rates
and perceived credit risk.
Convertible Securities
Convertible Securities are securities that may be exchanged for, converted
into, or exercised to acquire a predetermined number of shares of the issuer's
common stock at a portfolio's option during a specified time period (such as
convertible preferred stocks, convertible debentures and warrants). A
convertible security is generally a fixed income security that is senior to
common stock in an issuer's capital structure, but is usually subordinated to
similar non-convertible securities. In exchange for the conversion feature,
many corporations will pay a lower rate of interest on convertible securities
than debt securities of the same corporation. 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).
Convertible securities are subject to the same risks as similar securities
without the convertible feature. The price of a convertible security is more
volatile during times of steady interest rates than other types of debt
securities. In addition, they are 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 common stock declines.
A synthetic convertible security is a combination investment in which a
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.
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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
a 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 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 and applicable sub-adviser take such differences
into account when evaluating such positions. When a synthetic convertible
position "matures" because of the expiration of the associated option, a
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 a portfolio
does not so extend the maturity of a position, it may continue to hold the
associated fixed income security.
Rights and Warrants
A right is a privilege granted to existing shareholders of a corporation to
subscribe to shares of a new issue of common stock before it is issued.
Rights normally have a short life, usually two to four weeks, are freely
transferable and entitle the holder to buy the new common stock at a lower
price than the public offering price. Warrants are securities that are
usually issued together with a debt security or preferred stock and that give
the holder the right to buy proportionate amount of common stock at a
specified price. Warrants are freely transferable and are traded on major
exchanges. Unlike rights, warrants normally have a life that is measured in
years and entitles the holder to buy common stock of a company at a price that
is usually higher than the market price at the time the warrant is issued.
Corporations often issue warrants to make the accompanying debt security more
attractive.
An investment in warrants and rights may entail greater risks than certain
other types of investments. Generally, rights and warrants do not carry the
right to receive dividends or exercise voting rights with respect to the
underlying securities, and they do not represent any rights in the assets of
the issuer. In addition, their value does not necessarily change with the
value of the underlying securities, and they cease to have value if they are
not exercised on or before their expiration date. Investing in rights and
warrants increases the potential profit or loss to be realized from the
investment as compared with investing the same amount in the underlying
securities.
Risks of Investing in Equity Securities
General Risks of Investing in Stocks
While investing in stocks allows investors to participate in the benefits of
owning a company, such investors must accept the risks of ownership. Unlike
bondholders, who have preference to a company's earnings and cash flow,
preferred
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stockholders, followed by common stockholders in order of priority, are
entitled only to the residual amount after a company meets its other
obligations. For this reason, the value of a company's stock will usually
react more strongly to actual or perceived changes in the company's financial
condition or prospects than its debt obligations. Stockholders of a company
that fares poorly can lose money.
Stock markets tend to move in cycles with short or extended periods of rising
and falling stock prices. The value of a company's stock may fall because of:
. Factors that directly relate to that company, such as decisions made by its
management or lower demand for the company's products or services;
. Factors affecting an entire industry, such as increases in production
costs; and
. Changes in financial market conditions that are relatively unrelated to the
company or its industry, such as changes in interest rates, currency
exchange rates or inflation rates.
Because preferred stock is generally junior to debt securities and other
obligations of the issuer, deterioration in the credit quality of the issuer
will cause greater changes in the value of a preferred stock than in a more
senior debt security with similar stated yield characteristics.
Small and Medium-Sized Companies
Investors in small and medium-sized companies typically take on greater risk
and price volatility than they would by investing in larger, more established
companies. This increased risk may be due to the greater business risks of
their small or medium size, limited markets and financial resources, narrow
product lines and frequent lack of management depth. The securities of small
and medium companies are often traded in the over-the-counter market and might
not be traded in volumes typical of securities traded on a national securities
exchange. Thus, the securities of small and medium capitalization companies
are likely to be less liquid, and subject to more abrupt or erratic market
movements, than securities of larger, more established companies.
Technology Companies
Stocks of technology companies have tended to be subject to greater volatility
than securities of companies that are not dependent upon or associated with
technological issues. Technology companies operate in various industries.
Since these industries frequently share common characteristics, an event or
issue affecting one industry may significantly influence other, related
industries. For example, technology companies may be strongly affected by
worldwide scientific or technological developments and their products and
services may be subject to governmental regulation or adversely affected by
governmental policies.
FOREIGN SECURITIES
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Types of Foreign Securities
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Foreign securities are debt and equity securities that are traded in markets
outside of the United States. The markets in which these securities are
located can be developed or emerging. People can invest in foreign securities
in a number of ways:
. They can invest directly in foreign securities denominated in a foreign
currency;
. They can invest in American Depositary Receipts (ADRs), European Depositary
Receipts (EDRs) and other similar global instruments; and
. They can invest in investment funds.
American Depositary Receipts
American Depositary Receipts are certificates evidencing ownership of shares
of a foreign issuer. These certificates are issued by depository banks and
generally trade on an established market in the United States or elsewhere. A
custodian bank or similar financial institution in the issuer's home country
holds the underlying shares in trust. The depository bank may not have
physical custody of the underlying securities at all times and may charge fees
for various services, including forwarding dividends and interest and
corporate actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However, ADRs
continue to be subject to many of the risks associated with investing directly
in foreign securities. EDRs are similar to ADRs, except that they are
typically issued by European Banks or trust companies.
Emerging Markets
An "emerging country" is generally a country that the International Bank for
Reconstruction and Development (World Bank) and the International Finance
Corporation would consider to be an emerging or developing country. Typically,
emerging markets are in countries that are in the process of
industrialization, with lower gross national products (GNP) than more
developed countries. There are currently over 130 countries that the
international financial community generally considers to be emerging or
developing countries, approximately 40 of which currently have stock markets.
These countries generally include every nation in the world except the United
States, Canada, Japan, Australia, New Zealand and most nations located in
Western Europe.
Investment Funds
Some emerging countries currently prohibit direct foreign investment in the
securities of their companies. Certain emerging countries, however, permit
indirect foreign investment in the securities of companies listed and traded
on their stock exchanges through investment funds that they have specifically
authorized. Investments in these investment funds are subject to the
provisions of the 1940 Act. Shareholders of a UAM Fund that invests in such
investment funds will bear not only their proportionate share of the expenses
of the UAM Fund (including operating expenses and the fees of the adviser),
but also will indirectly bear similar expenses of the underlying investment
funds. In addition, these investment funds may trade at a premium over their
net asset value.
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Risks of Foreign Securities
Foreign securities, foreign currencies, and securities issued by U.S. entities
with substantial foreign operations may involve significant risks in addition
to the risks inherent in U.S. investments.
Political and Economic Factors
Local political, economic, regulatory, or social instability, military action
or unrest, or adverse diplomatic developments may affect the value of foreign
investments. Listed below are some of the more important political and
economic factors that could negatively affect an investment in foreign
securities:
. The economies of foreign countries may differ from the economy of the
United States in such areas as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency, budget deficits
and national debt;
. Foreign governments sometimes participate to a significant degree, through
ownership interests or regulation, in their respective economies. Actions
by these governments could significantly influence the market prices of
securities and payment of dividends;
. The economies of many foreign countries are dependent on international
trade and their trading partners and they could be severely affected if
their trading partners were to enact protective trade barriers and economic
conditions;
. The internal policies of a particular foreign country may be less stable
than in the United States. Other countries face significant external
political risks, such as possible claims of sovereignty by other countries
or tense and sometimes hostile border clashes; and
. A foreign government may act adversely to the interests of U.S. investors,
including expropriation or nationalization of assets, confiscatory taxation
and other restrictions on U.S. investment. A country may restrict or
control foreign investments in its securities markets. These restrictions
could limit the portfolio's ability to invest in a particular country or
make it very expensive for the portfolio to invest in that country. Some
countries require prior governmental approval, limit the types or amount of
securities or companies in which a foreigner can invest. Other countries
may restrict the ability of foreign investors to repatriate their
investment income and capital gains.
Information and Supervision
There is generally less publicly available information about foreign companies
than companies based in the United States. For example, there are often no
reports and ratings published about foreign companies comparable to the ones
written about United States companies. Foreign companies are typically not
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to United States
companies. The lack of comparable information makes investment decisions
concerning foreign countries more difficult and less reliable than domestic
companies.
Stock Exchange and Market Risk
The adviser anticipates that in most cases an exchange or over-the-counter
(OTC) market located outside of the United States will be the best available
market for foreign securities. Foreign stock markets, while growing in volume
and
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<PAGE>
sophistication, are generally not as developed as the markets in the United
States. Foreign stocks markets tend to differ from those in the United States
in a number of ways:
. They are generally not as developed or efficient as, and more volatile,
than those in the United States;
. They have substantially less volume;
. Their securities tend to be less liquid and to experience rapid and erratic
price movements;
. Commissions on foreign stocks are generally higher and subject to set
minimum rates, as opposed to negotiated rates;
. Foreign security trading, settlement and custodial practices are often less
developed than those in U.S. markets; and
. They may have different settlement practices, which may cause delays and
increase the potential for failed settlements.
Foreign Currency Risk
While the UAM Funds denominate their net asset value in United States dollars,
the securities of foreign companies are frequently denominated in foreign
currencies. Thus, a change in the value of a foreign currency against the
United States dollar will result in a corresponding change in value of
securities denominated in that currency. Some of the factors that may impair
the investments denominated in a foreign currency are:
. It may be expensive to convert foreign currencies into United States
dollars and vice versa;
. Complex political and economic factors may significantly affect the values
of various currencies, including United States dollars, and their exchange
rates;
. Government intervention may increase risks involved in purchasing or
selling foreign currency options, forward contracts and futures contracts,
since exchange rates may not be free to fluctuate in response to other
market forces;
. There may be no systematic reporting of last sale information for foreign
currencies or regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis;
. Available quotation information is generally representative of very large
round-lot transactions in the inter-bank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1 million)
where rates may be less favorable; and
. The inter-bank market in foreign currencies is a global, around-the-clock
market. To the extent that a market is closed while the markets for the
underlying currencies remain open, certain markets may not always reflect
significant price and rate movements.
Taxes
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries it is possible for a portfolio to recover a
portion of these taxes, the portion that cannot be recovered will reduce the
income a portfolio receives from its investments. A portfolio does not expect
such foreign withholding taxes to have a significant impact on performance.
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<PAGE>
Emerging Markets
Investing in emerging markets may magnify the risks of foreign investing.
Security prices in emerging markets can be significantly more volatile than
those in more developed markets, reflecting the greater uncertainties of
investing in less established markets and economies. In particular, countries
with emerging markets may:
. Have relatively unstable governments;
. Present greater risks of nationalization of businesses, restrictions on
foreign ownership and prohibitions on the repatriation of assets;
. Offer less protection of property rights than more developed countries; and
. Have economies that are based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer
from extreme and volatile debt burdens or inflation rates.
Local securities markets may trade a small number of securities and may be
unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of holdings difficult or impossible at times.
The Euro
The single currency for the European Economic and Monetary Union ("EMU"), the
Euro, is scheduled to replace the national currencies for participating member
countries over a period that began on January 1, 1999 and ends in July 2002.
At the end of that period, use of the Euro will be compulsory and countries in
the EMU will no longer maintain separate currencies in any form. Until then,
however, each country and issuers within each country are free to choose
whether to use the Euro.
On January 1, 1999, existing national currencies became denominations of the
Euro at fixed rates according to practices prescribed by the European Monetary
Institute and the Euro became available as a book-entry currency. On or about
that date, member states began conducting financial market transactions in
Euros and redenominating many investments, currency balances and transfer
mechanisms into Euros. The portfolio also anticipates pricing, trading,
settling and valuing investments whose nominal values remain in their existing
domestic currencies in Euros. Accordingly, the portfolio expects the
conversion to the Euro to impact investments in countries that adopt the Euro
in all aspects of the investment process, including trading, foreign exchange,
payments, settlements, cash accounts, custody and accounting. Some of the
uncertainties surrounding the conversion to the Euro include:
. Will the payment and operational systems of banks and other financial
institutions be ready by the scheduled launch date?
. Will the conversion to the Euro have legal consequences on outstanding
financial contracts that refer to existing currencies rather than Euro?
. How will existing currencies be exchanged into Euro?
. Will suitable clearing and settlement payment systems for the new currency
be created?
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<PAGE>
INVESTMENT COMPANIES
- --------------------------------------------------------------------------------
A portfolio may buy and sell shares of other investment companies. Such
investment companies may pay management and other fees that are similar to the
fees currently paid by a portfolio. Like other shareholders, each portfolio
would pay its proportionate share of those fees. Consequently, shareholders
of a portfolio would pay not only the management fees of a portfolio, but also
the management fees of the investment company in which a portfolio invests. A
portfolio may invest up to 10% of its total assets in the securities of other
investment companies, but may not invest more than 5% of its total assets in
the securities of any one investment company or acquire more than 3% of the
outstanding securities of any one investment company.
The SEC has granted an order that allows a portfolio to invest the greater of
5% of its total assets or $2.5 million in the UAM DSI Money Market Portfolio,
provided that the investment is:
. For cash management purposes;
. Consistent with a portfolio's investment policies and restrictions; and
. The adviser to the investing portfolio waives any fees it earns on the
assets of a portfolio that are invested in the UAM DSI Money Market
Portfolio.
The investing portfolio will bear expenses of the UAM DSI Money Market
Portfolio on the same basis as all of its other shareholders.
REPURCHASE AGREEMENTS
- --------------------------------------------------------------------------------
In a repurchase agreement, an investor agrees to buy a security (underlying
security) from a securities dealer or bank that is a member of the Federal
Reserve System (counter-party). At the time, the counter-party agrees to
repurchase the underlying security for the same price, plus interest.
Repurchase agreements are generally for a relatively short period (usually not
more than 7 days). The portfolios normally use repurchase agreements to earn
income on assets that are not invested.
When a portfolio enters into a repurchase agreement it will:
. Pay for the underlying securities only upon physically receiving them or
upon evidence of their receipt in book-entry form; and
. Require the counter party to add to the collateral whenever the price of
the repurchase agreement rises above the value of the underlying security
(i.e., it will require the borrower to "mark to the market" on a daily
basis).
If the seller of the security declares bankruptcy or otherwise becomes
financially unable to buy back the security, a portfolio's right to sell the
security may be restricted. In addition, the value of the security might
decline before a portfolio can sell it and a portfolio might incur expenses in
enforcing its rights.
RESTRICTED SECURITIES
- --------------------------------------------------------------------------------
The portfolios may purchase restricted securities that are not registered for
sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the
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<PAGE>
supervision of the Board, the Adviser determines the liquidity of such
investments by considering all relevant factors. Provided that a dealer or
institutional trading market in such securities exists, these restricted
securities are not treated as illiquid securities for purposes of a
portfolio's investment limitations. The price realized from the sales of
these securities could be more or less than those originally paid by a
portfolio or less than what may be considered the fair value of such
securities.
SECURITIES LENDING
- --------------------------------------------------------------------------------
A portfolio may lend a portion of its total assets to broker- dealers or other
financial institutions. It may then reinvest the collateral it receives in
short-term securities and money market funds. When a portfolio lends its
securities, it will follow the following guidelines:
. The borrower must provide collateral at least equal to the market value of
the securities loaned;
. The collateral must consist of cash, an irrevocable letter of credit issued
by a domestic U.S. bank or securities issued or guaranteed by the U. S.
government;
. The borrower must add to the collateral whenever the price of the
securities loaned rises (i.e., the borrower "marks to the market" on a
daily basis);
. It must be able to terminate the loan at any time;
. It must receive reasonable interest on the loan (which may include a
portfolio investing any cash collateral in interest bearing short-term
investments); and
. It must determine that the borrower is an acceptable credit risk.
These risks are similar to the ones involved with repurchase agreements. When
a portfolio lends securities, there is a risk that the borrower will become
financially unable to honor its contractual obligations. If this happens, a
portfolio could:
. Lose its rights in the collateral and not be able to retrieve the
securities it lent to the borrower; and
. Experience delays in recovering its securities.
SHORT SALES
- --------------------------------------------------------------------------------
Description of Short Sales
Selling a security short is when an investor sells a security it does not own.
To sell a security short an investor must borrow the security from someone
else to deliver to the buyer. The investor then replaces the security it
borrowed by purchasing it at the market price at or before the time of
replacement. Until it replaces the security, the investor repays the person
that lent it the security for any interest or dividends that may have accrued
during the period of the loan.
Investors typically sell securities short to:
. Take advantage of an anticipated decline in prices.
. Protect a profit in a security it already owns.
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<PAGE>
A portfolio can lose money if the price of the security it sold short
increases between the date of the short sale and the date on which a portfolio
replaces the borrowed security. Likewise, a portfolio can profit if the price
of the security declines between those dates.
To borrow the security, a portfolio also may be required to pay a premium,
which would increase the cost of the security sold. A portfolio will incur
transaction costs in effecting short sales. A portfolio's gains and losses
will be decreased or increased, as the case may be, by the amount of the
premium, dividends, interest, or expenses a portfolio may be required to pay
in connection with a short sale.
The broker will retain the net proceeds of the short sale, to the extent
necessary to meet margin requirements, until the short position is closed out.
Short Sales Against the Box
In addition, a portfolio may engage in short sales "against the box". In a
short sale against the box, a portfolio agrees to sell at a future date a
security that it either contemporaneously owns or has the right to acquire at
no extra cost. A portfolio will incur transaction costs to open, maintain and
close short sales against the box.
Restrictions on Short Sales
A portfolio will not short sell a security if:
. After giving effect to such short sale, the total market value of all
securities sold short would exceed 25% of the value of a portfolio net
assets.
. The market value of the securities of any single issuer that have been sold
short by a portfolio would exceed the two percent (2%) of the value of a
portfolio's net assets.
. Such securities would constitute more than two percent (2%) of any class of
the issuer's securities.
Whenever a portfolio sells a security short, its custodian segregates an
amount of cash or liquid securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short and
(b) any cash or U.S. Government securities a portfolio is required to deposit
with the broker in connection with the short sale (not including the proceeds
from the short sale). The segregated assets are marked to market daily in an
attempt to ensure that the amount deposited in the segregated account plus the
amount deposited with the broker is at least equal to the market value of the
securities at the time they were sold short.
WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED DELIVERY TRANSACTIONS
- --------------------------------------------------------------------------------
A when-issued security is one whose terms are available and for which a market
exists, but which have not been issued. In a forward delivery transaction, a
portfolio contracts to purchase securities for a fixed price at a future date
beyond customary settlement time. "Delayed delivery" refers to securities
transactions on the secondary market where settlement occurs in the future. In
each of these transactions, the parties fix the payment obligation and the
interest rate
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<PAGE>
that they will receive on the securities at the time the parties enter the
commitment; however, they do not pay money or deliver securities until a later
date. Typically, no income accrues on securities a portfolio has committed to
purchase before the securities are delivered, although a portfolio may earn
income on securities it has in a segregated account. A portfolio will only
enter into these types of transactions with the intention of actually
acquiring the securities, but may sell them before the settlement date.
A portfolio uses when-issued, delayed-delivery and forward delivery
transactions to secure what it considers an advantageous price and yield at
the time of purchase. When a portfolio engages in when-issued, delayed-
delivery and forward delivery transactions, it relies on the other party to
consummate the sale. If the other party fails to complete the sale, a
portfolio may miss the opportunity to obtain the security at a favorable price
or yield.
When purchasing a security on a when-issued, delayed delivery, or forward
delivery basis, a portfolio assumes the rights and risks of ownership of the
security, including the risk of price and yield changes. At the time of
settlement, the market value of the security may be more or less than the
purchase price. The yield available in the market when the delivery takes
place also may be higher than those obtained in the transaction itself.
Because a portfolio does not pay for the security until the delivery date,
these risks are in addition to the risks associated with its other
investments.
A portfolio will segregate cash and liquid securities equal in value to
commitments for the when-issued, delayed-delivery or forward delivery
transaction. A portfolio will segregate additional liquid assets daily so
that the value of such assets is equal to the amount of its commitments.
Investment Policies of the Portfolios
A portfolio will determine investment limitation percentages (with the
exception of a limitation relating to borrowing) immediately after and as a
result of its acquisition of such security or other asset. Accordingly, a
portfolio will not consider changes in values, net assets or other
circumstances when determining whether the investment complies with its
investment limitations.
FUNDAMENTAL INVESTMENT POLICIES
- --------------------------------------------------------------------------------
The following investment limitations are fundamental, which means a portfolio
cannot change them without approval by the vote of a majority of the
outstanding voting securities of the portfolio, as defined by the 1940 Act.
Defensive Equity Fund, Enhanced Equity Fund, Master Fixed Income Fund and Short-
Term Government Fund
Each Portfolio may not:
. Make loans except that the portfolio, in accordance with its investment
objective and policies, may (i) purchase debt obligations, (ii) enter into
repurchase agreements and (iii) lend its portfolio securities.
. Act as an underwriter of securities of other issuers, except as it may be
deemed to be an underwriter under the 1933 Act in connection with the
purchase and sale of portfolio securities.
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<PAGE>
. Purchase or sell commodities or commodity contracts, except that the
portfolio, in accordance with its investment objective and policies, may:
(i) invest in readily marketable securities of issuers which invest or
engage in such activities; and (ii) enter into forward contracts, futures
contracts and options thereon.
. Purchase or sell real estate, or real estate partnership interests, except
that this limitation shall not prevent the portfolio from investing
directly or indirectly in readily marketable securities of issuers which
can invest in real estate, institutions that issue mortgages, or real
estate investment trusts which deal with real estate or interests therein.
. Issue senior securities (as defined in the 1940 Act) except as permitted in
connection with the portfolio's policies on borrowing and pledging, or as
permitted by rule, regulation or order of the SEC.
. Purchase more than 10% of the voting securities of any one issuer or
purchase securities of any one issuer if, at the time of purchase, more
than 5% of its total assets will be invested in that issuer except up to
25% of its assets may be invested without regard to these limits. For
purposes of this investment limitation, the term "issuer" does not include
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities and repurchase agreements collateralized by such
obligations.
. Invest 25% or more of its total assets at the time of purchase in
securities of issuers (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities and repurchase
agreements collateralized by such obligations) whose principal business
activities are in the same industry. For purposes of this investment
limitation, state and municipal governments and their agencies and
authorities are not deemed to be industries; utility companies will be
divided according to their services (e.g., gas, gas transmission, electric,
electric and gas, and telephone), and financial service companies will be
classified according to end use of their service (e.g., automobile finance,
bank finance, and diversified finance).
Defensive Equity Fund
The Portfolio may not borrow money (other than pursuant to reverse repurchase
agreements) except for temporary or emergency purposes and then only in
amounts up to 10% of its total assets. The temporary borrowing will include,
for example, borrowing to facilitate the orderly sale of portfolio securities
to accommodate substantial redemption requests if they should occur, to
facilitate the settlement of securities transactions, and is not for
investment purposes. All borrowings in excess of 5% of the portfolio's total
assets will be repaid before making additional investments. The foregoing
percentages will apply at the time of each purchase of a security. The
portfolio is monitored daily, and re-balanced periodically to ensure optimum
performance.
Enhanced Equity Fund, Master Fixed Income Fund and Short-Term Government Fund
The Portfolio may not borrow money (other than pursuant to reverse repurchase
agreements) except for temporary or emergency purposes and then only in
amounts up to 15% of its total assets. The temporary borrowing will include,
for example, borrowing to facilitate the orderly sale of portfolio securities
to accommodate substantial redemption requests if they should occur, to
facilitate the settlement of securities transactions, and is not for
investment purposes. All borrowings in excess of 5% of the portfolio's total
assets will be repaid before making additional investments. The foregoing
percentages will apply at the time of each purchase of a security.
International Fund
The Portfolio may not:
. Make any investment that is inconsistent with its classification as a
diversified investment management company under the 1940 Act.
. Concentrate its investments in securities of issuers primarily engaged in
any particular industry (other securities issued or guaranteed by the
United States government or its agencies or instrumentalities or when the
portfolio adopts a temporary defensive position).
. Issue senior securities, except as permitted by the 1940 Act.
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<PAGE>
. Invest in physical commodities or contracts on physical commodities.
. Purchase or sell real estate or real estate limited partnerships, although
it may purchase and sell securities of companies which deal in real estate
and may purchase and sell securities which are secured by interests in real
estate.
. Make loans except (i) by that the acquisition of investment securities or
other investment instruments in accordance with the portfolio's prospectus
and statement of additional information shall not be deemed to be the
making of a loan; and (ii) that the portfolio may lend its portfolio
securities in accordance with applicable law and the guidelines set forth
in the portfolio's prospectus and statement of additional information, as
they may be amended from time to time.
. Underwrite the securities of other issuers.
. Borrow money, except to the extent permitted by applicable law and the
guidelines set forth in the portfolio's prospectus and statement of
additional information, as they may be amended from time to time.
NON-FUNDAMENTAL INVESTMENT POLICIES
- --------------------------------------------------------------------------------
The following limitations are non-fundamental, which means a portfolio may
change them without shareholder approval.
Defensive Equity Fund, Enhanced Equity Fund, Master Fixed Income Fund and Short-
Term Government Fund
Each Portfolio may not:
. Pledge more than 10% of its total assets, except that the portfolio may
pledge assets to the extent permitted by the 1940 Act in order to (i)
secure permitted borrowings or (ii) as may be necessary in connection with
the portfolio's use of options and futures contracts.
. Purchase or hold the securities of an issuer if, at the time thereof, any
such purchase or holding would cause more than 15% of the portfolio's net
assets to be invested in illiquid securities. This limitation does not
include any Rule 144A security that has been determined by, or pursuant to
procedures established by, the board, based on trading markets for such
security, to be liquid.
. Purchase or sell puts, calls, straddles, spreads, and any combination
thereof except that a portfolio may, in accordance with its investment
objective and policies, write covered call options with respect to any of
its portfolio securities, write covered put options and enter into closing
purchase transactions with respect to such options, engage in put and call
option transactions and engage in interest rate and stock index futures
contracts and related options transactions.
. Purchase securities of open-end or closed-end investment companies, except
to the extent permitted by the 1940 Act.
. Invest in companies for the purpose of exercising control.
. Purchase securities on margin, except that the portfolio may: (i) obtain
short-term credits as necessary for the clearance of security transactions;
and (ii) establish margin accounts as may be necessary in connection with
the portfolio's use of options and futures contracts.
. Invest in interests in oil, gas or other mineral leases, exploration or
development programs, except that this shall not prevent a portfolio from
investing in readily marketable securities of issuers that invest or engage
in oil, gas or other mineral leases, exploration or development programs or
issuers secured by interest in such activities.
. Invest more than 5% of the value of its total assets in securities of
issuers which have a record of less than three years continuous operation,
including in such three years the operation of any predecessor company or
companies, partnership or individual proprietorship if the company whose
securities are to be purchased by the portfolio has
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<PAGE>
come into existence as a result of a distribution, merger, consolidation,
reorganization or the purchase of all or substantially all of the assets of
such predecessor.
. Purchase or retain the securities of any issuer if, to the knowledge of the
portfolio, any of the officers or directors of the portfolio or its
investment adviser owns individually more than one-half of one percent of
the securities of such issuer and together own more than 5% of the
securities of such issuer.
Defensive Equity Fund
The Portfolio may not:
. Make short sales of securities or maintain a short position, unless at all
times when a short position is open, the portfolio owns an equal amount of
such securities or owns securities convertible into or exchangeable for
securities, without payment of additional consideration (except upon
exercise of covered call options on such securities with a strike price no
higher than the price at which the securities were sold short or, if
higher, if the difference between the strike price and the price at which
the securities were sold short is maintained in U.S. government securities
in a segregated account with the portfolio's custodian or a broker), which
are at least equal in an amount to and of the same issue as the securities
sold short and such securities are not subject to outstanding call options,
and unless not more than 10% of the portfolio's net assets (taken at
current value) are held as collateral for such sales at any one time.
. Invest more than 10% of the value of its total assets in securities
restricted as to disposition under the Federal securities laws.
. Participate on a joint or a joint and several basis in any trading account
in securities.
. Sell or buy options which are not listed for trading on a national
securities exchange if, as a result, more than 5% of the portfolio's net
assets would be at risk in connection with all such unlisted options.
. Sell any covered put stock option if, as a result, the portfolio would then
have more than 50% of its total assets at current value subject to being
invested upon the exercise of put options.
. Make short sales "against the box," except for the purpose of deferring
realization of gain or loss for Federal income tax purposes and/or to
receive interest on the proceeds of such sales when made in connection with
convertible securities. Such sales will not be made of securities subject
to outstanding options.
International Fund
The Portfolio may not:
. Purchase on margin or sell short except that the portfolio may purchase
futures as described in the prospectus and this SAI.
. Invest more than 10% of its total assets in the securities of other
investment companies.
. Invest more than 5% of its total assets in the securities of any one-
investment company.
. Acquire more than 3% of the voting securities of any other investment
company.
. Invest more than an aggregate of 15% of its net assets in securities that
are subject to legal or contractual restrictions on resale (restricted
securities) or securities for which there are no readily available markets
(illiquid securities).
Borrowing
The portfolio may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. The portfolio may also borrow an additional 5% of its total assets from
banks or others for temporary or emergency purposes, such as the redemption of
portfolio shares. The portfolio may purchase additional securities so long as
borrowings do not exceed 5% of its total assets. The portfolio may obtain such
short-term
33
<PAGE>
credit as may be necessary for the clearance of purchases and sales of
portfolio securities. The portfolio may purchase securities on margin and
engage in short sales to the extent permitted by applicable law.
Defensive Equity Fund, Enhanced Equity Fund, International Fund, Master Fixed
Income Fund and Short-Term Government Fund
A portfolio will cover its derivatives according to guidelines established by
the SEC so as to avoid creating a "senior security" (as defined in the 1940
Act) in connection with use of such instruments. Accordingly, a portfolio
will either own the securities underlying the derivative or will segregate
with its custodian cash or liquid securities in an amount at all times equal
to the portfolio's commitment with respect to these instruments or contracts.
Assets that are segregated for purposes of proving cover need not be
physically segregated in a separate account provided that the custodian notes
on its books that such securities are segregated.
Management Of The Fund
The governing board manages the business of the Fund. The governing board
elects officers to manage the day-to-day operations of the Fund and to execute
policies the board has formulated. The Fund pays each board member who is not
also an officer or affiliated person (independent board member) a $150
quarterly retainer fee per active portfolio and a $2,000 meeting fee. In
addition, the Fund reimburses each independent board member for travel and
other expenses incurred while attending board meetings. The $2,000 meeting
fee and expense reimbursements are aggregated for all of the board members and
allocated proportionately among the portfolios of the UAM Funds Complex. The
Fund does not pay board members that are affiliated with the fund for their
services as board members. UAM, its affiliates or SEI pay the Fund's officers.
The following table lists the board members and officers of the Fund and
provides information regarding their present positions, date of birth,
address, principal occupations during the past five years, aggregate
compensation received from the Fund and total compensation received from the
UAM Funds Complex. The UAM Funds Complex is currently comprised of 51
portfolios. Those people with an asterisk (*) beside their name are
"interested persons" of the Fund as that term is defined in the 1940 Act. Mr.
English does have an investment advisory relationship with Investment
Counselors of Maryland, an investment adviser to one of the portfolios in the
UAM Funds Complex. However, the Fund does not believe that the relationship
is a material business relationship, and, therefore, does not consider him to
be an "interested person" of the Fund. If these circumstances change, the
Board will determine whether any action is required to change the composition
of the Board.
<TABLE>
<CAPTION>
Aggregate Aggregate
Compensation Compensation From
Position From the Fund the UAM Funds
Name, Address, Date with as of December 31, Complex as of
of Birth Fund Principal Occupations During the Past 5 years 1999 December 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
John T. Bennett, Jr. Board President of Squam Investment Management Company, $4,309 $40,500
College Road -- RFD 3 Member Inc. and Great Island Investment Company, Inc.
Meredith, NH 03253 (Investment Management); President of Bennett
1/26/29 Management Company from 1988 to 1993.
- ----------------------------------------------------------------------------------------------------------------------------------
Nancy J. Dunn Board Financial Officer of World Wildlife Fund since $4,309 $40,500
1250 24th St., NW Member January 1999 (nonprofit); Vice President for Finance
Washington, DC 20037 and Administration and Treasurer of Radcliffe College
8/14/51 (Education) from 1991 to 1999.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Aggregate Aggregate
Compensation Compensation From
Position From the Fund the UAM Funds
Name, Address, Date with as of December 31, Complex as of
of Birth Fund Principal Occupations During the Past 5 years 1999 December 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William A. Humenuk Board Senior Vice President, General Counsel and Secretary $4,309 $40,500
100 King Street West Member of Lone Star Industries Incorporated (cement and
P.O. Box 2440, LCD-1 ready-mix concrete company) from April 2000 to
Hamilton Ontario, present; Executive Vice President and Chief
Canada L8N-4J6 Administrative Officer of Philip Services Corp.
4/21/42 (ferrous scrap processing, brokerage and industrial
outsourcing cervices) from June 1998 to March 2000;
Partner in the Philadelphia office of the law firm
Dechert Price & Rhoads from July 1976 to June 1998;
formerly a Director of Hofler Corp.
- ----------------------------------------------------------------------------------------------------------------------------------
Philip D. English Board President and Chief Executive Officer of Broventure $4,309 $40,500
16 West Madison Street Member Company, Inc. (Investment Management); Chairman of
Baltimore, MD 21201 the Board of Chektec Corporation (Drugs) and Cyber
8/5/48 Scientific, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
James P. Pappas* Board President of UAM Investment Services, Inc. since 0 0
211 Congress Street Member March 1999; Vice President UAM Trust Company since
Boston, MA 02110 January 1996; Principal of UAM Fund Distributors,
2/24/53 Inc. since December 1995; Vice President of UAM
Investment Services, Inc. from January 1996 to March
1999 and a Director and Chief Operating Officer of CS
First Boston Investment Management from 1993-1995.
- ----------------------------------------------------------------------------------------------------------------------------------
Norton H. Reamer* Board Chairman, Chief Executive Officer and a Director of 0 0
One International Place Member; United Asset Management Corporation (financial
Boston, MA 02110 President services); Director, Partner or Trustee of each of
3/21/35 and the Investment Companies of the Eaton Vance Group of
Chairman Mutual Funds (mutual funds).
- ----------------------------------------------------------------------------------------------------------------------------------
Peter M. Whitman, Jr.* Board President and Chief Investment Officer of Dewey 0 0
One Financial Center Member Square Investors Corporation (investment management)
Boston, MA 02111 since 1988; Director and Chief Executive Officer of
7/1/43 H.T. Investors, Inc., formerly a subsidiary of Dewey
Square.
- ----------------------------------------------------------------------------------------------------------------------------------
William H. Park Vice Executive Vice President and Chief Financial Officer 0 0
One International Place President of United Asset Management Corporation (financial
Boston, MA 02110 services).
9/19/47
- ----------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Secretary Vice President and Associate General Counsel of 0 0
211 Congress Street UAMFSI (financial services) since February 1998;
Boston, MA 02110 Assistant General Counsel of First Union Corporation
9/15/67 (financial services) from 1995 to 1998; Attorney with
Signature Financial Group, Inc. (financial services)
from 1994 to 1995.
- ----------------------------------------------------------------------------------------------------------------------------------
Theresa DelVeccio Assistant Secretary of UAMFSI (financial Services) since 0 0
211 Congress Street Secretary February 1998; Secretary and Compliance Officer of
Boston, MA 02110 UAMFDI (broker dealer) since February 2000; Assistant
12/23/63 Vice President of Scudder Kemper Investments
(financial services) from May 1992 to February 1998.
- ----------------------------------------------------------------------------------------------------------------------------------
Gary L. French Treasurer President of UAMFSI (financial services) and UAMFDI 0 0
211 Congress Street (broker dealer); Treasurer of the Fidelity Group of
Boston, MA 02110 Mutual Funds from 1991 to 1995 (mutual funds); held
7/4/51 various other offices with Fidelity Investments
(financial services) from November 1990 to March 1995.
- ----------------------------------------------------------------------------------------------------------------------------------
Robert R. Flaherty Assistant Vice President of UAMFSI (financial services); 0 0
211 Congress Street Treasurer Manager of Fund Administration and Compliance of
Boston, MA 02110 Chase Global Fund Services Company from 1995 to 1996;
9/18/63 Senior Manager of Deloitte & Touche LLP (accounting
firm) from 1985 to 1995,
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Aggregate Aggregate
Compensation Compensation From
Position From the Fund the UAM Funds
Name, Address, Date with as of December 31, Complex as of
of Birth Fund Principal Occupations During the Past 5 years 1999 December 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert J. DellaCroce Assistant Director, Mutual Fund Operations - SEI Investments 0 0
SEI Investments Treasurer (financial services); Senior Manager at Arthur
One Freedom Valley Rd. Andersen (accounting firm) prior to 1994.
Oaks, PA 19456
12/17/63
</TABLE>
Principal Shareholders
As of April 18, 2000, the following persons or organizations held of record or
beneficially 5% or more of the shares of a portfolio:
Name and Address of Shareholder Percentage of
Shares Owned Portfolio
- -----------------------------------------------------------------------------
Charles Schwab & Co., Inc. 26.16 Analytic Defensive
Special Custody Account Equity Fund
For Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------
National Financial Services Corp. 5.65% Analytic Defensive
FBO Exclusive Benefit of Our Customer Equity Fund
Attn: Mutual Funds
200 Liberty Street
New York, NY 10281-1003
- -----------------------------------------------------------------------------
Charles Schwab & Co., Inc. 41.92% Analytic Enhanced
Special Custody Account Equity Fund
For Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------
UMB Bank NA CUST 19.51% Analytic Enhanced
FBO IBC Retirement Income Plan Equity Fund
928 Grand Boulevard
Kansas City, MO 64106-2008
- -----------------------------------------------------------------------------
National Financial Services Corp. 11.42% Analytic Enhanced
FBO Exclusive Benefit of Our Customers Equity Fund
Attn: Mutual Funds
200 Liberty Street
New York, NY 10281-1003
- -----------------------------------------------------------------------------
Resources Trust Company 57.09% Analytic
P. O. Box 3865 International Fund
Englewood, CO 80155-3865
- -----------------------------------------------------------------------------
Analytic TSA Global Asset Management Inc. 21.08% Analytic
Investment Manager for Prison Law Office International Fund
700 S. Flower Street, Suite 2400
Los Angeles, CA 90017-4211
- -----------------------------------------------------------------------------
Charles Schwab & Co., Inc. 14.45% Analytic
Special Custody Account International Fund
For Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------
Analytic TSA Global Asset Management, Inc. 15.75% Analytic Master
FBO Mountain Grove Cemetery Assn. Fixed Income Fund
700 S. Flower Street, Ste 2400
Los Angeles, CA 90017-4211
- -----------------------------------------------------------------------------
Wexford Clearing Services Corp. FBO 13.25% Analytic Master
Nursing & Home Care of Wilton Fixed Income Fund
INC Pension Fund Trust
P. O. Box 489
Wilton, CT 06897-0489
- -----------------------------------------------------------------------------
UAM Trust Company CUST 7.92% Analytic Master
IRA R/O Greg McMurran Fixed Income Fund
2116 Westwood Avenue
Santa Ana, CA 92706-1924
- -----------------------------------------------------------------------------
UAM Trust Company CUST 6.56% Analytic Master
IRA R/O R. Borzilleri Fixed Income Fund
4 Landmark Square
Stamford, CT 06901-2502
- -----------------------------------------------------------------------------
Resources Trust Company 5.86% Analytic Master
P. O. Box 3865 Fixed Income Fund
Englewood, CO 80155-3865
- -----------------------------------------------------------------------------
Charles Schwab & Co., Inc. 5.41% Analytic Master
Special Custody Account Fixed Income Fund
For Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
- -----------------------------------------------------------------------------
First American National Bank 56.50% Analytic Short-Term
300 Union Street Government Fund
Nashville, TN 37237-0052
- -----------------------------------------------------------------------------
Analytic TSA Global Asset Management, Inc. 18.08% Analytic Short-Term
FBO Mountain Grove Cemetery Ass Government Fund
700 S. Flower Street, Ste 2400
Los Angeles, CA 90017-4211
- -----------------------------------------------------------------------------
Resources Trust Company 5.34% Analytic Short-Term
P. O. Box 3865 Government Fund
Englewood, CO 80155-3865
Any shareholder listed above as owning 25% or more of the outstanding shares
of a portfolio may be presumed to "control" (as that term is defined in the
1940 Act) the portfolio. Shareholders controlling the portfolio could have the
ability to vote a majority of the shares of the portfolio on any matter
requiring the approval of shareholders of the portfolio. As of April 18, 2000,
the directors and officers of the Fund owned less than 1% of the outstanding
shares of the portfolios.
Investment Advisory and Other Services
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Who is the Investment Adviser of the Portfolio?
Analytic Investors, Inc., located at 700 S. Flower Street, Suite 2400, Los
Angeles, CA 90017,is the investment adviser to the portfolios. Due to the
effect of fee waivers by the adviser, the actual percentage of average net
assets that the portfolio pays in any given year may be different from the
rate set forth in its contract with the adviser. For its services, a portfolio
pays the adviser a fee based on its average daily net assets at the following
annual rates:
<TABLE>
<CAPTION>
Annual Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Defensive Equity Fund 0.60%
- -----------------------------------------------------------------------------------------------------------------------------------
Enhanced Equity Fund 0.60%
- -----------------------------------------------------------------------------------------------------------------------------------
International Fund 1.00%for the first $100 million in average
daily net assets and 0.80% thereafter
- -----------------------------------------------------------------------------------------------------------------------------------
Master Fixed Income Fund 0.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Government Fund 0.30%
</TABLE>
What is the History of the Adviser?
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 funds for
fiduciaries and other long term investors. It is one of the oldest investment
management firms in this specialized area. In 1985 it became a wholly-owned
affiliate of UAM (NYSE:UAM). UAM is an investment management holding company,
with 51 affiliated management firms, managing more than $206 billion in
assets. In January 1996, Analytic
36
<PAGE>
Investment Management, Inc. 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
and yield curve strategies.
What is the Adviser's Philosophy?
The adviser utilizes state of the art quantitative investment management
techniques in seeking to deliver superior investment performance. We believe
that the use of such techniques allows us to fulfill our clients' objectives
through rational, systematic identification of market opportunities, while
minimizing the impact of human emotions which often dominate investment
decision making. The firm has based its investment decisions on quantitative
techniques for more than 25 years.
What is the Adviser's Investment Process and Style?
Defensive Equity Fund
The portfolio is a stock portfolio that combines a quantitative approach to
stock selection with a unique hedging style. As the name suggests, the goal of
the portfolio is to allow shareholders to enjoy substantial protection against
a declining stock market while still allowing for the shareholder to
participate to a large degree in a rising stock market. The core strategy of
the portfolio is based on a belief that there are five primary elements that
drive an individual stock's performance: 1) relative valuation, 2) growth
potential, 3) historical return momentum, 4) liquidity and 5) risk. The
valuation process examines dozens of financial measures within these five
elements. We accept, however, that the predictive power of each of these
financial measures has changed over time and will continue to change into the
future. As a result, Analytic Investors has developed a unique weighting
process for each of these financial measures which allows our approach to
adapt to constantly changing market conditions. The adaptive approach
increases the weight of those variables that have contributed most heavily to
recent performance and decreases the weight to those measures that have lost
their predictive capacity. The stock selection process commences by developing
rankings for all the companies in the Equity Universe based on the combined
attractiveness of the five elements. This requires extensive analysis and
necessitates the assistance of a computer model to simultaneously evaluate all
the data for each stock. Once the stocks are ranked, a highly diversified
portfolio is constructed by selecting that combination of stocks which
represents the best potential return while maintaining a risk profile that is
similar to the Equity Universe. Individual security positions are limited to a
maximum of a 3% active position relative to their respective weights in the
Equity Universe. Once established, this portfolio is strategically hedged to
reduce the risk to the overall portfolio when individual stocks become
excessively volatile. In the process, our quantitative approach greatly
reduces the exposures to firm size, market style, and economic sector biases.
This is referred to as being size neutral, style neutral and sector neutral.
Enhanced Equity Fund
The adviser believes the characteristics that drive stock prices can be
systematically identified and measured. There are five primary elements used
to determine a stock's attractiveness: 1) relative valuation, 2) growth
potential, 3) historical return momentum, 4) liquidity and 5) risk. The
valuation process examines dozens of financial measures within these five
elements. The adviser accepts, however, that the predictive power of each of
these financial measures has changed over time and will continue to change
into the future. As a result, the adviser has developed a unique weighting
process for each of these financial measures, which allows our approach to
adapt to constantly changing market conditions. The adaptive approach
increases the weight of those variables that have contributed most heavily to
recent performance and decreases the weight to those measures that have lost
their predictive capacity. The enhanced equity process commences by
developing rankings for all the companies in the equity universe based on the
combined attractiveness of the five elements. This requires extensive
analysis and necessitates the assistance of a computer model to simultaneously
evaluate all the data for each stock. Once the stocks are ranked, a highly
diversified portfolio is constructed by selecting that combination of stocks
which represents the best potential return while maintaining a risk profile
that is similar to the equity universe. In the process, our quantitative
approach greatly reduces the exposures to
37
<PAGE>
firm size, market style, and economic sector biases. This is referred to as
being size neutral, style neutral and sector neutral. The portfolio is
monitored daily, and re-balanced periodically to ensure optimum performance.
Individual security positions are limited to a maximum of a 3% active position
relative to their respective weights in the equity universe. The portfolio
seeks to be fully invested at all times.
International Fund
The adviser believes the characteristics that drive stock prices can be
systematically identified and measured. There are several basic elements used
to determine a stock's attractiveness, including relative valuation, growth
potential, historical return momentum, liquidity, and risk. The valuation
process examines dozens of financial measures within these five elements. The
adviser accepts, however, that the predictive power of each of these financial
measures has changed over time and will continue to change into the future.
As a result, the adviser has developed a unique weighting process for each of
these financial measures, which allows our approach to adapt to constantly
changing market conditions. The adaptive approach increases the weight of
those variables that have contributed most heavily to recent performance and
decreases the weight to those measures that have lost their predictive
capacity. The International Equity process commences by developing rankings
for all the companies in the International Equity Universe based on the
combined attractiveness of the basic elements. This requires extensive
analysis and necessitates the assistance of a computer model to simultaneously
evaluate all the data for each stock. Once the stocks are ranked, a highly
diversified portfolio is constructed by selecting that combination of stocks
which represents the best potential return while maintaining a risk profile
that is similar to the International Equity Universe. In the process, our
quantitative approach greatly reduces the portfolio's exposure, relative to
the International Equity Universe, to firm size, market style, country risk
and economic sector biases. This is referred to as being size neutral, style
neutral and sector neutral. The portfolio is monitored daily, and re-balanced
periodically to ensure optimum performance. Individual security positions
are limited to a maximum of a 3% active position relative to their respective
weights in the International Equity Universe. The portfolio seeks to be fully
invested at all times.
Master Fixed Income Fund
The Master Fixed Income Fund is an intermediate term bond fund that seeks to
outperform other intermediate term bond funds through three sources of value:
(1) analyzing shifts in the yield curve; (2) tactically increasing and
decreasing the allocation of the portfolio to the corporate bond sector; and
(3) utilizing a unique method of creating "synthetic" corporate bonds. A
synthetic corporate bond is an unleveraged position consisting of a long
treasury security and a short equity put option. Analytic believes that
through careful quantitative analysis these three methods can add value
without significantly increasing the volatility of the portfolio above that of
the intermediate-term bond market.
The core strategy of the portfolio begins with the selection of a diversified
mix of Treasuries, agencies, mortgage-related bonds, and high-grade corporate
bonds. Additional value is found in the corporate sector through the creation
of synthetic high-grade corporate instruments using Analytic's option
valuation model. The usefulness of this procedure is in its ability to make
available to the portfolio a far broader array of corporate bond choices than
can typically be found in the traditional corporate bond market. This broader
array of choices offered by the creation of synthetic bonds includes (1) bonds
free from the callability feature that so often adds unnecessary risk to the
use of traditional corporate bonds; (2) bonds that have a level of credit
quality that can be higher or lower than the credit quality of existing
corporate bonds; (3) bonds associated with corporations that don't typically
offer corporate bonds. The portfolio varies exposure to the synthetic bond
market depending on the availability of mispriced offerings, as identified by
Analytic's real-time, proprietary valuation approach. Finally, the portfolio
uses a sophisticated approach to assess the shape of the yield curve and to
find arbitrage opportunities to provide additional value.
Short-Term Government Fund
The Short-Term Government Fund is a fixed income fund that invests primarily
in high-grade debt instruments of short maturities, three years or less. While
the portfolio invests more than half its assets in US Treasury and Agency
securities, the portfolio management team enhances performances through three
sources of value: (1) Selected use
38
<PAGE>
of short-term corporate securities; (2) A sophisticated approach to finding
and exploiting yield curve arbitrage opportunities; and (3) Tactical
investments in short-term interest rate differentials between major global
economies.
Portfolio Management Teams
Listed below are the investment professionals of the adviser that form the
teams primarily responsible for the day-to-day management of the funds and a
brief biographical description of each member.
<TABLE>
<CAPTION>
Manager Experience
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harindra de Silva Employment
----------
4/98 to present Analytic Investors, Inc., President
4/98 to present Analytic/TSA Investors, Inc., President
10/96 to 4/98 Analytic Investors, Inc., Managing Director
5/95 to 10/96 Analytic Investors, Inc., Director of Research
10/97 to 4/98 Analytic/TSA Investors, Inc., Managing Director
1/99 to present Analytic US Market Neutral, Ltd., Director
4/97 to 4/98 Analytic Optioned Equity Fund, President
4/86 to 3/98 Analysis Group (Economic Management Consultant), Principal
5/93 to 3/98 AG Risk Management (Investment Management Consultant), President
Analytic Series Fund, President
Education
--------- Ph.D. in Finance from the University of California, Irvine
MBA in Finance and an MS in Economic Forecasting from the University of Rochester
BS in Mechanical Engineering from the University of Manchester Institute of Science and
Technology
Other
----- Chartered Financial Analyst
Member of Association for Investment Management and Research
Member of the American Finance Association
Member of the International Association of Financial Analysts
- ---------------------------------------------------------------------------------------------------------------------------------
Dennis M. Bein Employment
---------- Analytic Investors, Inc., Portfolio Manager
8/95 to present Analytic/TSA Investors, Inc., Portfolio Manager
8/95 to present Analysis Group, Inc. (Economic Management Consultant), Senior Associate
1990 to 1998
Education
--------- MBA from the Anderson Graduate School of Management at the University of California,
Riverside
Undergraduate studies in Business Administration from the Anderson Graduate School of
Management at the University of California, Riverside
Other
----- Chartered Financial Analyst
Member of Association for Investment Management and Research
Member of the Institute of Chartered Financial Analysts
Member of the Los Angeles Society of Financial Analysts
- ---------------------------------------------------------------------------------------------------------------------------------
Greg McMurran Employment
---------- Analytic Investors, Inc., Chief Investment Officer
1/98 to present Analytic Investors, Inc., Director and Portfolio Manager
2/96 to 1/98 Analytic/TSA Investors, Inc., Chief Investment Officer
10/97 to present Analytic Investment Management, Senior Vice President and Senior Portfolio Manager
10/76 to 2/96
Education
--------- MA in Economics at California State University, Fullerton
BS in Economics from the University of California, Irvine
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Manager Experience
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Scott Barker Employment
----------
8/95 to present Analytic Investors, Inc., Portfolio Manager
8/95 to present Analytic/TSA Investors, Inc., Portfolio Manager
1993 to 1998 Analysis Group, Inc. (Economic Management Consultant), Research Analyst
Education
--------- BA in Physics from Pomona College
Other
----- Chartered Financial Analyst
Member of Association for Investment Management and Research
Member of the Los Angeles Society of Financial Analysts
- -----------------------------------------------------------------------------------------------------------------------------------
Robert Murdock, Ph.D. Employment
----------
11/97 to present Analytic Investors, Inc., Portfolio Manager
11/97 to present Analytic/TSA Investors, Inc., Portfolio Manager
9/91 to 7/97 Anderson Graduate School of Management at the University of California, Los Angeles,
Researcher.
9/89 to 8/91 Institute for Policy Reform, Manager
Education
--------- Ph.D in management, Anderson Graduate School of Management at the University of
California, Los Angeles
MA in Economics from the University of Pennsylvania
MBA, Amos Tuck School of Business
BS in economics and math from University of Wyoming
Douglas Savarese Employment
----------
8/96 to present Analytic Investors, Inc., Portfolio Manager
8/96 to present Analytic/TSA Investors, Inc., Portfolio Manager
11/97 to 10/98 Analysis Group (Economic Management Consultant), Senior Associate
Education
--------- BA in Mathematics and BS in Business Studies from the Richard Stockton College
- -----------------------------------------------------------------------------------------------------------------------------------
Steven Sapra Employment
----------
9/99 to present Analytic Investors, Inc., Portfolio Manager
9/99 to present Analytic/TSA Investors, Inc., Portfolio Manager
7/97 to 8/99 BARRA, Inc., Consultant
Education
--------- MA in economics, University of Southern California
BS in economics, California State Polytechnic University, Ponoma
</TABLE>
Investment Advisory Agreement
This section summarizes some of the important provisions the Investment
Advisory Agreements. The Fund has filed each agreement with the SEC as part
of its registration statement on Form N-1A.
Service Performed by Adviser
Each adviser:
. Manages the investment and reinvestment of a portfolio's assets;
. Continuously reviews, supervises and administers the investment program of
a portfolio; and
. Determines what portion of a portfolio's assets will be invested in
securities and what portion will consist of cash.
Limitation of Liability
In the absence of (1) willful misfeasance, bad faith, or gross negligence on
the part of the adviser in the performance of its obligations and duties under
the Investment Advisory Agreement, (2) reckless disregard by the adviser of
its obligations and duties under the Investment Advisory Agreement, or (3) a
loss resulting from a breach of fiduciary duty
40
<PAGE>
with respect to the receipt of compensation for services, the adviser shall
not be subject to any liability whatsoever to the Fund, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services under the Investment Advisory Agreement.
Continuing an Investment Advisory Agreement
An Investment Advisory Agreement continues in effect for periods of one year
so long as such continuance is specifically approved at least annually:
. By a majority of those Board Members who are not parties to the Investment
Advisory Agreement or interested persons of any such party; and
. By a majority of the Board Members or by a majority of the shareholders of
the portfolio.
Terminating an Investment Advisory Agreement
The Fund may terminate an Investment Advisory Agreement at any time, without
the payment of any penalty if:
. A majority of the portfolio's shareholders vote to do so or a majority of
Board Members vote to do so; and
. It gives the adviser 60 days' written notice.
The adviser may terminate the Investment Advisory Agreement at any time,
without the payment of any penalty, upon 90 days' written notice to the Fund.
An Investment Advisory Agreement will automatically and immediately terminate
if it is assigned.
Advisory Fees
For its services, each portfolio pays its adviser the following annual fees,
which are expressed as a percentage of the average daily net assets of the
portfolio. Due to the effect of fee waivers by the adviser, the actual
percentage of average net assets that a portfolio pays in any given year may
be different from the rate set forth in its contract with the adviser. For
the last three fiscal years, the portfolios paid the following in management
fees to the adviser:
<TABLE>
<CAPTION>
Investment Advisory Fees Investment Advisory Fees Total Investment Advisory
Paid Waived Fees
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Defensive Equity Fund+ $302,138 $ 94,228 $396,366
1999
- -----------------------------------------------------------------------------------------------------------------------------------
1998 $246,192 $112,512 $358,704
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $389,998 $ 0 $389,998
- -----------------------------------------------------------------------------------------------------------------------------------
Enhanced Equity Fund* $289,086 $ 70,227 $359,313
1999
- -----------------------------------------------------------------------------------------------------------------------------------
1998 $ 0 $107,747 $107,747
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $ 24,800 $ 40,662 $ 65,462
- -----------------------------------------------------------------------------------------------------------------------------------
International Fund $ 0 $ 3,652 $ 3,652
1999
- -----------------------------------------------------------------------------------------------------------------------------------
1998 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
1997 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Master Fixed Income Fund* $ 0 $ 23,789 $ 23,789
1999
- -----------------------------------------------------------------------------------------------------------------------------------
1998 $ 0 $ 22,260 $ 22,260
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $ 24,800 $ 40,662 $ 65,462
- -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Government Fund* $ 0 $ 13,250 $ 13,250
1999
- -----------------------------------------------------------------------------------------------------------------------------------
1998 $ 0 $ 10,668 $ 10,668
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $ 0 $ 2,791 $ 0
</TABLE>
+ From August 31, 1998 to April 5, 1999, Pilgrim Baxter was the investment
adviser to the portfolio and Analytic Investors, Inc. was the portfolio's
sub-adviser. During that period, any fees paid to Analytic Investors were
paid from Pilgrim Baxter advisory fees. Before August 31, 1998 Analytic
Investors was the investment adviser to the portfolio.
41
<PAGE>
* From July 27, 1998 to April 5, 1999, Pilgrim Baxter was the investment
adviser and Analytic Investors, Inc. was the portfolio's sub-adviser.
During that period, any fees paid to Analytic Investors were paid from
Pilgrim Baxter advisory fees. Before August 27, 1998 Analytic Investors was
the investment adviser to the portfolio.
DISTRIBUTOR
- --------------------------------------------------------------------------------
UAMFDI is the Fund's distributor. The Fund offers its shares continuously.
While UAMFDI will use its best efforts to sell shares of the Fund, it is not
obligated to sell any particular amount of shares. UAMFDI receives no
compensation for its services. UAMFDI, an affiliate of UAM, is located at 211
Congress Street, Boston, Massachusetts 02110.
SHAREHOLDER SERVICING ARRANGEMENTS
- --------------------------------------------------------------------------------
UAM and each of its affiliates, may, at its own expense, compensate a Service
Agent or other person for marketing, shareholder servicing, record-keeping
and/or other services performed with respect to the Fund or a portfolio. The
person making such payments may do so out of its revenues, its profits or any
other source available to it. Such services arrangements, when in effect, are
made generally available to all qualified service providers. The adviser may
also compensate its affiliated companies for referring investors to the
portfolio.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Administrator
Pursuant to a Fund Administration Agreement with the Fund, UAMFSI manages,
administers and conducts the general business activities of the Fund. As a
part of its responsibilities, UAMFSI provides and oversees the provision by
various third parties of administrative, fund accounting, dividend disbursing
and transfer agent services for the Fund. UAMFSI, an affiliate of UAM, has its
principal office at 211 Congress Street, Boston, Massachusetts 02110.
UAMFSI will bear all expenses in connection with the performance of its
services under the Fund Administration Agreement. Other expenses to be
incurred in the operation of the Fund will be borne by the Fund or other
parties, including:
. Taxes, interest, brokerage fees and commissions.
. Salaries and fees of officers and Board Members who are not officers,
directors, shareholders or employees of an affiliate of UAM, including
UAMFSI, UAMFDI or the adviser.
. SEC fees and state Blue-Sky fees.
. EDGAR filing fees.
. Processing services and related fees.
. Advisory and administration fees.
. Charges and expenses of pricing and data services, independent public
accountants and custodians.
. Insurance premiums including fidelity bond premiums.
. Outside legal expenses.
42
<PAGE>
. Costs of maintenance of corporate existence.
. Typesetting and printing of prospectuses for regulatory purposes and for
distribution to current shareholders of the Fund.
. Printing and production costs of shareholders' reports and corporate
meetings.
. Cost and expenses of Fund stationery and forms.
. Costs of special telephone and data lines and devices.
. Trade association dues and expenses.
. Any extraordinary expenses and other customary Fund expenses.
The Fund Administration Agreement continues in effect from year to year if the
Board specifically approves such continuance every year. The Board or UAMFSI
may terminate the Fund Administration Agreement, without penalty, on not less
than ninety (90) days' written notice. The Fund Administration Agreement
automatically terminates upon its assignment by UAMFSI without the prior
written consent of the Fund.
UAMFSI will from time to time employ other people to assist it in performing
its duties under the Fund Administration Agreement. Such people may be
officers and employees who are employed by both UAMFSI and the Fund. UAMFSI
will pay such people for such employment. The Fund will not incur any
obligations with respect to such people.
Administration Fees
Each portfolio pays a four-part fee to UAMFSI as follows:
1. In exchange for administrative services, a portfolio pays a fee to UAMFSI
calculated at the annual rate of:
. $19,500 for the first operational class; plus
. $3,750 for each additional class; plus
. A fee calculated from the aggregate net assets of each portfolio at the
following rates:
<TABLE>
<CAPTION>
Annual Rate
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Defensive Equity Fund 0.063%
- --------------------------------------------------------------------------------------------------------------------------
Enhanced Equity Fund 0.043%
- --------------------------------------------------------------------------------------------------------------------------
International Fund 0.063%
- --------------------------------------------------------------------------------------------------------------------------
Master Fixed Income Fund 0.043%
- --------------------------------------------------------------------------------------------------------------------------
Short-Term Government Fund 0.043%
</TABLE>
2. Each portfolio also pays a fee to UAMFSI for sub-administration and other
services provided by SEI. The fee, which UAMFSI pays to SEI, is calculated
at the annual rate of:
. Not more than $35,000 for the first operational class; plus
. $5,000 for each additional operational class; plus
. 0.03% of their pro rata share of the combined assets of the UAM Funds
Complex.
3. An annual base fee that UAMFSI pays to DST Systems, Inc. for its services as
transfer agent and dividend-disbursing agent equal to $10,500 for the first
operational class and $10,500 for each additional class.
4. An annual base fee that UAMFSI pays to UAMSSC for its services as sub-
shareholder-servicing agent equal to $7,500 for the first operational class
and $2,500 for each additional class.
43
<PAGE>
For the last three fiscal years the portfolios paid the following in
administration and sub-administration fees:
<TABLE>
<CAPTION>
Total Administration Fee
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Defensive Equity Fund+ $115,619
1999
- ---------------------------------------------------------------------------------------------------------
1998 $ 80,296
- ---------------------------------------------------------------------------------------------------------
1997 $115,544
- ---------------------------------------------------------------------------------------------------------
Enhanced Equity Fund* $ 93,565
1999
- ---------------------------------------------------------------------------------------------------------
1998 $ 48,987
- ---------------------------------------------------------------------------------------------------------
1997 $ 21,124
- ---------------------------------------------------------------------------------------------------------
International Fund $ 14,076
1999
- ---------------------------------------------------------------------------------------------------------
1998 N/A
- ---------------------------------------------------------------------------------------------------------
1997 N/A
- ---------------------------------------------------------------------------------------------------------
Master Fixed Income Fund* $ 43,178
1999
- ---------------------------------------------------------------------------------------------------------
1998 $ 33,890
- ---------------------------------------------------------------------------------------------------------
1997 $ 55,769
- ---------------------------------------------------------------------------------------------------------
Short-Term Government Fund* $ 43,724
1999
- ---------------------------------------------------------------------------------------------------------
1998 $ 32,639
- ---------------------------------------------------------------------------------------------------------
1997 $ 24,891
</TABLE>
+ From August 31, 1998, to April 5, 1999, PBHG Fund Services, Inc. was the
administrator to the portfolio. From May 15, 1997 to August 31, 1998, UAM
Fund Services, Inc. was the administrator to the portfolio. Before May
15,1997, Analytic Investors was the administrator to the portfolio.
. From July 27, 1998, to April 5, 1999, PBHG Fund Services, Inc. was the
administrator to the portfolio. From May 15, 1997 to July 27, 1998, 1998,
UAM Fund Services, Inc. was the administrator to the portfolio. Before May
15,1997, Analytic Investors was the administrator to the portfolio.
CUSTODIAN
- --------------------------------------------------------------------------------
First Union National Bank (successor to CoreStates Bank, N.A.) 530 Walnut
Street Philadelphia, PA 19106, provides for the custody of the Company's
assets pursuant to the terms of a custodian agreement with the Company.
INDEPENDENT PUBLIC ACCOUNTANT
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountant for the Fund.
CODE OF ETHICS
- --------------------------------------------------------------------------------
The Fund, its distributor and its investment advisers have adopted a codes of
ethics under to Rule 17j-1 of the 1940 Act that permit personnel subject to
their particular code of ethics to invest in securities, including securities
that may be purchased or held by a portfolio.
44
<PAGE>
Brokerage Allocation and Other Practices
SELECTION OF BROKERS
- --------------------------------------------------------------------------------
Each Investment Advisory Agreement authorizes the adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for each portfolio. The Investment Advisory Agreement also directs
the adviser to use its best efforts to obtain the best execution with respect
to all transactions for the portfolio. The adviser may select brokers based
on research, statistical and pricing services they provide to the adviser.
Information and research provided by a broker will be in addition to, and not
instead of, the services the adviser is required to perform under the
Investment Advisory Agreement. In so doing, the portfolio may pay higher
commission rates than the lowest rate available when the adviser believes it
is reasonable to do so in light of the value of the research, statistical, and
pricing services provided by the broker effecting the transaction. For the
fiscal year ended December 31, 1999, neither the portfolios nor the adviser
directed and of the portfolios brokerage transactions to a broker because of
research services provided.
It is not the practice of the Fund to allocate brokerage or effect principal
transactions with dealers based on sales of shares that a broker-dealer firm
makes. However, the Fund may place trades with qualified broker-dealers who
recommend the Fund or who act as agents in the purchase of Fund shares for
their clients.
As of December 31, 1999 the Analytic Defensive Equity Fund held 5,016 shares,
$635,151 worth of shares, of JP Morgan, one of its regular brokers or dealers
as defined in rule 10b-1 of the 1940 Act. In addition, for the same period,
Analytic Enhanced Equity Fund held 11,461 shares, $1,451,249 worth of shares,
of JP Morgan, one of its regular brokers or dealers as defined in rule 10b-1
of the 1940 Act.
SIMULTANEOUS TRANSACTIONS
- --------------------------------------------------------------------------------
The adviser makes investment decisions for each portfolio independently of
decisions made for its other clients. When a security is suitable for the
investment objective of more than one client, it may be prudent for the
adviser to engage in a simultaneous transaction, that is, buy or sell the same
security for more than one client. The adviser strives to allocate such
transactions among its clients, including the portfolios, in a fair and
reasonable manner. Although there is no specified formula for allocating such
transactions, the Fund's governing board periodically reviews the various
allocation methods used by the adviser.
45
<PAGE>
BROKERAGE COMMISSIONS
- --------------------------------------------------------------------------------
Equity Securities
Generally, equity securities are bought and sold through brokerage
transactions for which commissions are payable. Purchases from underwriters
will include the underwriting commission or concession, and purchases from
dealers serving as market makers will include a dealer's mark-up or reflect a
dealer's mark-down.
Debt Securities
Debt securities are usually bought and sold directly from the issuer or an
underwriter or market maker for the securities. Generally, a portfolio will
not pay brokerage commissions for such purchases. When a debt security is
bought from an underwriter, the purchase price will usually include an
underwriting commission or concession. The purchase price for securities
bought from dealers serving as market makers will similarly include the
dealer's mark up or reflect a dealer's mark down. When a portfolio executes
transactions in the over-the-counter market, it will deal with primary market
makers unless prices that are more favorable are otherwise obtainable.
Commissions Paid
For the last three fiscal years, the portfolios paid the brokerage commissions
set forth below. Significant differences are due to increases or decreases in
a portfolio's net assets.
<TABLE>
<CAPTION>
Brokerage Commissions
- --------------------------------------------------------------------------------
<S> <C>
Defensive Equity Fund $282,632
1999
- --------------------------------------------------------------------------------
1998 $258,118
- --------------------------------------------------------------------------------
1997 $159,674
- --------------------------------------------------------------------------------
Enhanced Equity Fund $193,218
1999
- --------------------------------------------------------------------------------
1998 $ 64,668
- --------------------------------------------------------------------------------
1997 $ 16,005
- --------------------------------------------------------------------------------
International Fund $ 1,281
1999
- --------------------------------------------------------------------------------
1998 N/A
- --------------------------------------------------------------------------------
1997 N/A
- --------------------------------------------------------------------------------
Master Fixed Income Fund $ 21,008
1999
- --------------------------------------------------------------------------------
1998 $ 27,405
- --------------------------------------------------------------------------------
1997 $ 43,983
- --------------------------------------------------------------------------------
Short-Term Government Fund $ 5,010
1999
- --------------------------------------------------------------------------------
1998 $ 2,737
- --------------------------------------------------------------------------------
1997 $ 0
</TABLE>
Capital Stock and Other Securities
THE FUND
- --------------------------------------------------------------------------------
46
<PAGE>
The Fund was organized under the name "PBHG Advisor Funds, Inc." as a Maryland
corporation on January 9, 1998 and is registered as an open-end management
investment company under the 1940 Act. On April 6, 1999, the Fund changed its
name to "UAM Funds, Inc. II." The Fund's principal executive office is
located at 211 Congress Street, Boston, MA 02110; however, shareholders should
direct all correspondence to the address listed on the cover of this SAI.
Each portfolio is a diversified series of the Fund. This means that with
respect to 75% of a portfolio's total assets, a portfolio may not invest more
than 5% of its total assets in the securities of any one issuer (except U.S.
government securities). Each share of a portfolio represents an equal
proportionate interest in that Fund
DESCRIPTION OF SHARES AND VOTING RIGHTS
- --------------------------------------------------------------------------------
The Fund's Articles of Incorporation, as amended, provide that:
(i) all consideration received by the Fund for shares of any portfolio and
all assets in which such consideration is invested would belong to
that portfolio and would be subject to the liabilities related
thereto;
(ii) each share of stock shall entitle the holder thereof to one vote for
each dollar (and each fractional dollar thereof) of net asset value
(number of shares owned times net asset value per share) of shares of
stock outstanding in such holder's name on the books of the Fund, and
all shares of stock shall be voted in the aggregate; provided,
however, that to the extent series voting is required by the 1940 Act
or Maryland law, or otherwise directed by the board, as to any such
matter, shares of stock shall be voted by series;
(iii) in the event of the liquidation or dissolution of any series of stock
of the Fund, stockholders of such series shall be entitled to receive
out of the assets of such series available for distribution to
stockholders the assets belonging to such series; and the assets so
distributable to the stockholders of such series shall be distributed
among such stockholders in proportion to the number of shares of such
series held by them and recorded on the books of the Fund; and
(iv) no holder of shares of stock of the Fund shall, as such holders, have
any preemptive rights to purchase or subscribe for any additional
shares of stock of the Fund or any other security of the Fund.
The Fund will not hold annual meetings except when required to by the 1940 Act
or other applicable law.
Dividend and Distribution Options
There are three ways for shareholders to receive dividends and capital gains:
. Income dividends and capital gains distributions are reinvested in
additional shares at net asset value;
. Income dividends are paid in cash and capital gains distributions are
reinvested in additional shares at NAV; and
. Income dividends and capital gains distributions are paid in cash.
Unless the shareholder elects otherwise in writing, the fund will
automatically reinvest all dividends and distributions in additional shares of
the portfolio at NAV (as of the business day following the record date).
Shareholders may change their dividend and distributions option by writing to
the fund at least three days before the record date for income dividend or
capital gain distribution.
47
<PAGE>
The fund sends account statements to shareholders whenever it pays an income
dividend or capital gains distribution.
Federal Taxes
Each portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute out its income to
shareholders each year so that the portfolio itself generally will be relieved
of federal income and excise taxes. If a portfolio were to fail to make
sufficient distributions in a year, it would be subject to corporate income
taxes and/or excise taxes. In addition, if the shortfall were large enough, a
portfolio could be disqualified as a regulated investment company. If a
portfolio were to fail to so qualify: (1) it would be taxed at regular
corporate rates without any deduction for distributions to shareholder; and
(2) its shareholders would be taxed as if they received ordinary dividends,
although corporate shareholders could be eligible for the dividends received
deduction.
The portfolios' dividends that are paid to their corporate shareholders and
are attributable to qualifying dividends it received from U.S. domestic
corporations may be eligible, in the hands of such shareholders, for the
corporate dividends received deduction, subject to certain holding period
requirements and debt financing limitations.
At December 31, 1999, the following portfolios had available the following
capital loss carryovers for federal income tax purposes, which will expire on
the dates indicated:
<TABLE>
2002 2003 2004 2005 2006 2007
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Master Fixed Income Fund -- -- -- -- $208,911 $14,131
- ---------------------------------------------------------------------------------------------------------------
Short-Term Government Fund $46,629 $257,536 $444,657 $3,860 -- $70,796
</TABLE>
Purchase, Redemption and Pricing of Shares
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Calculating VAV
The purchase and redemption price of the shares of a portfolio is equal to the
NAV of the portfolio. The Fund calculates the NAV of a portfolio by
subtracting its liabilities from its total assets and dividing the result by
the total number of shares outstanding. For purposes of this calculation:
. Liabilities include accrued expenses and dividends payable; and
. Total assets include the market value of the securities held by the
portfolio, plus cash and other assets plus income accrued but not yet
received.
Each portfolio normally calculates its NAV as of the close of trading on the
NYSE every day the NYSE is open for trading. The NYSE usually closes at 4:00
p.m. The NYSE is closed on the following days: New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
48
<PAGE>
How the Fund Values it Assets
Equity Securities
Equity securities listed on a securities exchange for which market quotations
are readily available are valued at the last quoted sale price of the day.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted equity securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued neither exceeding the asked prices nor less than
the bid prices. Quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against U.S. dollars quoted by any major
bank or by a broker.
Debt Securities
Debt securities are valued according to the broadest and most representative
market, which will ordinarily be the over-the-counter market. Debt securities
may be valued based on prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities. Securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost when the governing board determines that amortized cost reflects fair
value.
Other Assets
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the governing board.
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
Service Agents may enter confirmed purchase orders on behalf of their
customers. To do so, the Service Agent must receive your investment order
before the close of trading on the NYSE and must transmit it to the fund
before the close of its business day to receive that day's share price. The
fund must receive proper payment for the order by the time the portfolio
calculates its NAV 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.
Shareholders can buy full and fractional (calculated to three decimal places)
shares of a portfolio. The fund will not issue certificates for fractional
shares and will only issue certificates for whole shares upon the written
request of a shareholder.
The Fund may reduce or waive the minimum for initial and subsequent investment
for certain fiduciary accounts, such as employee benefit plans or under
circumstances, where certain economies can be achieved in sales of the
portfolio's shares.
In-Kind Purchases
At its discretion, the Fund may permit shareholders to purchase shares of the
portfolio with securities, instead of cash. If the Fund allows a shareholder
to make an in-kind purchase, it will value such securities according to the
policies described under "How the Fund Values it Assets" at the next
determination of net asset value after acceptance. The Fund will issue shares
of the portfolio at the NAV of the portfolio determined as of the same time.
The Fund will only acquire securities through an in-kind purchase for
investment and not for immediate resale. The Fund will only accept in-kind
purchases if the transaction meets the following conditions:
49
<PAGE>
. The securities are eligible investments for the portfolio;
. The securities have readily available market quotations;
. The investor represents and agrees that the securities are liquid and that
there are no restrictions on their resale imposed by the 1933 Act or
otherwise;
. All dividends, interest, subscription, or other rights pertaining to such
securities become the property of the portfolio and are delivered to the
fund by the investor upon receipt from the issuer; and
. Immediately after the transaction is complete, the value of all securities
of the same issuer held by the portfolio cannot exceed 5% of the net assets
of the portfolio. This condition does not apply to U.S. government
securities.
Investors who are subject to Federal taxation upon exchange may realize a gain
or loss for federal income tax purposes depending upon the cost of securities
or local currency exchanged. Investors interested in such exchanges should
contact the adviser.
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
When you redeem, your shares may be worth more or less than the price you paid
for them depending on the market value of the investments held by the
portfolio.
By Mail
Requests to redeem shares must include:
. Share certificates, if issued;
. A letter of instruction or an assignment specifying the number of shares or
dollar amount the shareholder wishes to redeem signed by all registered
owners of the shares in the exact names in which they are registered;
. Any required signature guarantees (see "Signature Guarantees"); and
. Any other necessary legal documents for estates, trusts, guardianships,
custodianships, corporations, pension and profit sharing plans and other
organizations.
By Telephone
Shareholders may not do the following by telephone:
. Change the name of the commercial bank or the account designated to receive
redemption proceeds. To change an account in this manner, you must submit a
written request signed by each shareholder, with each signature guaranteed.
. Redeem shares represented by a certificate.
The Fund and UAMSSC will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and they may be liable for
any losses if they fail to do so. These procedures include requiring the
investor to provide certain personal identification at the time an account is
opened and before effecting each transaction requested by telephone. In
addition, all telephone transaction requests will be recorded and investors
may be required to provide additional telecopied written instructions of such
transaction requests. The Fund or UAMSSC may be liable for any losses due to
unauthorized or fraudulent telephone instructions if the Fund or the UAMSSC
does not employ
50
<PAGE>
the procedures described above. Neither the Fund nor the UAMSSC will be
responsible for any loss, liability, cost or expense for following
instructions received by telephone that it reasonably believes to be genuine.
Redemptions-In-Kind
If the governing board determines that it would be detrimental to the best
interests of remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in-kind of liquid securities held by the portfolio in lieu of
cash in conformity with applicable rules of the SEC. Investors may incur
brokerage charges on the sale of portfolio securities received in payment of
redemptions.
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 investment securities or in cash, as the Board may deem
advisable; however, payment will be made wholly in cash unless the governing
board believes that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If a portfolio pays
redemption proceeds with securities instead of cash, it will value such
securities as set forth under "How the Fund Values its Assets." A redeeming
shareholder would normally incur brokerage expenses if these securities were
converted to cash.
Signature Guarantees
The Fund requires signature guarantees for certain types of documents,
including:
. Written requests for redemption;
. Separate instruments for assignment ("stock power"), which should specify
the total number of shares to be redeemed; and
. On all stock certificates tendered for redemption.
The purpose of signature guarantees is to verify the identity of the person
who has authorized a redemption from your account and to protect your account,
the Fund and its sub-transfer agent from fraud.
The Fund will accept signature guarantees from any eligible guarantor
institution, as defined by the Securities Exchange Act of 1934 that
participates in a signature guarantee program. Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. You can get a complete definition of eligible guarantor
institutions by calling 1-877-826-5465. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital
of at least $100,000. Credit unions must be authorized to issue signature
guarantees.
Other Redemption Information
Normally, the Fund will pay for all shares redeemed under proper procedures
within seven days after it received your request. However, the Fund will pay
your redemption proceeds earlier as applicable law so requires.
51
<PAGE>
The Fund may suspend redemption privileges or postpone the date of payment:
. when the NYSE and custodian bank are closed;
. when trading on the NYSE is restricted;
. during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for the
portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets; or
. for such other periods as the Commission may permit.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
The exchange privilege is only available with respect to portfolios that are
qualified for sale in the shareholder's state of residence. Exchanges are
based on the respective net asset values of the shares involved. The
Institutional Class shares of UAM Funds do not charge a sales commission or
charge of any kind for exchanges.
Neither the Fund nor any of its service providers will be responsible for the
authenticity of the exchange instructions received by telephone. The
governing board of the Fund may restrict the exchange privilege at any time.
Such instructions may include limiting the amount or frequency of exchanges
and may be for the purpose of assuring such exchanges do not disadvantage the
Fund and its shareholders.
TRANSFER OF SHARES
- --------------------------------------------------------------------------------
Shareholders may transfer shares of the portfolio to another person by making
a written request to the Fund. Your request should clearly identify the
account and number of shares you wish to transfer. All registered owners
should sign the request and all stock certificates, if any, which are subject
to the transfer. The signature on the letter of request, the stock certificate
or any stock power must be guaranteed in the same manner as described under
"Signature Guarantees." As in the case of redemptions, the written request
must be received in good order before any transfer can be made.
Performance Calculations
Each portfolio measures its performance by calculating its yield and total
return. Yield and total return figures are based on historical earnings and
are not intended to indicate future performance. The portfolio calculates its
current yield and average annual total return information according to the
methods required by the SEC. The performance is calculated separately for
each portfolio.
TOTAL RETURN
- --------------------------------------------------------------------------------
52
<PAGE>
Total return is the change in value of an investment in a portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A
cumulative or aggregate total return reflects actual performance over a stated
period. An average annual total return is a hypothetical rate of return that,
if achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period.
The fund calculates the average annual total return of a portfolio by finding
the average annual compounded rates of return over one, five and ten-year
periods that would equate an initial hypothetical $1,000 investment to its
ending redeemable value. The calculation assumes that all dividends and
distributions are reinvested when paid. The quotation assumes the amount was
completely redeemed at the end of each one, five and ten-year period and the
deduction of all applicable Fund expenses on an annual basis.
The fund calculates these figures according to the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the 1,
5 or 10 year periods (or fractional portion thereof).
Set forth in the table below are the portfolios' average annual returns for
the one-year period and the five-year period ended December 31, 1999 and the
shorter of the ten-year period ended December 31, 1999 or the period from a
portfolio's inception date through December 31, 1999.
<TABLE>
<CAPTION>
Shorter of 10 Years or
One Year Five Years Since Inception Inception Date
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Defensive Equity Fund 21.35% 21.24% 13.34% 7/1/78
- ----------------------------------------------------------------------------------------------------------------------------
Enhanced Equity Fund 20.06% 29.02% 22.33% 7/1/93
- ----------------------------------------------------------------------------------------------------------------------------
International Fund N/A N/A 12.67%* 9/30/99
- ----------------------------------------------------------------------------------------------------------------------------
Master Fixed Income Fund -2.00% 6.61% 5.45% 7/1/93
- ----------------------------------------------------------------------------------------------------------------------------
Short-Term Government Fund 2.54% 6.18% 5.07% 7/1/93
</TABLE>
* Cumulative since inception.
YIELD
- --------------------------------------------------------------------------------
Yield refers to the income generated by an investment in a portfolio over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all mutual funds. As
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
The current yield is determined by dividing the net investment income per
share earned during a 30-day base period by the maximum offering price per
share on the last day of the period and annualizing the result. Expenses
accrued for
53
<PAGE>
the period include any fees charged to all shareholders during the base
period. Since Institutional Service Class shares bear additional service and
distribution expenses, their yield will generally be lower than that of the
Institutional Class Shares.
Yield is obtained using the following formula:
Yield = 2[((a-b)/(cd)+1)/6/-1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
Set forth in the table below are the yields for certain of the portfolios for
the 30-day period December 31, 1999.
<TABLE>
<CAPTION>
30-Day Yield
- ----------------------------------------------------------------------------
<S> <C>
Defensive Equity Fund 0.42%
- ----------------------------------------------------------------------------
Enhanced Equity Fund 0.95%
- ----------------------------------------------------------------------------
Master Fixed Income Fund 5.51%
- ----------------------------------------------------------------------------
Short-Term Government Fund 5.81%
</TABLE>
COMPARISONS
- --------------------------------------------------------------------------------
A portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further
described in this SAI. This information may also be included in sales
literature and advertising.
To help investors better evaluate how an investment in a portfolio might
satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated
above) to performance as reported by other investments, indices and averages.
Please see "Comparative Benchmarks" for publications, indices and averages
that may be used.
In assessing such comparisons of performance, an investor should keep in mind:
. that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in a portfolio;
. that the indices and averages are generally unmanaged;
. that the items included in the calculations of such averages may not be
identical to the formula used by a portfolio to calculate its performance;
and
. that shareholders cannot invest directly in such indices or averages.
In addition, there can be no assurance that a portfolio will continue this
performance as compared to such other averages.
54
<PAGE>
Financial Statements
The following documents are included in the portfolios' December 31, 1999
Annual Report:
. Financial statements for the fiscal year ended December 31, 1999;
. Financial highlights for the respective periods presented; and
. The report of PricewaterhouseCoopers LLP.
Each of the above-referenced documents is incorporated by reference into this
SAI. However, no other parts of the portfolios' Annual Reports are
incorporated by reference herein. Shareholders may get copies of the
portfolios' Annual Reports free of charge by calling the UAM Funds at the
telephone number appearing on the front page of this SAI.
Glossary
All terms that this SAI does not otherwise define, have the same meaning in
the SAI as they do in the prospectus(es) of the portfolios.
1933 Act means the Securities Act of 1933, as amended.
1934 Act means the Securities Exchange Act of 1934, as amended.
1940 Act means the Investment Company Act of 1940, as amended.
Adviser means the investment adviser to each portfolio.
Board Member refers to a single member of the Fund's Board.
Board refers to the Fund's Board of Trustees as a group.
SEI is SEI Investments Mutual Funds Services, the Fund's sub-administrator.
Fund refers to UAM Funds, Inc. II.
Governing Board, see Board.
NAV is the net asset value per share of a portfolio.\
NYSE is the New York Stock Exchange. Also known as "The Exchange" or "The Big
Board," the NYSE is located on Wall Street and is the largest exchange in the
United States.
55
<PAGE>
Portfolio refers to a single series of the Fund, while portfolios refer to all
of the series of the Fund.
SEC is the Securities and Exchange Commission. The SEC is the federal agency
that administers most of the federal securities laws in the United States. In
particular, the SEC administers the 1933 Act, the 1940 Act and the 1934 Act.
UAM Funds Complex includes UAM Funds, Inc., UAM Funds Trust, UAM Funds Inc. II
and all of their portfolios.
UAM is United Asset Management Corporation.
UAMFDI is UAM Fund Distributors, Inc., the Fund's distributor.
UAMFSI is UAM Fund Services, Inc., the Fund's administrator.
UAMSSC is UAM Fund Shareholder Servicing Center, the Fund's sub-shareholder-
servicing agent.
Bond Ratings
MOODY'S INVESTORS SERVICE, INC.
- --------------------------------------------------------------------------------
Preferred Stock Ratings
<TABLE>
<S> <C>
aaa An issue which is rated "aaa" is considered to be a top-quality preferred stock. This rating
indicates good asset protection and the least risk of dividend impairment within the universe of
preferred stocks.
aa An issue which is rated "aa" is considered a high-grade preferred stock. This rating indicates that
there is a reasonable assurance the earnings and asset protection will remain relatively
well-maintained in the foreseeable future.
a An issue which is rated "a" is considered to be an upper-medium grade preferred stock. While risks
are judged to be somewhat greater than in the "aaa" and "aa" classification, earnings and asset
protection are, nevertheless, expected to be maintained at adequate levels.
baa An issue that which is rated "baa" is considered to be a medium--grade preferred stock, neither highly
protected nor poorly secured. Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
ba An issue which is rated "ba" is considered to have speculative elements and its future cannot be
considered well assured. Earnings and asset protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position characterizes preferred stocks in this class.
b An issue that is rated "b" generally lacks the characteristics of a desirable investment. Assurance
of dividend payments and maintenance of other terms of the issue over any long period of time may be
small.
caa An issue that is rated "caa" is likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payments.
ca An issue that is rated "ca" is speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payments.
c This is the lowest rated class of preferred or preference stock. Issues so rated can thus be regarded
as having extremely poor prospects of ever attaining any real investment standing.
</TABLE>
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<TABLE>
<S> <C>
plus (+) or Moody's applies numerical modifiers 1, 2, and 3 in each rating classification: the modifier 1
minus (-) indicates that the security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
</TABLE>
Debt Ratings - Taxable Debt & Deposits Globally
<TABLE>
<S> <C>
Aaa Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt-edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that make the long-term
risks appear somewhat larger than the Aaa securities.
A Bonds that are rated A possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds that are rated Baa are considered as medium-grade obligations, (i.e., they are neither highly
protected nor poorly secured). Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds that are rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract over any long period
of time may be small.
Caa Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
Ca Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Con. (...) (This rating applies only to U.S. Tax-Exempt Municipals) Bonds for which the security depends upon
the completion of some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in
operating experience, (c) rentals that begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
</TABLE>
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
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<PAGE>
Short-Term Prime Rating System - Taxable Debt & Deposits Globally
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
<TABLE>
<S> <C>
Prime-1 Issuers rated Prime-1 (or supporting institution) have a superior ability for repayment of senior
short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the
following characteristics:
. Leading market positions in well-established industries.
. Conservative capitalization structure with moderate reliance on debt and ample asset protection.
. Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
. Well-established access to a range of financial markets and assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Prime 3 Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior
short-term obligation. The effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage. Adequate alternate
liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime rating categories.
</TABLE>
Standard & Poor's Ratings Services
- --------------------------------------------------------------------------------
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of payment-capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations
are typically rated lower than senior obligations, to reflect the lower
priority in bankruptcy, as noted above. Accordingly, in the case of junior
debt, the rating may not conform exactly with the category definition.
58
<PAGE>
<TABLE>
<S> <C>
AAA An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's
capacity to meet its financial commitment on the obligation is extremely strong.
AA An obligation rated 'AA' differs from the highest rated obligations only in small degree. The
obligor's capacity to meet its financial commitment on the obligation is very strong.
A An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the obligation is still strong.
BBB An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to
meet its financial commitment on the obligation.
</TABLE>
Obligations rated 'BB', 'B', 'CCC' , 'CC' and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least degree of
speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major risk exposures to adverse conditions.
<TABLE>
<S> <C>
BB An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it
faces major ongoing uncertainties or exposures to adverse business, financial, or economic conditions
which could lead to the obligor's inadequate capacity to meet its financial commitment on the
obligation.
B An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor
currently has the capacity to meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC An obligation rated 'CCC' is currently vulnerable to non-payment, and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic conditions, the obligor is not
likely to have the capacity to meet its financial commitment on the obligations.
CC An obligation rated 'CC' is currently highly vulnerable to nonpayment.
C A subordinated debt or preferred stock obligation rated 'C' is CURRENTLY HIGHLY VULNERABLE to
non-payment. The 'C' rating may be used to cover a situation where a bankruptcy petition has been
filed or similar action taken, but payments on this obligation are being continued. A 'C' will also
be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is
currently paying.
D An obligation rated 'D' is in payment default. The 'D' rating category is used when payments on an
obligation are not made on the date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such grace period. The 'D' rating
also will be used upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
r This symbol is attached to the ratings of instruments with significant noncredit risks. It highlights
risks to principal or volatility of expected returns which are not addressed in the credit rating.
Examples include: obligation linked or indexed to equities, currencies, or commodities; obligations
exposed to severe prepayment risk - such as interest-only or principal-only mortgage securities; and
obligations with unusually risky interest terms, such as inverse floaters.
N.R. This indicates that no rating has been requested, that there is insufficient information on which to
base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.
</TABLE>
Plus (+) or minus (-): The ratings from 'AA' to 'CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
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<PAGE>
Short-Term Issue Credit Ratings
<TABLE>
<S> <C>
A-1 A short-term obligation rated 'A-1' is rated in the highest category by Standard & Poor's. The
obligor's capacity to meet its financial commitment on the obligation is strong. Within this
category, certain obligations are designated with a plus sign (+). This indicates that the obligor's
capacity to meet its financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rating categories. However, the
obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A-3 A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
B A short-term obligation rated 'B' is regarded as having significant speculative characteristics. The
obligor currently has the capacity to meet its financial commitment on the obligation; however, it
faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D A short-term obligation rated 'D' is in payment default. The 'D' rating category is used when
payments on an obligation are not made on the date due even if the applicable grace period has not
expired, unless Standard & Poors' believes that such payments will be made during such grace period.
The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
</TABLE>
Local Currency and Foreign Currency Risks
Country risks considerations are a standard part of Standard & Poor's analysis
for credit ratings on any issuer or issue. Currency of repayment is a key
factor in this analysis. An obligor's capacity to repay foreign currency
obligations may be lower than its capacity to repay obligations in its local
currency due to the sovereign government's own relatively lower capacity to
repay external versus domestic debt. These sovereign risk considerations are
incorporated in the debt ratings assigned to specific issues. Foreign
currency issuer ratings are also distinguished from local currency issuer
ratings to identity those instances where sovereign risks make them different
for the same issuer.
DUFF & PHELPS CREDIT RATING CO.
- --------------------------------------------------------------------------------
Long-Term Debt and Preferred Stock
<TABLE>
<S> <C>
AAA Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free
U.S. Treasury debt.
AA+/AA/ High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time
AA- to time because of economic conditions.
A+/A/A- Protection factors are average but adequate. However, risk factors are more variable in periods of
greater economic stress.
BBB+/BBB Below-average protection factors but still considered sufficient for prudent investment. Considerable
BBB- variability in risk during economic cycles.
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
BB+/BB/ Below investment grade but deemed likely to meet obligations when due. Present or prospective
BB- financial protection factors fluctuate according to industry conditions. Overall quality may move up
or down frequently within this category.
B+/B/B- Below investment grade and possessing risk that obligation will not be met when due. Financial
protection factors will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty exists as to timely payment of
principal, interest or preferred dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal and/or interest payments.
DP Preferred stock with dividend arrearages.
Short-Term Debt
High Grade
D-1+ Highest certainty of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
D-1 Very high certainty of timely payment. Liquidity factors are excellent and supported by good
fundamental protection factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although
ongoing funding needs may enlarge total financing requirements, access to capital markets is good.
Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors qualify issues as to investment grade. Risk
factors are larger and subject to more variation. Nevertheless, timely payment is expected.
Non-Investment Grade
D-4 Speculative investment characteristics. Liquidity is not sufficient to insure against disruption in
debt service. Operating factors and market access may be subject to a high degree of variation.
Default
D-5 Issuer failed to meet scheduled principal and/or interest payments.
</TABLE>
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<PAGE>
FITCH IBCA RATINGS
- --------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade
<TABLE>
<S> <C>
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of credit risk. They are
assigned only in case of exceptionally strong capacity for timely payment of financial commitments.
This capacity is highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation of credit risk. They indicate
very strong capacity for timely payment of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit risk. The capacity for timely
payment of financial commitments is considered strong. This capacity may, nevertheless, be more
vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered adequate, but adverse changes
in circumstances and in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade
BB Speculative. `BB' ratings indicate that there is a possibility of credit risk developing,
particularly as the result of adverse economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be met. Securities rated in this
category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk is present, but a limited
margin of safety remains. Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and economic environment.
CCC,CC,C High default risk. Default is a real possibility. Capacity for meeting financial commitments is
solely reliant upon sustained, favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal imminent default.
DDD,DD,D Default. The ratings of obligations in this category are based on their prospects for achieving
partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery
values are highly speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery, around 90%-100% of
outstanding amounts and accrued interest. "D" indicates potential recoveries in the range of
50%-90%, and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their obligations. Entities rated
"DDD" have the highest prospect for resumption of performance or continued operation with or without
a formal reorganization process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a higher portion of
their outstanding obligations, while entities rated "D" have a poor prospect for repaying all
obligations.
</TABLE>
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<PAGE>
International Short-Term Credit Ratings
<TABLE>
<S> <C>
F1 Highest credit quality. Indicates the Best capacity for timely payment of financial commitments; may
have an added "+" to denote any exceptionally strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the
margin of safety is not as great as in the case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments is adequate; however,
near-term adverse changes could result in a reduction to non-investment grade.
B Speculative. Uncertain capacity for timely payment of financial commitments, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for meeting financial commitments that is
highly uncertain and solely reliant upon a sustained, favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
</TABLE>
Notes
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the `AAA' long-term rating
category, to categories below `CCC', or to short-term ratings other than `F1'.
`NR' indicates that Fitch IBCA does not rate the issuer or issue in question.
`Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
RatingAlert: Ratings are placed on RatingAlert to notify investors that there
is a reasonable probability of a rating change and the likely direction of
such change. These are designated as "Positive", indicating a potential
upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may
be raised, lowered or maintained. RatingAlert is typically resolved over a
relatively short period.
Comparative Benchmarks
(alphabetically)
CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. --
analyzes price, current yield, risk, total return and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
Consumer Price Index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics -- a statistical measure of change, over time in the price
of goods and services in major expenditure groups.
Donoghue's Money Fund Average -- is an average of all major money market fund
yields, published weekly for 7 and 30-day yields.
Dow Jones Industrial Average - a price-weighted average of thirty blue-chip
stocks that are generally the leaders in their industry and are listed on the
New York Stock Exchange. It has been a widely followed indicator of the stock
market since October 1, 1928.
Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times, Global
Investor, Investor's Daily, Lipper, Inc., Morningstar, Inc., The New York
Times, Personal Investor, The Wall Street Journal and Weisenberger Investment
Companies Service -- publications that rate fund performance over specified
time periods.
Historical data supplied by the research departments of First Boston
Corporation, J.P. Morgan & Co, Inc., Salomon Smith Barney, Merrill Lynch &
Co., Inc., Lehman Brothers, Inc. and Bloomberg L.P.
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<PAGE>
IBC's Money Fund Average/All Taxable Index - an average of all major money
market fund yields, published weekly for 7- and 30-day yields.
IFC Investable Composite Index - an unmanaged market capitalization-weighted
index maintained by the International Finance Corporation. This index
consists of over 890 companies in 26 emerging equity markets, and is designed
to measure more precisely the returns portfolio managers might receive from
investment in emerging markets equity securities by focusing on companies and
markets that are legally and practically accessible to foreign investors.
Lehman Brothers Indices:
------------------------
Lehman Brothers Aggregate Bond Index - an unmanaged fixed income market value-
weighted index that combines the Lehman Government/Corporate Index and the
Lehman Mortgage-Backed Securities Index, and includes treasury issues, agency
issues, corporate bond issues and mortgage backed securities. It includes
fixed rate issuers of investment grade (BBB) or higher, with maturities of at
least one year and outstanding par values of at least $100 million for U.S.
government issues and $25 million for others.
Lehman Brothers Corporate Bond Index - an unmanaged index of all publicly
issued, fixed-rate, nonconvertible investment grade domestic corporate debt.
Also included are yankee bonds, which are dollar-denominated SEC registered
public, nonconvertible debt issued or guaranteed by foreign sovereign
governments, municipalities, or governmental agencies, or international
agencies.
Lehman Brothers Government Bond Index - an unmanaged treasury bond index
including all public obligations of the U.S. Treasury, excluding flower bonds
and foreign-targeted issues, and the Agency Bond Index (all publicly issued
debt of U.S. government agencies and quasi-federal corporations, and corporate
debt guaranteed by the U.S. government). In addition to the aggregate index,
sub-indices cover intermediate and long term issues.
Lehman Brothers Government/Corporate Bond Index -- an unmanaged fixed income
market value-weighted index that combines the Government and Corporate Bond
Indices, including U.S. government treasury securities, corporate and yankee
bonds. All issues are investment grade (BBB) or higher, with maturities of at
least one year and outstanding par value of at least $100 million of U.S.
government issues and $25 million for others. Any security downgraded during
the month is held in the index until month end and then removed. All returns
are market value weighted inclusive of accrued income.
Lehman Brothers High Yield Bond Index - an unmanaged index of fixed rate, non-
investment grade debt. All bonds included in the index are dollar denominated,
nonconvertible, have at least one year remaining to maturity and an
outstanding par value of at least $100 million.
Lehman Brothers Intermediate Government/Corporate Index - an unmanaged fixed
income, market value-weighted index that combines the Lehman Brothers
Government Bond Index (intermediate-term sub-index) and four corporate bond
sectors.
Lehman Brothers Mortgage-Backed Securities Index - an unmanaged index of all
fixed-rate securities backed by mortgage pools of Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and
Federal National Mortgage Association (FNMA).
Lipper, Inc./Lipper Indices/Lipper Averages
-------------------------------------------
The Lipper Indices are equally weighted indices for typically the 30 largest
mutual funds within their respective portfolio investment objectives. The
indices are currently grouped in six categories: U.S. Diversified Equity with
12 indices; Equity with 27 indices, Taxable Fixed-Income with 20 indices, Tax-
Exempt Fixed-Income with 28 indices, Closed-End Funds with 16 indices, and
Variable Annuity Funds with 18 indices.
In September, 1999, Lipper, Inc. introduced its new portfolio-based mutual
fund classification method in which peer comparisons are based upon
characteristics of the specific stocks in the underlying funds, rather than
upon a broader investment objective stated in a prospectus. Certain of Lipper,
Inc.'s classifications for general equity funds' investment objectives were
changed while other equity objectives remain unchanged. Changing investment
objectives include Capital Appreciation Funds, Growth Funds, Mid-Cap Funds,
Small-Cap Funds, Micro-Cap Funds, Growth & Income
64
<PAGE>
Funds, and Equity Income Funds. Unchanged investment objectives include Sector
Equity Funds, World Equity Funds, Mixed Equity Funds, and certain other funds
including all Fixed Income Funds and S&P(R) Index Funds.
Criteria for the Lipper Indices are: 1) component funds are largest in group;
2) number of component funds remains the same (30); 3) component funds are
defined annually; 4) can be linked historically; and 5) are used as a
benchmark for fund performance.
Criteria for the Lipper Averages are: 1) includes all funds in the group in
existence for the period; 2) number of component funds always changes; 3)
universes are dynamic due to revisions for new funds, mergers, liquidations,
etc.; and 4) will be inaccurate if historical averages are linked.
Certain Lipper, Inc. indices/averages used by the UAM Funds may include, but
are not limited to, the following:
Lipper Short-Intermediate Investment Grade Debt Funds Average -- is an average
of 100 funds that invest at least 65% of assets in investment grade debt
issues (BBB or higher) with dollar-weighted average maturities of one to five
years or less. (Taxable Fixed-Income category)
Lipper Balanced Fund Index - an unmanaged index of open-end equity funds whose
primary objective is to conserve principal by maintaining at all times a
balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio
ranges around 60%/40%. (Equity category)
Lipper Equity Income Fund Index - an unmanaged index of equity funds which
seek relatively high current income and growth of income through investing 60%
or more of the portfolio in equities. (Equity category)
Lipper Equity Mid Cap Fund Index - an unmanaged index of funds that by
prospectus or portfolio practice invest primarily in companies with market
capitalizations less than $5 billion at the time of purchase. (Equity
category)
Lipper Equity Small Cap Fund Index - an unmanaged index of funds by prospectus
or portfolio practice invest primarily in companies with market
capitalizations less than $1 billion at the time of purchase. (Equity
category)
Lipper Growth Fund Index - an unmanaged index composed of the 30 largest funds
by asset size which invest in companies with long-term earnings expected to
grow significantly faster than the earnings of the stocks represented in the
major unmanaged stock indices. (Equity category)
Lipper Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis -- measures total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestments of all distributions, exclusive
of any applicable sales charges.
Merrill Lynch 1-4.99 Year Corporate/Government Bond Index -- is an unmanaged
index composed of U.S. treasuries, agencies and corporates with maturities
from 1 to 4.99 years. Corporates are investment grade only (BBB or higher).
Merrill Lynch 1-3 Year Treasury Index - an unmanaged index composed of U.S.
treasury securities with maturities from 1 to 3 years.
Morgan Stanley Capital International EAFE Index -- arithmetic, market value-
weighted averages of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
yield, risk and total return for equity funds.
NASDAQ Composite Index -- is a market capitalization, price only, unmanaged
index that tracks the performance of domestic common stocks traded on the
regular NASDAQ market as well as national market System traded foreign common
stocks and ADRs.
Nikkei Stock Average - a price weighted index of 225 selected leading stocks
listed on the First Section of the Tokyo Stock Exchange.
New York Stock Exchange composite or component indices -- capitalization-
weighted unmanaged indices of all industrial, utilities, transportation and
finance stocks listed on the New York Stock Exchange.
Russell U.S. Equity Indices:
----------------------------
65
<PAGE>
Russell 3000(R) Index - measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents approximately
98% of the investable U.S. equity market.
Russell 1000(R) Index - an unmanaged index which measures the performance of
the 1,000 largest companies in the Russell 3000 Index, which represents
approximately 92% of the total market capitalization of the Russell 3000
Index.
Russell 2000(R) Index -- an unmanaged index which measures the performance of
the 2,000 smallest companies in the Russell 3000 Index, which represents
approximately 8% of the total market capitalization of the Russell 3000 Index.
Russell Top 200(TM) Index - measures the performance of the 200 largest
companies in the Russell 1000 Index, which represents approximately 74% of the
total market capitalization of the Russell 1000 Index.
Russell Mid-Cap(TM) Index -- measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represents approximately 26% of the
total market capitalization of the Russell 1000 Index.
Russell 2500(TM) Index - an unmanaged index which measures the performance of
the 2,5000 smallest companies in the Russell 3000 Index, which represents
approximately 17% of the total market capitalization of the Russell 3000
Index.
Russell 3000(R) Growth Index - measures the performance of those Russell 3000
Index companies with higher price-to-book ratios and higher forecasted growth
values. The stocks in this index are also members of either the Russell 1000
Growth or the Russell 2000 Growth indexes.
Russell 3000(R) Value Index - measures the performance of those Russell 3000
Index companies with lower price-to-book ratios and lower forecasted growth
values. The stocks in this index are also members of either the Russell 1000
Value or the Russell 2000 Value indexes.
Russell 1000(R) Growth Index - measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth
values.
Russell 1000(R) Value Index - measures the performance of those Russell 1000
with lower price-to-book ratios and lower forecasted growth values.
Russell 2000(R) Growth Index - measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth
values.
Russell 2000(R) Value Index - measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
Russell Top 200(TM) Growth Index - measures the performance of those Russell
Top 200 companies with higher price-to-book ratios and higher forecasted
growth values. The stocks re also members of the Russell 1000 Growth index.
Russell Top 200(TM) Value Index - measures the performance of those Russell
Top 200 companies with lower price-to-book ratios and lower forecasted growth
values. The stocks are also members of the Russell 1000 Value index.
Russell Midcap(TM) Growth Index - measures the performance of those Russell
Midcap companies with higher price-to-book ratios and higher forecasted growth
values. The stocks are also members of the Russell 1000 Growth index.
Russell Midcap(TM) Value Index - measures the performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted growth
values. The stocks are also members of the Russell 1000 Value index.
Russell 2500(TM) Growth Index - measures the performance of those Russell 2500
companies with higher price-to-book ratios and higher forecasted growth
values.
Russell 2500(TM) Value Index - measures the performance of those Russell 2500
companies with lower price-to-book ratios and lower forecasted growth values.
Ryan Labs 5 Year GIC Master Index - an arithmetic mean of market rates of $1
million GIC contracts held for five years. The market rates are representative
of a diversified, investment grade portfolio of contracts issued by credit
worthy insurance companies. The index is unmanaged and does not reflect any
transaction costs. Direct investment in the index is not possible.
66
<PAGE>
Standard & Poor's U.S. Indices:
-------------------------------
In October, 1999, Standard & Poor's and Morgan Stanley Capital International
launched a new global industry classification standard consisting of 10
economic sectors aggregated from 23 industry groups, 59 industries, and 123
sub-industries covering almost 6,000 companies globally. The new
classification standard will be used with all of their respective indices.
Features of the new classification include 10 economic sectors, rather than
the 11 S&P currently uses. Sector and industry gradations are less severe.
Rather than jumping from 11 sectors to 115 industries under the former S&P
system, the new system progresses from 10 sectors through 23 industry groups,
50 industries and 123 sub-industries.
S&P 500 Index - an unmanaged index composed of 400 industrial stocks, 40
financial stocks, 40 utilities stocks and 20 transportation stocks. Widely
regarded as the standard for measuring large-cap U.S. stock market
performance. It is used by 97% of U.S. money managers and pension plan
sponsors. More than $1 trillion is indexed to the S&P 500.
S&P MidCap 400 Index -- consists of 400 domestic stocks chosen for market
size, liquidity, and industry group representation. It is a market-value
weighted index with each stock affecting the index in proportion to its market
value. It is used by over 95% of U.S. managers and pension plan sponsors. More
than $25 billion is indexed to the S&P MidCap 400.
S&P Small Cap 600 Index - an unmanaged index comprised of 600 domestic stocks
chosen for market size, liquidity, and industry group representation. The
index is comprised of stocks from the industrial, utility, financial, and
transportation sectors. It is gaining wide acceptance as the preferred
benchmark for both active and passive management due to its low turnover and
greater liquidity. Approximately $8 billion is indexed to the S&P SmallCap
600.
S&P SuperComposite 1500 - combines the S&P 500, MidCap 400, and SmallCap 600
indices, representing 87% of the total U.S. equity market capitalization.
S&P 100 Index - known by its ticker symbol OEX, this index measures large
company U.S. stock market performance. This market capitalization-weighted
index is made up of 100 major, blue chip stocks across diverse industry
groups.
S&P/BARRA Growth and Value Indices - are constructed by dividing the
securities in the S&P 500 Index according to price-to-book ratio. The Value
index contains the companies with the lower price-to-book ratios; while the
companies with the higher price-to-book ratios are contained in the Growth
index.
S&P REIT Composite Index - launched in 1997, this benchmark tracks the market
performance of U.S. Real Estate Investment Trusts, known as REITS. The REIT
Composite consists of 100 REITs chosen for their liquidity and importance in
representing a diversified real estate portfolio. The Index covers over 80%
of the securitized U.S. real estate market.
S&P Utilities Stock Price Index - a market capitalization weighted index
representing three utility groups and, with the three groups, 43 of the
largest utility companies listed on the New York Stock Exchange, including 23
electric power companies, 12 natural gas distributors and 8 telephone
companies.
Standard & Poor's CANADA Indices:
---------------------------------
S&P/TSE Canadian MidCap Index - measures the performance of the mid-size
company segment of the Canadian equity market.
S&P/TSE Canadian SmallCap Index - Measures the small company segment of the
Canadian equity market.
Standard & Poor's Global Indices:
---------------------------------
S&P Global 1200 Index - aims to provide investors with an investable
portfolio. This index, which covers 29 countries and consists of seven
regional components, offers global investors an easily accessible, tradable
set of stocks and particularly suits the new generation of index products,
such as exchange-traded funds (ETFs).
S&P Euro and S&P Euro Plus Indices - the S&P Euro Index covers the Eurobloc
countries; the Euro Plus Index includes the Euro markets as well as Denmark,
Norway, Sweden and Switzerland. The S&P Euro Plus Index contains
67
<PAGE>
200 constituents, and the S&P Euro Index, a subset of Euro Plus, contains 160
constituents. Both indices provide geographic and economic diversity over 11
industry sectors.
S&P/TSE 60 Index - developed with the Toronto Stock Exchange, is designed as
the new Canadian large cap benchmark and will ultimately replace the Toronto
35 and the TSE 100.
S&P/TOPIX 150 - includes 150 highly liquid securities selected from each
major sector of the Tokyo market. It is designed specifically to give
portfolio managers and derivative traders an index that is broad enough to
provide representation of the market, but narrow enough to ensure liquidity.
S&P Asia Pacific 100 Index - includes highly liquid securities from each major
economic sector of major Asia-Pacific equity markets. Seven countries --
Australia, Hong Kong, Korea, Malaysia, New Zealand, Singapore, and Taiwan --
are represented in the new index.
S&P Latin America 40 Index - part of the S&P Global 1200 Index, includes
highly liquid securities from major economic sectors of Mexican and South
American equity markets. Companies from Mexico, Brazil, Argentina, and Chile
are represented in the new index.
S&P United Kingdom 150 Index - includes 150 highly liquid securities selected
from each of the new S&P sectors. The S&P UK 150 is designed to be broad
enough to provide representation of the market, but narrow enough to ensure
liquidity.
Salomon Smith Barney Global excluding U.S. Equity Index - an unmanaged index
comprised of the smallest stocks (less than $1 billion market capitalization)
of the Extended Market Index, of both developed and emerging markets.
Salomon Smith Barney One to Three Year Treasury Index - an unmanaged index
comprised of U.S. treasury notes and bonds with maturities of one year or
greater, but less than three years.
Salomon Smith Barney Three-Month T-Bill Average -- the average for all
treasury bills for the previous three-month period.
Salomon Smith Barney Three-Month U.S. Treasury Bill Index - a return
equivalent yield average based on the last three 3-month Treasury bill issues.
Savings and Loan Historical Interest Rates -- as published by the U.S. Savings
and Loan League Fact Book.
Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates --
historical measure of yield, price and total return for common and small
company stock, long-term government bonds, U.S. treasury bills and inflation.
Target Large Company Value Index - an index comprised of large companies with
market capitalizations currently extending down to approximately $1.9 billion
that are monitored using a variety of relative value criteria in order to
capture the most attractive value opportunities available. A high quality
profile is required and companies undergoing adverse financial pressures are
eliminated.
U.S. Three-Month Treasury Bill Average - the average return for all treasury
bills for the previous three month period.
Value Line Composite Index -- composed of over 1,600 stocks in the Value Line
Investment Survey.
Wilshire Real Estate Securities Index - a market capitalization-weighted index
of publicly traded real estate securities, including real estate investment
trusts, real estate operating companies and partnerships. The index is used
by the institutional investment community as a broad measure of the
performance of public real estate equity for asset allocation and performance
comparison.
Wilshire REIT Index - includes 112 real estate investment trusts (REITs) but
excludes seven real estate operating companies that are included in the
Wilshire Real Estate Securities Index.
Note: With respect to the comparative measures of performance for equity
securities described herein, comparisons of performance assume reinvestment of
dividends, except as otherwise stated.
68
<PAGE>
PART C
UAM FUNDS, INC. II
OTHER INFORMATION
ITEM 23. EXHIBITS
Exhibits previously filed by the Fund are incorporated by reference to such
filings. The following table describes the location of all exhibits. In the
table, the following references are used: PRE 2 = Pre-Effective Amendment No. 2
filed on April 17, 1998; PEA 7 = Post-Effective Amendment No. 7 filed on April
7, 1999; Post-Effective Amendment No. 8 filed on June 30, 1999; PEA 11 = Post-
Effective Amendment No. 11 filed on September 21, 1999.
<TABLE>
<CAPTION>
Exhibit Incorporated by
- ------- Reference to (Location):
------------------------
<S> <C> <C>
A. 1. Articles of Amendment and Reinstatement dated April 9, 1998 PRE 2
2. Articles of Amendment to Articles of Incorporation filed April 7, 1999 PEA 8
3. Certificate of Change of Registered Agent and Address of UAM Funds, Inc. II PEA 8
filed April 7, 1999
4. Articles Supplementary dated April 9, 1998 PRE 2
5. Articles Supplementary filed April 7, 1999 PEA 7
B. 1. Amended and Restated By-Laws dated April 6, 1999 PEA 8
C. The rights of security holders are defined in the Registrant's Articles of PRE 2
Amendments and Restatement and in the Registrant's By-Laws.
D. 1. Investment Advisory Agreement For Analytic Defensive Equity Fund dated April PEA 8
6, 1999
2. Investment Advisory Agreement For Analytic Enhanced Equity Fund dated April PEA 8
6, 1999
3. Investment Advisory Agreement For Analytic Master Fixed Income Fund dated PEA 8
April 6, 1999
4. Investment Advisory Agreement For Analytic Short-Term Government Fund dated PEA 8
April 6, 1999
5. Investment Advisory Agreement For Analytic International Fund dated PEA 11
September 15, 1999
E. 1. Distribution Agreement between Registrant and UAM Fund Distributors, Inc. PEA 8
dated as of April 6, 1999
2. Form of Selling Dealer Agreement - Institutional Service Class Shares filed herewith
3. Form of Selling Dealer Agreement - Institutional Class Shares filed herewith
4. Form of Broker Services Agreement - Institutional Service Class Shares filed herewith
5. Form of Broker Services Agreement - Institutional Class Shares filed herewith
F. Bonus or Profit Sharing Contracts Not applicable
G. 1. Custodian Agreement between Registrant and CoreStates Bank, N. A. dated as PRE 2
of April 1, 1998
2. Rule 17f-5 Amendment to Custodian Agreement between Registrant and First PEA 11
Union National Bank dated as of August 19, 1999
H. 1. Fund Administration Agreement between Registrant and UAM Fund Services, Inc. PEA 8
dated as of April 6, 1999
2. Mutual Fund Services Agreement between UAM Fund Services, Inc. and SEI PEA 8
Mutual Funds Services dated April 7, 1999
I. Opinion and Consent of Counsel PEA 11, filed herewith
J. Consent of PricewaterhouseCoopers LLP PEA 11, filed herewith
K. Other Financial Statements Not applicable
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
L. Stock Subscription Agreement between the Registrant and Pilgrim Baxter & PRE 2
Associates, Ltd.
M. Rule 12b-1 Plan Not applicable
N. Rule 18f-3 Plan Not applicable
O. Powers of Attorney PEA 7
P. Code of Ethics filed herewith
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Not applicable.
ITEM 25. INDEMNIFICATION
Reference is made to Article SIXTH of the Registrant's Articles of
Incorporation, which was filed as Exhibit No. 1 to the Registrant's initial
registration statement, and as Exhibit No. A to PRE #2. Insofar as
indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provision, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefor, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Provisions for indemnification of UAM Fund Services, Inc. are contained in
Section 6 of its Fund Administration Agreement with the Registrant.
Provisions for indemnification of the Registrant's investment advisers are
contained in Section 7 of their respective Investment Advisory Agreements with
the Registrant.
Provisions for indemnification of Registrant's principal underwriter, UAM Fund
Distributors, Inc., are contained in Section 15 of its Distribution Agreement
with the Registrant.
Provisions for indemnification of Registrant's custodian, First Union National
Bank, N.A. (formerly CoreState Bank N.A.) are contained in Section 14 of its
Fund Global Custody Agreement with the Registrant.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the caption "Investment Adviser" in the Prospectuses
constituting Part A of this Registration Statement and "Investment Adviser" in
Part B of this Registration Statement. The information required by this Item 26
with respect to each director, officer, or partner of other investment adviser
of the Registrant is incorporated by reference to the Form ADV filed by Analytic
Investors, Inc. with the Securities and Exchange Commission pursuant to the
Investment Advisers Act of 1940, as amended, under the file number 801-7082.
Analytic Investors, Inc. is an affiliate of United Asset Management Corporation
("UAM"), a Delaware corporation owning firms engaged primarily in institutional
investment management.
ITEM 27. PRINCIPAL UNDERWRITERS
<PAGE>
UAM Fund Distributors, Inc. ("UAMFDI") acts as sole distributor of the
registrant's shares.
The information required with respect to each director and officer of UAMFDI is
incorporated by reference to Schedule A of Form BD filed pursuant to the
Securities and Exchange Act of 1934 (SEC File No. 8-41126).
Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
(a) First Union National Bank (successor to CoreStates Bank, N.A.)
530 Walnut Street
Philadelphia, PA 19106
(b) SEI Investments Mutual Funds Services (formerly SEI Fund Resources)
One Freedom Valley Road
Oaks, PA 19456
(c) UAM Fund Services, Inc.
211 Congress Street, 4th Floor
Boston, Massachusetts 02110
(d) UAM Shareholder Services Center, Inc.
825 Duportail Road
Wayne, PA 19087
(e) DST Systems, Inc.
210 West 10th Street
Kansas City, Missouri 64105
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the registrant certifies that it meets all of the requirement for
effectiveness of this registration statement under Rule 485(b) under the
Securities Act and has duly caused this registration statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Boston, and
Commonwealth of Massachusetts on the 28th day of April, 2000.
UAM FUNDS, INC. II
/s/Martin J. Wolin
------------------
Martin J. Wolin
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the 28th day of April, 2000:
*
- -------------------------------
Norton H. Reamer, Chairman and
President
*
- -------------------------------
John T. Bennett, Jr., Director
*
- -------------------------------
Nancy J. Dunn, Director
*
- -------------------------------
Philip D. English, Director
*
- -------------------------------
William A. Humenuk, Director
*
- -------------------------------
James P. Pappas, Director
*
- -------------------------------
Peter M. Whitman, Jr., Director
/s/ Gary L. French
- -------------------------------
Gary L. French, Treasurer
/s/Gary L. French
- -----------------
*Gary L. French
(Attorney-in-Fact)
<PAGE>
EXHIBITS
Exhibit Description
- ------- -----------
E. 2. Form of Selling Dealer Agreement - Institutional Service Class Shares
3. Form of Selling Dealer Agreement - Institutional Class Shares
4. Form of Broker Services Agreement - Institutional Service Class Shares
5. Form of Broker Services Agreement - Institutional Class Shares
I. Opinion and Consent of Counsel
J. Consent of PricewaterhouseCoopers LLP
P. Code of Ethics
<PAGE>
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, Massachusetts 02110
----------------------------------------------
SELLING DEALER AGREEMENT
UAM FUNDS, INC., UAM FUNDS, INC. II AND UAM FUNDS TRUST
(Institutional Service Class Shares)
----------------------------------------------
Dealer:
Gentlemen:
We invite you, as a selected dealer, to participate as principal in the
distribution of the Institutional Service Class Shares (the "Shares") of the
Portfolios of UAM Funds, Inc. and of UAM Funds Trust (each Portfolio is referred
to herein as the "Fund") with respect to which we have been retained to act as
exclusive national distributor and which are offered for sale pursuant to
currently effective federal Prospectuses describing such Shares.
OFFERING PRICE TO PUBLIC:
- -------------------------
Orders for Shares received from you and accepted by the Fund, will be at
the public offering price applicable to each order as set forth in that Fund's
Prospectus relating to such Shares. The manner of computing the net asset value
of Shares, the public offering price and the effective time of orders received
from you are described in the Prospectuses for the Shares. We reserve the
right, at any time and without notice, to suspend the sale of Fund Shares.
SALES, ORDERS AND CONFIRMATIONS:
- --------------------------------
In offering Fund Shares to the public or otherwise, you shall act as dealer
for your own account, and in no transaction shall you have any authority to act
as agent for the Fund, for any other selected dealer or for us. No person is
authorized to make any representation concerning the Shares or any Fund except
those contained in the relevant and current Prospectus and in written
information issued by the Fund or by us as a supplement to such Prospectus. In
purchasing Fund Shares, you shall rely solely on such representations contained
in the Prospectus and in such written supplemental information.
All sales are made subject to confirmation and orders are subject to
acceptance or rejection by the Fund in its sole discretion. Your orders must be
wired, telephoned or written to the Fund as provided in the relevant and current
Prospectus. You agree to place orders for the same number of Shares sold by you
at the price at which such Shares are sold. You agree that you will not
purchase Shares except for investment or for the purpose of covering purchase
orders already received and that you will not, as principal, sell Fund Shares
unless purchased by you from the Fund under the terms hereof. You also agree
that you will not withhold placing with us orders received from your customers
so as to profit yourself from such withholding.
<PAGE>
Each of your orders shall be confirmed by you in writing on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES:
- -------------------------------------
The Shares purchased by you hereunder shall be paid for in full at the
public offering price, by check payable to the Fund, at its office, within three
business days after our acceptance of your order. If not so paid, we reserve
the right to cancel the sale and to hold you responsible for any loss sustained
by us or the Fund (including lost profit) in consequence. Certificates
representing the Shares will not be issued.
REDEMPTIONS:
- ------------
The relevant Prospectus describes the provisions whereby a Fund, under all
ordinary circumstances, will redeem Shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their Shares other than the statements contained in the relevant
and current Prospectus, and the underlying organizational documents of the Fund,
to which it refers, and that you will quote as the redemption price only the
price determined by the Fund. You shall not repurchase any Shares from your
customers at a price below that next quoted by the Fund for redemption. You may
hold such repurchased Shares for investment purposes or submit such Shares to
the Fund for redemption.
DISTRIBUTION AND/OR SERVICE FEES:
- ---------------------------------
We expect you to provide distribution and marketing services (the
"Services") in the promotion of the sale of the Shares of such Fund and the
retention of assets by such Fund and/or services and assistance to your
customers who own Fund Shares, including but not limited to, answering routine
inquiries regarding the Shares or a Fund or the status of a customer's account
and providing information to customers relating to maintaining their investment
in the Fund.
12b-1 Plans:
------------
For your Services in respect of Shares of any Fund that has a
Distribution Plan under Rule 12b-1 (a "12b-1 Plan") of the Investment
Company Act of 1940 (the "1940 Act"), you will receive a fee (the "12b-1
Fee"), as established by us and the Fund from time to time, pursuant to the
provisions of the 12b-1 Plan of such Fund relating to such Shares, subject
to the further provisions of this Agreement, the terms of the then current
and applicable Prospectus relating to such Shares and the provisions of the
relevant 12b-1 Plan. The 12b-1 Fee in respect of Shares of a particular
Fund shall be based on the net asset value of such Shares held in the
accounts of your customers, provided that such Shares so held have an
aggregate net asset value of at least the minimum amount established by us
from time to time. Such 12b-1 Fee shall consist of a distribution fee
component, if any, and/or a service fee component, if any, the rates of
which shall be as provided in the schedule of fees set forth in Appendix A
attached hereto, as the same may be amended by a Fund or by us at any time
and from time to time by notice thereof to you; provided, however, that in
no event shall the rate of any such component be in excess of the current
rates set forth in the then current and applicable Prospectus relating to
such Shares and the provisions of the relevant 12b-1 Plan.
<PAGE>
We reserve the right, at any time, without notice, to modify, suspend or
terminate payments hereunder, or any component of such payments, either with
respect to one or more Funds or classes of Shares or generally with respect to
the Funds and the Shares; and the payment of 12b-1 Fees hereunder shall be
automatically suspended or terminated if and to the extent that payments under
the relevant 12b-1 Plan are suspended or terminated, or automatically reduced if
and to the extent that the corresponding rates of payments to be made under the
relevant 12b-1 Plan are reduced. Any such action may be for any reason
whatsoever or no reason at all; and you agree that you shall not be entitled to
any payments for any period after the effective date of any such suspension or
termination, nor shall you be entitled to any payments after the effective date
of any such modification or reduction except as may be calculated pursuant to a
modified or reduced schedule of fees substituted for the previously effective
schedule.
You understand and agree that we merely administer and forward payments
pursuant to the 12b-1 Plans of the Funds and that we shall have no liability to
you for such payments. Accordingly, you agree that anything to the contrary
herein notwithstanding (i) we shall have no liability to you, and you shall have
no recourse whatsoever against us or our assets, for any payment for which
provision is made in this Agreement, and (ii) your sole recourse, if any, in
respect of any such payment for which provision is made in this Agreement shall
be against the respective Fund.
LEGAL COMPLIANCE:
- ----------------
This Agreement and any transaction with, or payments to, you pursuant to
the terms hereof is conditioned on each party's representation to the other
party that, as of the date of this Agreement it is, and at all times during the
effectiveness of this Agreement it will be, a registered broker-dealer under the
Securities Exchange Act of 1934, as amended, and qualified under applicable
state securities laws in each jurisdiction in which the actions contemplated to
be taken by it under this Agreement require it to be qualified to act as a
broker-dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"). Each party agrees to
notify the other promptly in writing and immediately suspend sales of Shares if
this representation ceases to be true. Each party also agrees that it will
comply with the rules of the NASD including, in particular, Sections 2, 21(c)
and 26 of Article III of its Rules of Fair Practice, as amended, and that each
party will maintain adequate records with respect to its transactions with the
other and the Funds.
BLUE SKY MATTERS:
- -----------------
We shall have no obligation or responsibility with respect to your right to
sell Shares in any state or jurisdiction. We may furnish you with information
identifying the states and jurisdictions where the Shares of a Fund are
qualified for sale; and you will not transact orders for Shares except in such
states and jurisdictions as identified by us.
LITERATURE:
- -----------
We will furnish you with copies of each Fund's relevant Prospectus and
sales literature (if any) and other information made publicly available by us or
the Fund which relate to the Fund or the Shares of such Fund, in reasonable
quantities upon your request. You agree to deliver a copy
<PAGE>
of the current and relevant Prospectus in accordance with the provisions of the
Securities Act of 1933 to each purchaser of Shares. We shall file Fund sales
literature and promotional material with the NASD as required. You may not
publish or use any sales literature or promotional materials with respect to the
Shares, the Funds or any Fund without our prior review and written approval.
NOTICES AND COMMUNICATIONS:
- ---------------------------
All communications from you (other than purchase and sale orders) should be
addressed to us at 211 Congress Street, Boston, Massachusetts 02110, Attention:
Compliance Officer. Any notice from us to you shall be deemed to have been duly
given if mailed or telegraphed to you at the address set forth below. Each of
us may change the address to which notices shall be sent by notice to the other
in accordance with the terms hereof.
TERMINATION:
- ------------
This Agreement may be terminated by either party at any time by written
notice to that effect and will terminate without notice upon the appointment of
a trustee for you under the Securities Investor Protection Act, or any other act
of insolvency by you. Notwithstanding the termination of this Agreement, you
shall remain liable for any amounts otherwise owing to us or the Funds and for
your portion of any transfer tax or other liability which may be asserted or
assessed against the Fund, or us.
AMENDMENT:
- ----------
This Agreement may be amended or revised to modify, suspend or terminate
payments hereunder as provided in the section above entitled "Distribution
and/or Service Fees" or to amend Appendix A as provided in said section. This
Agreement may be otherwise amended or revised at any time by us upon notice to
you and you will be deemed to have accepted any such other amendment or revision
upon placing any subsequent order for Shares.
GENERAL:
- --------
Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event that you breach any
of the terms and conditions of this Agreement, you will indemnify us, the Funds,
and our affiliates for any damages, losses, costs and expenses (including
reasonable attorneys' fees and expenses) arising out of or relating to such
breach. In the event that we breach any of the terms and conditions of this
Agreement, we will indemnify you and your affiliates for any damages, losses,
costs and expenses (including reasonable attorneys' fees and expenses) arising
out of or relating to such breach. Nothing contained herein shall constitute
you, us and any dealers an association or partnership. All references in this
Agreement to the "Prospectus" refer to the then current and relevant version of
the Prospectus of the particular Fund or Funds concerned and include the
Statement of Additional Information incorporated by reference therein and any
stickers or supplements thereto.
<PAGE>
This Agreement is to be construed in accordance with the laws of The
Commonwealth of Massachusetts
Please confirm this Agreement by dating and executing, by your duly
authorized representative, one copy of this Agreement below and return it to us.
Keep the enclosed duplicate copy for your records.
UAM FUND DISTRIBUTORS, INC.
BY:_____________________________________
(Name of Officer and Title)
<PAGE>
SELECTED DEALER AGREEMENT ACCEPTANCE
- ------------------------------------
UAM FUND DISTRIBUTORS, INC.
The undersigned hereby confirms its acceptance of, and agreement to the
terms of, the foregoing Selected Dealer Agreement and acknowledges that any
purchase of Fund Shares made during the effectiveness of this Agreement is
subject to all the applicable terms and conditions set forth in this Agreement,
and agrees to pay for the shares at the price and upon the terms and conditions
stated in the Agreement. The undersigned hereby acknowledges receipt of
Prospectuses relating to the Fund Shares and confirms that, in executing this
Selected Dealer Agreement, it has relied on such Prospectuses and not on any
other statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
________________________________________
(Full Corporate Name of Broker-Dealer)
By:_____________________________________
(Name of Officer and Title)
________________________________________
(Broker-Dealer's Tax Identification No,)
________________________________________
(Notice Address -- Please include name
of compliance contact)
Date:___________________________________
<PAGE>
Revised 5/99
APPENDIX A
SCHEDULE OF FEES
12B-1 FEES
A separate fee for each Fund will be determined quarterly based on the
annual rates set forth below.
<TABLE>
<CAPTION>
Distribution Service
Name of Fund Component Component
- ------------ ------------- ----------
<S> <C> <C>
DSI Disciplined Value Portfolio (IS) 0.00% 0.25%
IRA Capital Preservation Portfolio (IS) * 0.00% 0.25%
FMA Small Company Portfolio (IS) 0.15% 0.25%
MJI International Equity Portfolio (IS) 0.00% 0.25%
NWQ Balanced Portfolio (IS) 0.15% 0.25%
NWQ Special Equity Portfolio (IS) 0.15% 0.25%
Sirach Bond Portfolio (IS) 0.00% 0.25%
Sirach Equity Portfolio (IS) 0.00% 0.25%
Sirach Growth Portfolio (IS) 0.00% 0.25%
Sirach Special Equity Portfolio (IS) 0.00% 0.25%
TJ Core Equity Portfolio (IS) 0.00% 0.25%
</TABLE>
* This Portfolio has a redemption fee and is offered only to IRA accounts.
<PAGE>
UAM FUND DISTRIBUTORS, INC.
---------------------------
UAM Fund Distributors, Inc., the distributor of the UAM Funds, Inc. and UAM
Funds Trust (collectively, the "Funds"), is a member of the National Securities
Clearing Corporation ("NSCC") Fund/Serv. Accordingly, transactions in shares of
portfolios of the Funds may be processed through Fund/Serv. If you are
interested in utilizing Fund/Serv, please provide the information requested
below.
Firm Name: ____________________________________
Address: ____________________________________
____________________________________
____________________________________
NSCC Dealer #: _________________________
NSCC Dealer Alpha Code: _________________________
NSCC Clearing #: _________________________
Phone Number: _________________________
Fax Number: _________________________
Mutual Fund Contact: _________________________
UAM Fund Distributors, Inc. has also executed and filed with the NSCC the
Investment Company Institute's ("ICI") Standard Networking Agreement. Provided
your firm has also executed and filed such agreement, Networking may be
utilized. If your firm wishes to utilize Networking, please complete the below
acknowledgment. By completing this acknowledgment, you agree that your firm
will participate in Networking under the terms of the ICI Standard Agreement.
Acknowledgment
Firm: ____________________________
By: _____________________________
Name:
Title:
Date:
<PAGE>
UAM FUND DISTRIBUTORS, INC
211 Congress Street
Boston, Massachusetts 02110
---------------------------------------
SELLING DEALER AGREEMENT
UAM FUNDS, INC. AND UAM FUNDS TRUST
(Institutional Class Shares)
---------------------------------------
Dealer:
Gentlemen:
We invite you, as a selected dealer, to participate as principal in the
distribution of the Institutional Class Shares (the "Shares") of the Portfolios
of UAM Funds, Inc., UAM Funds, Inc. II and of UAM Funds Trust (each Portfolio is
referred to herein as the "Fund") with respect to which we have been retained to
act as exclusive national distributor and which are offered for sale pursuant to
currently effective federal Prospectuses describing such Shares.
OFFERING PRICE TO PUBLIC:
- -------------------------
Orders for Shares received from you and accepted by the Fund, will be at
the public offering price applicable to each order as set forth in that Fund's
Prospectus relating to such Shares. The manner of computing the net asset value
of Shares, the public offering price and the effective time of orders received
from you are described in the Prospectuses for the Shares. We reserve the
right, at any time and without notice, to suspend the sale of Fund Shares.
SALES, ORDERS AND CONFIRMATIONS:
- --------------------------------
In offering Fund Shares to the public or otherwise, you shall act as dealer
for your own account, and in no transaction shall you have any authority to act
as agent for the Fund, for any other selected dealer or for us. No person is
authorized to make any representation concerning the Shares or any Fund except
those contained in the relevant and current Prospectus and in written
information issued by the Fund or by us as a supplement to such Prospectus. In
purchasing Fund Shares, you shall rely solely on such representations contained
in the Prospectus and in such written supplemental information.
All sales are made subject to confirmation and orders are subject to
acceptance or rejection by the Fund in its sole discretion. Your orders must be
wired, telephoned or written to the Fund as provided in the relevant and current
Prospectus. You agree to place orders for the same number of Shares sold by you
at the price at which such Shares are sold. You agree that you will not
purchase Shares except for investment or for the purpose of covering purchase
<PAGE>
orders already received and that you will not, as principal, sell Fund Shares
unless purchased by you from the Fund under the terms hereof. You also agree
that you will not withhold placing with us orders received from your customers
so as to profit yourself from such withholding. Each of your orders shall be
confirmed by you in writing on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES:
- -------------------------------------
The Shares purchased by you hereunder shall be paid for in full at the
public offering price, by check payable to the Fund, at its office, within three
business days after our acceptance of your order. If not so paid, we reserve
the right to cancel the sale and to hold you responsible for any loss sustained
by us or the Fund (including lost profit) in consequence. Certificates
representing the Shares will not be issued.
REDEMPTIONS:
- ------------
The relevant Prospectus describes the provisions whereby a Fund, under all
ordinary circumstances, will redeem Shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their Shares other than the statements contained in the relevant
and current Prospectus, and the underlying organizational documents of the Fund,
to which it refers, and that you will quote as the redemption price only the
price determined by the Fund. You shall not repurchase any Shares from your
customers at a price below that next quoted by the Fund for redemption. You may
hold such repurchased Shares for investment purposes or submit such Shares to
the Fund for redemption.
DISTRIBUTION AND/OR SERVICE FEES :
- ----------------------------------
We expect you to provide distribution and marketing services (the
"Services") in the promotion of the sale of the Shares of such Fund and the
retention of assets by such Fund and/or services and assistance to your
customers who own Fund Shares, including but not limited to, answering routine
inquiries regarding the Shares or a Fund or the status of a customer's account
and providing information to customers relating to maintaining their investment
in the Fund. Certain of the managers (the "Managers") of the Funds may, from
time to time, determine to provide support for the distribution and marketing
of, and/or the provision of services to the holders of, the Shares in the form
of payments or additional payments to selected broker-dealers who enter into
Selling Dealer Agreements with us. Accordingly, for your Services in respect of
Shares of any Fund the Manager of which has determined to provide such support
and has adopted a Supplemental Plan (a "Supplemental Plan"), you will receive a
supplemental fee (the "Supplemental Fees"), as established by each particular
Manager from time to time, subject to the further provisions of this Agreement,
the terms of the then current and applicable Prospectus relating to such Shares
and the instructions received by us from such Manager. The Supplemental Fees,
if any, in respect of Shares of a particular Fund may be based on such factors
as initial and/or current purchase prices or net asset values of such Shares
acquired by or held in the accounts of your customers or certain customers and
the periods for which such shares have been held and may be subject to such
other minimums as may be established by the Managers or by us from time to time.
Such Supplemental Fees shall be as provided in the schedule of fees set forth in
Appendix A attached hereto, as the same may be amended by us at any time and
from
<PAGE>
time to time by notice thereof to you; provided, however, that in no event shall
the rate be in excess of the current rates set forth in any form of subsequent
notice furnished to you by us or on our behalf, or by the Manager or the Fund.
We reserve the right, at any time, without notice, to modify, suspend or
terminate payments hereunder, or any component of such payments, either with
respect to one or more Funds or classes of Shares or generally with respect to
the Funds and the Shares; and the payment of Supplemental Fees hereunder shall
be automatically suspended or terminated if and to the extent that payments from
the relevant Manager are suspended or terminated, or automatically reduced if
and to the extent that the corresponding rates of payments to be made from the
relevant Manager are reduced. Any such action may be for any reason whatsoever
or no reason at all; and you agree that you shall not be entitled to any
payments for any period after the effective date of any such suspension or
termination, nor shall you be entitled to any payments after the effective date
of any such modification or reduction except as may be calculated pursuant to a
modified or reduced schedule of fees substituted for the previously effective
schedule.
You understand and agree that we merely administer and forward payments
pursuant to the Supplemental Plans of the Managers and that we shall have no
liability to you for such payments. Accordingly, you agree that anything to the
contrary herein notwithstanding (i) we shall have no liability to you, and you
shall have no recourse whatsoever against us or our assets, for any payment for
which provision is made in this Agreement, and (ii) your sole recourse, if any,
in respect of any such payment for which provision is made in this Agreement
shall be against the respective Manager.
LEGAL COMPLIANCE:
- ----------------
This Agreement and any transaction with, or payments to, you pursuant to
the terms hereof is conditioned on each party's representation to the other
party that, as of the date of this Agreement it is, and at all times during the
effectiveness of this Agreement it will be, a registered broker-dealer under the
Securities Exchange Act of 1934, as amended, and qualified under applicable
state securities laws in each jurisdiction in which the actions contemplated to
be taken by it under this Agreement require it to be qualified to act as a
broker-dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"). Each party agrees to
notify the other promptly in writing and immediately suspend sales of Shares if
this representation ceases to be true. Each party also agrees that it will
comply with the rules of the NASD including, in particular, Sections 2, 21(c)
and 26 of Article III of its Rules of Fair Practice, as amended, and that each
party will maintain adequate records with respect to its transactions with the
other and the Funds.
BLUE SKY MATTERS:
- -----------------
We shall have no obligation or responsibility with respect to your right to
sell Shares in any state or jurisdiction. We may furnish you with information
identifying the states and jurisdictions where the Shares of a Fund are
qualified for sale; and you will not transact orders for Shares except in such
states and jurisdictions as identified by us.
<PAGE>
LITERATURE:
- -----------
We will furnish you with copies of each Fund's relevant Prospectus and
sales literature (if any) and other information made publicly available by us or
the Fund which relate to the Fund or the Shares of such Fund, in reasonable
quantities upon your request. You agree to deliver a copy of the current and
relevant Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Shares. We shall file Fund sales literature and
promotional material with the NASD as required. You may not publish or use any
sales literature or promotional materials with respect to the Shares, the Funds
or any Fund without our prior review and written approval.
NOTICES AND COMMUNICATIONS:
- ---------------------------
All communications from you (other than purchase and sale orders) should be
addressed to us at 211 Congress Street, Boston, Massachusetts 02110, Attention:
Compliance Officer. Any notice from us to you shall be deemed to have been duly
given if mailed or telegraphed to you at the address set forth below. Each of
us may change the address to which notices shall be sent by notice to the other
in accordance with the terms hereof.
TERMINATION:
- ------------
This Agreement may be terminated by either party at any time by written
notice to that effect and will terminate without notice upon the appointment of
a trustee for you under the Securities Investor Protection Act, or any other act
of insolvency by you. Notwithstanding the termination of this Agreement, you
shall remain liable for any amounts otherwise owing to us or the Funds and for
your portion of any transfer tax or other liability which may be asserted or
assessed against the Fund, or us.
AMENDMENT:
- ----------
This Agreement may be amended or revised to modify, suspend or terminate
payments hereunder as provided in the section above entitled "Distribution
and/or Service Fees" or to amend Appendix A as provided in said section. This
Agreement may be otherwise amended or revised at any time by us upon notice to
you and you will be deemed to have accepted any such other amendment or revision
upon placing any subsequent order for Shares.
GENERAL:
- --------
Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event that you breach any
of the terms and conditions of this Agreement, you will indemnify us, the Funds,
and our affiliates for any damages, losses, costs and expenses (including
reasonable attorneys' fees and expenses) arising out of or relating to such
breach. In the event that we breach any of the terms and conditions of this
Agreement, we will indemnify you and your affiliates for any damages, losses,
costs and expenses (including reasonable attorneys' fees and expenses) arising
out of or relating to such breach. Nothing
<PAGE>
contained herein shall constitute you, us and any dealers an association or
partnership. All references in this Agreement to the "Prospectus" refer to the
then current and relevant version of the Prospectus of the particular Fund or
Funds concerned and include the Statement of Additional Information incorporated
by reference therein and any stickers or supplements thereto.
This Agreement is to be construed in accordance with the laws of The
Commonwealth of Massachusetts.
Please confirm this Agreement by dating and executing, by your duly
authorized representative, one copy of this Agreement below and return it to us.
Keep the enclosed duplicate copy for your records.
UAM FUND DISTRIBUTORS, INC.
BY:
----------------------------
(Name of Officer and Title)
<PAGE>
SELECTED DEALER AGREEMENT ACCEPTANCE
------------------------------------
UAM FUND DISTRIBUTORS, INC.
The undersigned hereby confirms its acceptance of, and agreement to the
terms of, the foregoing Selected Dealer Agreement and acknowledges that any
purchase of Fund Shares made during the effectiveness of this Agreement is
subject to all the applicable terms and conditions set forth in this Agreement,
and agrees to pay for the shares at the price and upon the terms and conditions
stated in the Agreement. The undersigned hereby acknowledges receipt of
Prospectuses relating to the Fund Shares and confirms that, in executing this
Selected Dealer Agreement, it has relied on such Prospectuses and not on any
other statement whatsoever, written or oral.
PLEASE SIGN HERE AND COMPLETE BELOW
----------------------------------------
(Full Corporate Name of Broker-Dealer)
By:
-------------------------------------
(Name of Officer and Title)
----------------------------------------
(Broker-Dealer's Tax Identification No,)
----------------------------------------
(Notice Address -- Please include name
of compliance contact)
Date:
-----------------------------------
<PAGE>
APPENDIX A
SCHEDULE OF FEES
SUPPLEMENTAL FEES
(CERTAIN DEFINED CONTRIBUTION PLANS ONLY)
Supplemental fees for sales of shares in the Funds set forth below will be
determined quarterly as of the end of each calendar quarter. Supplemental fees
will consist of the following:
(i) Once a Plan becomes a shareholder of the UAM Funds, a payment at an annual
rate of 20 basis points applied to the average daily net assets in the
account (excluding money market assets which will be paid at an annual rate
of 5 basis points of average daily net assets for such funds) for that
calendar quarter. These payments will be made after the completion of each
calendar quarter, based on the average daily net assets in the respective
accounts. Amounts related to investments for partial quarters will be pro-
rated based on the number of calendar days that the Plan is a shareholder
during that quarter.
(ii) Balances in a shareholder account exchanged into another shareholder
account or into another Portfolio of the Funds will continue to accrue and
be paid at the applicable rate, but in no event will any such payment
exceed the rate that would have been applicable had such exchange not
occurred.
A-1
<PAGE>
Revised 9/99
Name of Fund
- ------------
Acadian Emerging Markets Portfolio (I) *
Analytic Defensive Equity Fund
Analytic Enhanced Equity Fund
Analytic Master Fixed Income Fund
Analytic Short-Term Government Fund
BHM&S Total Return Bond Portfolio (I)
Cambiar Opportunity Portfolio (I)
C&B Balanced Portfolio (I)
C&B Equity Portfolio (I) *
C&B Equity Portfolio for Taxable Investors(I)
C&B Mid Cap Equity Portfolio (I)
Chicago Asset Management Intermediate Bond Portfolio (I)
Chicago Asset Management Value/Contrarian Portfolio (I)
Clipper Focus Portfolio (I)
DSI Balanced Portfolio (I)
DSI Disciplined Value Portfolio (I)
DSI Limited Maturity Bond Portfolio (I)
DSI Money Market Portfolio (I)
DSI Small Cap Value Portfolio (I)
IRA Capital Preservation Portfolio (I) * +
FMA Small Company Portfolio (I)
FPA Crescent Portfolio (I)
Hanson Equity Portfolio (I)
Heitman Real Estate Portfolio (I)
ICM Small Company Portfolio (I)
Jacobs International Octagon Portfolio (I)
McKee Domestic Equity Portfolio (I)
McKee International Equity Portfolio (I)
McKee Small Cap Equity Portfolio (I)
A-2
<PAGE>
McKee U.S. Government Portfolio (I)
MJI International Equity Portfolio (I)
NWQ Special Equity Portfolio (I)
Pell Rudman Mid-Cap Growth Portfolio (I)
Rice, Hall, James Small Cap Portfolio (I)
Rice, Hall, James Small/Mid Cap Portfolio (I)
Sirach Bond Portfolio (I)
Sirach Equity Portfolio (I)
Sirach Growth Portfolio (I)
Sirach Special Equity Portfolio (I)
Sirach Strategic Balanced Portfolio (I)
Sterling Partners' Balanced Portfolio (I)
Sterling Partners' Equity Portfolio (I)
Sterling Partners' Small Cap Value Portfolio (I)
TS&W Balanced Portfolio (I)
TS&W Equity Portfolio (I)
TS&W Fixed Income Portfolio (I)
TS&W International Equity Portfolio (I) *
* Please note that these Portfolios have a redemption fee.
+ This Portfolio is offered to IRA accounts only.
A-3
<PAGE>
UAM FUND DISTRIBUTORS, INC.
---------------------------
UAM Fund Distributors, Inc., the distributor of the UAM Funds, Inc. and UAM
Funds Trust (collectively, the "Funds"), is a member of the National Securities
Clearing Corporation ("NSCC") Fund/Serv. Accordingly, transactions in shares of
portfolios of the Funds may be processed through Fund/Serv. If you are
interested in utilizing Fund/Serv, please provide the information requested
below.
Firm Name: ____________________________________
Address: ____________________________________
____________________________________
____________________________________
NSCC Dealer #: ________________________
NSCC Dealer Alpha Code: ________________________
NSCC Clearing #: ________________________
Phone Number: ________________________
Fax Number: ________________________
Mutual Fund Contact: ________________________
UAM Fund Distributors, Inc. has also executed and filed with the NSCC the
Investment Company Institute's ("ICI") Standard Networking Agreement. Provided
your firm has also executed and filed such agreement, Networking may be
utilized. If your firm wishes to utilize Networking, please complete the below
acknowledgment. By completing this acknowledgment, you agree that your firm
will participate in Networking under the terms of the ICI Standard Agreement.
Acknowledgment
Firm: ____________________________
By: _____________________________
Name:
Title:
Date:
A-4
<PAGE>
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
BROKER SERVICES AGREEMENT
UAM FUNDS, INC., UAM FUNDS, INC. II AND UAM FUNDS TRUST
(Institutional Service Class Shares)
- --------------------------------------------------------------------------------
Broker:____________________________________
Gentlemen:
We offer to make available to your customers, through you acting as
broker or agent on behalf of such customers, Institutional Service Class Shares
(the "Shares") of the Portfolios of UAM Funds, Inc., UAM Funds, Inc. II and of
UAM Funds Trust (each Portfolio is referred to herein as the "Fund") with
respect to which we have been retained to act as exclusive national distributor
and which are offered for sale pursuant to currently effective federal
Prospectuses describing such Shares.
CUSTOMERS:
- ----------
The customers whom you assist in purchasing, or for whom you purchase,
Shares are for all purposes your customers and not our customers. Subject to the
further provisions of this Agreement, the applicable provisions of the
Prospectuses for the Shares, federal and state securities laws and the rules of
the NASD, we may sell Shares to your customers through you and upon your order.
OFFERING PRICE TO PUBLIC:
- -------------------------
Orders for Shares received from you and accepted by the Fund, will be
at the public offering price applicable to each order as set forth in that
Fund's Prospectus relating to such Shares. The manner of computing the net asset
value of Shares, the public offering price and the effective time of orders
received from you are described in the Prospectuses for the Shares. We reserve
the right, at any time and without notice, to suspend the sale of Fund Shares.
SALES, ORDERS AND CONFIRMATIONS:
- --------------------------------
In purchasing Fund Shares for customers or otherwise, you shall not act
as dealer for your own account, and in no transaction shall you have any
authority to act as agent for the Fund, for any other selected dealer or for us.
No person is authorized to make any representation concerning the Shares or any
Fund except those contained in the relevant and current Prospectus and in
written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund Shares, you shall rely solely on such
representations contained in the Prospectus and in such written supplemental
information.
All sales are made subject to confirmation and orders are subject to
acceptance or rejection by the Fund in its sole discretion. Your orders must be
wired, telephoned or written to the Fund as provided in the relevant and current
Prospectus. You agree to place orders solely upon receipt of orders for the same
number of Shares and at the same price from your customers and for your
customers' accounts, and that you will not otherwise purchase
<PAGE>
Shares except for investment. You will not, as principal, purchase or sell Fund
Shares, but will act solely as agent for your customers in all transactions
initiated by you, and as between you and your customers, your customers will be
the beneficial owners of the Shares. Each of your orders shall be confirmed by
you in writing on the same day. The procedures relating to the handling of
orders shall be subject to such further instructions as we may issue from time
to time.
PAYMENT AND ISSUANCE OF CERTIFICATES:
- -------------------------------------
The Shares purchased by you on behalf of your customers hereunder shall
be paid for in full at the public offering price, by check payable to the Fund,
at its office, within three business days after our acceptance of your order. If
not so paid, we reserve the right to cancel the sale and to hold you responsible
for any loss sustained by us or the Fund (including lost profit) in consequence.
Certificates representing the Shares will not be issued.
REDEMPTIONS:
- ------------
The relevant Prospectus describes the provisions whereby a Fund, under
all ordinary circumstances, will redeem Shares held by shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the redemption of their Shares other than the statements contained in the
relevant and current Prospectus, and the underlying organizational documents of
the Fund, to which it refers, and that you will quote as the redemption price
only the price determined by the Fund.
SERVICE FEES:
- -------------
We expect you to provide services and assistance (the "Services") to
your customers who own Fund Shares, including but not limited to, answering
routine inquiries regarding the Shares or a Fund or the status of a customer's
account and providing information to customers relating to maintaining their
investment in the Fund.
12b-1 Plans:
For your Services in respect of Shares of any Fund that has a
Distribution Plan under Rule 12b-1 (a "12b-1 Plan") of the Investment
Company Act of 1940 (the "1940 Act"), you will receive a fee (the
"12b-1 Fee"), as established by us and the Fund from time to time,
pursuant to the provisions of the 12b-1 Plan of such Fund relating to
such Shares, subject to the further provisions of this Agreement, the
terms of the then current and applicable Prospectus relating to such
Shares and the provisions of the relevant 12b-1 Plan. The 12b-1 Fee in
respect of Shares of a particular Fund shall be based on the net asset
value of such Shares held in the accounts of your customers, provided
that such Shares so held have an aggregate net asset value of at least
the minimum amount established by us from time to time. Such 12b-1 Fee
shall consist of a distribution fee component, if any, and/or a service
fee component, if any, the rates of which shall be as provided in the
schedule of fees set forth in Appendix A attached hereto, as the same
may be amended by a Fund or by us at any time and from time to time by
notice thereof to you; provided, however, that in no event shall the
rate of any such component be in excess of the current rates set forth
in the then current and applicable Prospectus relating to such Shares
and the provisions of the relevant 12b-1 Plan.
We reserve the right, at any time, without notice, to modify,
suspend or terminate payments hereunder, or any component of such
payments, either with respect to one or more Funds or classes of Shares
or generally with respect to the Funds and the Shares; and the payment
of 12b-1 Fees hereunder shall be automatically suspended or terminated
if and to the extent that payments under the relevant 12b-1 Plan are
suspended or terminated, or automatically reduced if and to the extent
that the corresponding rates of payments to be made under the relevant
12b-1 Plan are reduced. Any such action may be for any reason
whatsoever or no reason at all; and you agree that you shall not be
entitled to any payments for any period after the effective date of any
such suspension or termination, nor shall you be entitled to any
payments
2
<PAGE>
after the effective date of any such modification or reduction except
as may be calculated pursuant to a modified or reduced schedule of
fees substituted for the previously effective schedule.
You understand and agree that we merely administer and forward
payments pursuant to the 12b-1 Plans of the Funds and that we shall
have no liability to you for such payments. Accordingly, you agree that
anything to the contrary herein notwithstanding (i) we shall have no
liability to you, and you shall have no recourse whatsoever against us
or our assets, for any payment for which provision is made in this
Agreement, and (ii) your sole recourse, if any, in respect of any such
payment for which provision is made in this Agreement shall be against
the respective Fund or Manager, as the case may be.
LEGAL COMPLIANCE:
- -----------------
This Agreement and any transaction with, or payments to, you pursuant
to the terms hereof is conditioned on your representations to us that, as of the
date of this Agreement (i) you are, and at all times during its effectiveness
you will be, a registered broker-dealer under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"), or that the 1934 Act does
not require you to be so registered and such a member; and (ii) you are, and at
all times during its effectiveness you will be, qualified under applicable state
securities laws in each jurisdiction in which the actions contemplated to be
taken by you under this Agreement require you to be qualified to act as a dealer
in securities. You agree to notify us promptly in writing and immediately
suspend sales of Shares if this representation ceases to be true. You also agree
that you will comply with the rules of the NASD including, in particular,
Sections 2, 21(c) and 26 of Article III of its Rules of Fair Practice, as
amended, or, if you are not required to be a member of the NASD, with the
applicable rules and regulations of any organization, agency or authority having
jurisdiction in such matters; and, further, you agree that you will maintain
adequate records with respect to your transactions with us and the Funds.
BLUE SKY MATTERS:
- -----------------
We shall have no obligation or responsibility with respect to your
right to sell Shares in any state or jurisdiction. We may furnish you with
information identifying the states and jurisdictions where the Shares of a Fund
are qualified for sale; and you will not transact orders for Shares except in
such states and jurisdictions as identified by us.
LITERATURE:
- -----------
We will furnish you with copies of each Fund's relevant Prospectus and
sales literature (if any) and other information made publicly available by us or
the Fund which relate to the Fund or the Shares of such Fund, in reasonable
quantities upon your request. You agree to deliver a copy of the current and
relevant Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Shares. We shall file Fund sales literature and
promotional material with the NASD as required. You may not publish or use any
sales literature or promotional materials with respect to the Shares, the Funds
or any Fund without our prior review and written approval.
NOTICES AND COMMUNICATIONS:
- ---------------------------
All communications from you (other than purchase and sale orders)
should be addressed to us at 211 Congress Street, Boston, Massachusetts 02110,
Attention: Compliance Officer. Any notice from us to you shall be deemed to have
been duly given if mailed or telegraphed to you at the address set forth below.
Each of us may change the address to which notices shall be sent by notice to
the other in accordance with the terms hereof.
TERMINATION:
- ------------
3
<PAGE>
This Agreement may be terminated by either party at any time by written
notice to that effect and will terminate without notice upon the appointment of
a trustee for you under the Securities Investor Protection Act, or any other act
of insolvency by you. Notwithstanding the termination of this Agreement, you
shall remain liable for any amounts otherwise owing to us or the Funds and for
your portion of any transfer tax or other liability which may be asserted or
assessed against the Fund, or us.
AMENDMENT:
- ----------
This Agreement may be amended or revised to modify, suspend or
terminate payments hereunder as provided in the section above entitled "Service
Fees" or to amend Appendix A as provided in said section. This Agreement may be
otherwise amended or revised at any time by us upon notice to you and you will
be deemed to have accepted any such other amendment or revision upon placing any
subsequent order for Shares.
GENERAL:
- --------
Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event that you breach any of
the terms and conditions of this Agreement, you will indemnify us, the Funds,
and our affiliates for any damages, losses, costs and expenses (including
reasonable attorneys' fees and expenses) arising out of or relating to such
breach. In the event that we breach any of the terms and conditions of this
Agreement, we will indemnify you and your affiliates for any damages, losses,
costs and expenses (including reasonable attorneys' fees and expenses) arising
out of or relating to such breach. Nothing contained herein shall constitute
you, us and any brokers or dealers an association or partnership. All references
in this Agreement to the "Prospectus" refer to the then current and relevant
version of the Prospectus of the particular Fund or Funds concerned and include
the Statement of Additional Information incorporated by reference therein and
any stickers or supplements thereto.
This Agreement is to be construed in accordance with the laws of The
Commonwealth of Massachusetts.
Please confirm this Agreement by dating and executing, by your duly
authorized representative, one copy of this Agreement below and return it to us.
Keep the enclosed duplicate copy for your records.
UAM FUND DISTRIBUTORS, INC.
BY:__________________________________
(Name of Officer and Title)
4
<PAGE>
BROKER SERVICES AGREEMENT ACCEPTANCE
------------------------------------
UAM FUND DISTRIBUTORS, INC.
The undersigned hereby confirms its acceptance of, and agreement to the
terms of, the foregoing Broker Services Agreement and acknowledges that any
purchase of Fund Shares made during the effectiveness of this Agreement is
subject to all the applicable terms and conditions set forth in this Agreement,
and agrees to pay for the shares at the price and upon the terms and conditions
stated in the Agreement. The undersigned hereby acknowledges receipt of
Prospectuses relating to the Fund Shares and confirms that, in executing this
Broker Services Agreement, it has relied on such Prospectuses and not on any
other statement whatsoever, written or oral.
PLEASE SIGN HERE AND COMPLETE BELOW
----------------------------------------------------------------
(Full Corporate Name of Broker)
By:
-------------------------------------------------------------
(Name of Officer and Title)
-------------------------------------------------------------
(Broker's Tax Identification No.)
-------------------------------------------------------------
(Notice Address -- Please include name of compliance contact)
Date:
-----------------------------------------------------------
5
<PAGE>
9/99
APPENDIX A
SCHEDULE OF FEES
12B-1 FEES
A separate fee for each Fund will be determined quarterly based on the
annual rates set forth below.
Distribution Service
Name of Fund Component Component
- ------------ --------- ---------
Clipper Focus Portfolio (IS) 0.00% 0.25%
DSI Disciplined Value Portfolio (IS) 0.00% 0.25%
IRA Capital Preservation Portfolio (IS) * 0.00% 0.25%
FMA Small Company Portfolio (IS) 0.15% 0.25%
MJI International Equity Portfolio (IS) 0.00% 0.25%
NWQ Special Equity Portfolio (IS) 0.15% 0.25%
Sirach Bond Portfolio (IS) 0.00% 0.25%
Sirach Equity Portfolio (IS) 0.00% 0.25%
Sirach Growth Portfolio (IS) 0.00% 0.25%
Sirach Special Equity Portfolio (IS) 0.00% 0.25%
TJ Core Equity Portfolio (IS) 0.00% 0.25%
* This Portfolio has a redemption fee and is offered only to IRA accounts.
A-6
<PAGE>
UAM FUND DISTRIBUTORS, INC.
211 Congress Street
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
BROKER SERVICES AGREEMENT
UAM FUNDS, INC., UAM FUNDS, INC. II AND UAM FUNDS TRUST
(Institutional Class Shares)
- --------------------------------------------------------------------------------
Broker:_______________________________
Gentlemen:
We offer to make available to your customers, through you acting as
broker or agent on behalf of such customers, Institutional Class Shares (the
"Shares") of the Portfolios of UAM Funds, Inc., UAM Funds, Inc. II and of UAM
Funds Trust (each Portfolio is referred to herein as the "Fund") with respect to
which we have been retained to act as exclusive national distributor and which
are offered for sale pursuant to currently effective federal Prospectuses
describing such Shares.
CUSTOMERS:
- ----------
The customers whom you assist in purchasing, or for whom you purchase,
Shares are for all purposes your customers and not our customers. Subject to the
further provisions of this Agreement, the applicable provisions of the
Prospectuses for the Shares, federal and state securities laws and the rules of
the NASD, we may sell Shares to your customers through you and upon your order.
OFFERING PRICE TO PUBLIC:
- -------------------------
Orders for Shares received from you and accepted by the Fund, will be
at the public offering price applicable to each order as set forth in that
Fund's Prospectus relating to such Shares. The manner of computing the net asset
value of Shares, the public offering price and the effective time of orders
received from you are described in the Prospectuses for the Shares. We reserve
the right, at any time and without notice, to suspend the sale of Fund Shares.
SALES, ORDERS AND CONFIRMATIONS:
- --------------------------------
In purchasing Fund Shares for customers or otherwise, you shall not act
as dealer for your own account, and in no transaction shall you have any
authority to act as agent for the Fund, for any other selected dealer or for us.
No person is authorized to make any representation concerning the Shares or any
Fund except those contained in the relevant and current Prospectus and in
written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund Shares, you shall rely solely on such
representations contained in the Prospectus and in such written supplemental
information.
All sales are made subject to confirmation and orders are subject to
acceptance or rejection by the Fund in its sole discretion. Your orders must be
wired, telephoned or written to the Fund as provided in the relevant and current
Prospectus. You agree to place orders solely upon receipt of orders for the same
number of Shares and at
1
<PAGE>
the same price from your customers and for your customers' accounts, and that
you will not otherwise purchase Shares except for investment. You will not, as
principal, purchase or sell Fund Shares, but will act solely as agent for your
customers in all transactions initiated by you, and as between you and your
customers, your customers will be the beneficial owners of the Shares. Each of
your orders shall be confirmed by you in writing on the same day. The procedures
relating to the handling of orders shall be subject to such further instructions
as we may issue from time to time.
PAYMENT AND ISSUANCE OF CERTIFICATES:
- -------------------------------------
The Shares purchased by you on behalf of your customers hereunder shall
be paid for in full at the public offering price, by check payable to the Fund,
at its office, within three business days after our acceptance of your order. If
not so paid, we reserve the right to cancel the sale and to hold you responsible
for any loss sustained by us or the Fund (including lost profit) in consequence.
Certificates representing the Shares will not be issued.
REDEMPTIONS:
- ------------
The relevant Prospectus describes the provisions whereby a Fund, under
all ordinary circumstances, will redeem Shares held by shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the redemption of their Shares other than the statements contained in the
relevant and current Prospectus, and the underlying organizational documents of
the Fund, to which it refers, and that you will quote as the redemption price
only the price determined by the Fund.
SERVICE FEES:
- -------------
We expect you to provide services and assistance (the "Services") to
your customers who own Fund Shares, including but not limited to, answering
routine inquiries regarding the Shares or a Fund or the status of a customer's
account and providing information to customers relating to maintaining their
investment in the Fund. Certain of the managers (the "Managers") of the Funds
may, from time to time, determine to provide additional support for the
distribution and marketing of, and/or the provision of services to the holders
of, the Shares in the form of payments or additional payments to selected
broker-dealers who enter into Services Agreements with us. Accordingly, for your
Services in respect of Shares of any Fund the Manager of which has determined to
provide such additional support and has adopted a Supplemental Plan (a
"Supplemental Plan"), you will receive a supplemental fee (the "Supplemental
Fees"), as established by each particular Manager from time to time, subject to
the further provisions of this Agreement, the terms of the then current and
applicable Prospectus relating to such Shares and the instructions received by
us from such Manager. The Supplemental Fees, if any, in respect of Shares of a
particular Fund may be based on such factors as initial and/or current purchase
prices or net asset values of such Shares acquired by or held in the accounts of
your customers or certain customers and the periods for which such shares have
been held and may be subject to such other minimums as may be established by the
Managers or by us from time to time. Such Supplemental Fees shall be at the
rates of which shall be as provided in the schedule of fees set forth in
Appendix A attached hereto, as the same may be amended by us at any time and
from time to time by notice thereof to you; provided, however, that in no event
shall any such fees be in excess of the current rates set forth in any form of
subsequent notice furnished to you by us or on our behalf, or by the Manager or
the Fund.
We reserve the right, at any time, without notice, to modify, suspend
or terminate payments hereunder, or any component of such payments, either with
respect to one or more Funds or classes of Shares or generally with respect to
the Funds and the Shares; and the payment of Supplemental Fees hereunder shall
be automatically suspended or terminated if and to the extent that payments from
the relevant Manager are suspended or terminated, or automatically reduced if
and to the extent that the corresponding rates of payments to be made from the
relevant Manager are reduced. Any such action may be for any reason whatsoever
or no reason at all; and you agree that you shall not be entitled to any
payments for any period after the effective date of any such suspension or
termination, nor shall you be entitled to any payments after the effective date
of any such modification or reduction except as may be calculated pursuant to a
modified or reduced schedule of fees substituted for the previously effective
schedule.
2
<PAGE>
You understand and agree that we merely administer and forward payments
pursuant to the Supplemental Plans of the Managers and that we shall have no
liability to you for such payments. Accordingly, you agree that anything to the
contrary herein notwithstanding (i) we shall have no liability to you, and you
shall have no recourse whatsoever against us or our assets, for any payment for
which provision is made in this Agreement, and (ii) your sole recourse, if any,
in respect of any such payment for which provision is made in this Agreement
shall be against the respective Fund or Manager, as the case may be.
LEGAL COMPLIANCE:
- ----------------
This Agreement and any transaction with, or payments to, you pursuant
to the terms hereof is conditioned on your representations to us that, as of the
date of this Agreement (i) you are, and at all times during its effectiveness
you will be, a registered broker-dealer under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"), or that the 1934 Act does
not require you to be so registered and such a member; and (ii) you are, and at
all times during its effectiveness you will be, qualified under applicable state
securities laws in each jurisdiction in which the actions contemplated to be
taken by you under this Agreement require you to be qualified to act as a dealer
in securities. You agree to notify us promptly in writing and immediately
suspend sales of Shares if this representation ceases to be true. You also agree
that you will comply with the rules of the NASD including, in particular,
Sections 2, 21(c) and 26 of Article III of its Rules of Fair Practice, as
amended, or, if you are not required to be a member of the NASD, with the
applicable rules and regulations of any organization, agency or authority having
jurisdiction in such matters; and, further, you agree that you will maintain
adequate records with respect to your transactions with us and the Funds.
BLUE SKY MATTERS:
- -----------------
We shall have no obligation or responsibility with respect to your
right to sell Shares in any state or jurisdiction. We may furnish you with
information identifying the states and jurisdictions where the Shares of a Fund
are qualified for sale; and you will not transact orders for Shares except in
such states and jurisdictions as identified by us.
LITERATURE:
- -----------
We will furnish you with copies of each Fund's relevant Prospectus and
sales literature (if any) and other information made publicly available by us or
the Fund which relate to the Fund or the Shares of such Fund, in reasonable
quantities upon your request. You agree to deliver a copy of the current and
relevant Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Shares. We shall file Fund sales literature and
promotional material with the NASD as required. You may not publish or use any
sales literature or promotional materials with respect to the Shares, the Funds
or any Fund without our prior review and written approval.
NOTICES AND COMMUNICATIONS:
- ---------------------------
All communications from you (other than purchase and sale orders)
should be addressed to us at 211 Congress Street, Boston, Massachusetts 02110,
Attention: Compliance Officer. Any notice from us to you shall be deemed to have
been duly given if mailed or telegraphed to you at the address set forth below.
Each of us may change the address to which notices shall be sent by notice to
the other in accordance with the terms hereof.
TERMINATION:
- ------------
This Agreement may be terminated by either party at any time by written
notice to that effect and will terminate without notice upon the appointment of
a trustee for you under the Securities Investor Protection Act, or any other act
of insolvency by you. Notwithstanding the termination of this Agreement, you
shall remain liable for
3
<PAGE>
any amounts otherwise owing to us or the Funds and for your portion of any
transfer tax or other liability which may be asserted or assessed against the
Fund, or us.
AMENDMENT:
- ----------
This Agreement may be amended or revised to modify, suspend or
terminate payments hereunder as provided in the section above entitled "Service
Fees" or to amend Appendix A as provided in said section. This Agreement may be
otherwise amended or revised at any time by us upon notice to you and you will
be deemed to have accepted any such other amendment or revision upon placing any
subsequent order for Shares.
GENERAL:
- --------
Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event that you breach any of
the terms and conditions of this Agreement, you will indemnify us, the Funds,
and our affiliates for any damages, losses, costs and expenses (including
reasonable attorneys' fees and expenses) arising out of or relating to such
breach. In the event that we breach any of the terms and conditions of this
Agreement, we will indemnify you and your affiliates for any damages, losses,
costs and expenses (including reasonable attorneys' fees and expenses) arising
out of or relating to such breach. Nothing contained herein shall constitute
you, us and any brokers or dealers an association or partnership. All references
in this Agreement to the "Prospectus" refer to the then current and relevant
version of the Prospectus of the particular Fund or Funds concerned and include
the Statement of Additional Information incorporated by reference therein and
any stickers or supplements thereto.
This Agreement is to be construed in accordance with the laws of The
Commonwealth of Massachusetts.
Please confirm this Agreement by dating and executing, by your duly
authorized representative, one copy of this Agreement below and return it to us.
Keep the enclosed duplicate copy for your records.
UAM FUND DISTRIBUTORS, INC.
BY: ____________________________________
(Name of Officer and Title)
4
<PAGE>
BROKER SERVICES AGREEMENT ACCEPTANCE
------------------------------------
UAM FUND DISTRIBUTORS, INC.
The undersigned hereby confirms its acceptance of, and agreement to the
terms of, the foregoing Broker Services Agreement and acknowledges that any
purchase of Fund Shares made during the effectiveness of this Agreement is
subject to all the applicable terms and conditions set forth in this Agreement,
and agrees to pay for the shares at the price and upon the terms and conditions
stated in the Agreement. The undersigned hereby acknowledges receipt of
Prospectuses relating to the Fund Shares and confirms that, in executing this
Broker Services Agreement, it has relied on such Prospectuses and not on any
other statement whatsoever, written or oral.
PLEASE SIGN HERE AND COMPLETE BELOW
----------------------------------------------------------------
(Full Corporate Name of Broker)
By:
-------------------------------------------------------------
(Name of Officer and Title)
-------------------------------------------------------------
(Broker's Tax Identification No,)
-------------------------------------------------------------
(Notice Address -- Please include name of compliance contact)
Date:
-----------------------------------------------------------
5
<PAGE>
APPENDIX A
SCHEDULE OF FEES
SUPPLEMENTAL FEES
Supplemental fees for sales of shares in the Funds set forth below will be
determined quarterly as of the end of each calendar quarter. Supplemental fees
will consist of the following:
(i) Once an account becomes a shareholder of the UAM Funds, a payment at an
annual rate of 20 basis points applied to the average daily net assets in
the account (excluding money market assets which will be paid at an annual
rate of 5 basis points of average daily net assets for such funds) for that
calendar quarter. These payments will be made after the completion of each
calendar quarter, based on the average daily net assets in the respective
accounts. Amounts related to investments for partial quarters will be
pro-rated based on the number of calendar days that the account is a
shareholder during that quarter.
(ii) Balances in a shareholder account exchanged into another shareholder
account or into another Portfolio of the Funds will continue to accrue and
be paid at the applicable rate, but in no event will any such payment
exceed the rate that would have been applicable had such exchange not
occurred.
A-1
<PAGE>
Name of Fund
- ------------
Acadian Emerging Markets Portfolio (I) *
Analytic Defensive Equity Fund (I)
Analytic Enhanced Equity Fund (I)
Analytic Master Fixed Income Fund (I)
Analytic Short-Term Government Fund (I)
BHM&S Total Return Bond Portfolio (I)
Cambiar Opportunity Portfolio (I)
C&B Balanced Portfolio (I)
C&B Equity Portfolio (I)
C&B Equity Portfolio for Taxable Investors (I) *
C&B Mid Cap Equity Portfolio (I)
Chicago Asset Management Intermediate Bond Portfolio (I)
Chicago Asset Management Value/Contrarian Portfolio (I)
Clipper Focus Portfolio (I)
DSI Balanced Portfolio (I)
DSI Disciplined Value Portfolio (I)
DSI Limited Maturity Bond Portfolio (I)
DSI Money Market Portfolio (I)
DSI Small Cap Value Portfolio (I)
IRA Capital Preservation Portfolio (I) * +
FMA Small Company Portfolio (I)
FPA Crescent Portfolio (I)
Hanson Equity Portfolio (I)
Heitman Real Estate Portfolio (I)
A-2
<PAGE>
Jacobs International Octagon Portfolio (I)
McKee Domestic Equity Portfolio (I)
McKee International Equity Portfolio (I) *
McKee Small Cap Equity Portfolio (I) *
McKee U.S. Government Portfolio (I) *
MJI International Equity Portfolio (I)
NWQ Special Equity Portfolio (I)
Pell Rudman Mid-Cap Growth Portfolio (I)
Rice, Hall, James Small Cap Portfolio (I)
Rice, Hall, James Small/Mid Cap Portfolio (I)
Sirach Bond Portfolio (I)
Sirach Equity Portfolio (I)
Sirach Growth Portfolio (I)
Sirach Special Equity Portfolio (I)
Sirach Strategic Balanced Portfolio (I)
Sterling Partners' Balanced Portfolio (I)
Sterling Partners' Equity Portfolio (I)
Sterling Partners' Small Cap Value Portfolio (I)
TS&W Balanced Portfolio (I)
TS&W Equity Portfolio (I)
TS&W Fixed Income Portfolio (I)
TS&W International Equity Portfolio (I) *
* Please note that these Portfolios have a redemption fee.
+ This Portfolio is offered to IRA accounts only.
A-3
<PAGE>
UAM FUND DISTRIBUTORS, INC.
---------------------------
UAM Fund Distributors, Inc., the distributor of the UAM Funds, Inc. and UAM
Funds Trust (collectively, the "Funds"), is a member of the National Securities
Clearing Corporation ("NSCC") Fund/Serv. Accordingly, transactions in shares of
portfolios of the Funds may be processed through Fund/Serv. If you are
interested in utilizing Fund/Serv, please provide the information requested
below.
Firm Name: ____________________________________
Address: ____________________________________
____________________________________
____________________________________
NSCC Dealer #: ______________________
NSCC Dealer Alpha Code: _______________________
NSCC Clearing #: _______________________
Phone Number: _______________________
Fax Number: _______________________
Mutual Fund Contact: _______________________
UAM Fund Distributors, Inc. has also executed and filed with the NSCC the
Investment Company Institute's ("ICI") Standard Networking Agreement. Provided
your firm has also executed and filed such agreement, Networking may be
utilized. If your firm wishes to utilize Networking, please complete the below
acknowledgment. By completing this acknowledgment, you agree that your firm will
participate in Networking under the terms of the ICI Standard Agreement.
Acknowledgment
Firm: ____________________________
A-4
<PAGE>
By: _____________________________
Name:
Title:
Date:
A-5
<PAGE>
April 25, 2000
UAM Funds, Inc. II
211 Congress Street
Fourth Floor
Boston, MA 02110
RE: UAM Funds, Inc. II - Shares of Common Stock
-------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for UAM Funds Inc. II, a Maryland corporation
("UAM"), in connection with the registration by UAM of its shares of common
stock, par value $0.001 per share. The Articles of Incorporation of UAM
authorizes the issuance of 10,000,000,000 shares of common stock, which are
divided into multiple series and classes. The shares of common stock designated
into each such series are referred to herein as the "Shares." You have asked
for our opinion on certain matters relating to the Shares.
We have reviewed UAM's Articles of Incorporation, Articles Supplementary
and By-laws, resolutions of UAM's Board of Directors ("Board"), certificates of
public officials and of UAM's officers and such other legal and factual matters
as we have deemed appropriate. We have also reviewed UAM's Registration
Statement on Form N-1A under the Securities Act of 1933 (the "Registration
Statement"), as amended through Post-Effective Amendment No. 12 thereto.
This opinion is based exclusively on the General Corporation Law of the
State of Maryland and the federal law of the United States of America.
We have assumed the following for purposes of this opinion:
1. The Shares have been issued in accordance with the Articles of
Incorporation, Articles Supplementary and By-laws of UAM and
resolutions of UAM's Board relating to the creation, authorization and
issuance of the Shares.
<PAGE>
UAM Funds, Inc. II
April 25, 2000
Page 2
2. With respect to the future Shares, there will be compliance with the
terms, conditions and restrictions applicable to the issuance of such
Shares that are set forth in (i) UAM's Articles of Incorporation and
By-laws, each as amended as of the date of such issuance, and (ii) the
applicable future series designations.
3. The Board will not change the preferences, limitations or relative
rights of any class or series of Shares after any Shares of such class
or series have been issued.
Based upon the foregoing, we are of the opinion that the Shares will
be, when issued in accordance with, and sold for the consideration described in
the Registration Statement, validly issued, fully paid and non-assessable by
UAM.
We consent to the filing of this opinion with Post-Effective Amendment
No. 12 to the Registration Statement to be filed by UAM with the Securities and
Exchange Commission.
Sincerely yours,
/s/ Drinker Biddle & Reath LLP
Drinker Biddle & Reath LLP
AT/MM
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 15, 2000, relating to the
financial statements and financial highlights which appear in the December 31,
1999 Annual Report to Shareholders of the Analytic Enhanced Equity Fund,
Analytic Defensive Equity Fund, Analytic International Fund, Analytic Master
Fixed Income Fund and Analytic Short-Term Government Fund which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights," "Independent
Accountants" and "Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
April 26, 2000
<PAGE>
CODE OF ETHICS
OF
THE UAM FUNDS
PREAMBLE
- --------
This Code of Ethics is being adopted in compliance with the requirements of
Rule 17j-1 (the "Rule") adopted by the United States Securities and Exchange
Commission under the Investment Company Act of 1940 (the "Act") to effectuate
the purposes and objectives of that Rule. The Rule makes it unlawful for certain
persons, including any officer or Board member of UAM Funds, Inc., UAM Funds
Trust or UAM Funds, Inc. II (together, the "Fund") in connection with the
purchase or sale by such person of a security held or to be acquired by the
Fund1:
1. To employ a device, scheme or artifice to defraud the Fund;
2. To make to the Fund any untrue statement of a material fact or
omit to state to the Fund a material fact necessary in order to
make the statements made, in light of the circumstances in which
they are made, not misleading;
3. To engage in any act, practice or course of business which
operates or would operate as a fraud or deceit upon the Fund; or
4. To engage in a manipulative practice with respect to the Fund.
The Rule also requires that the Fund and each adviser to the Fund adopt a
written code of ethics containing provisions reasonably necessary to prevent
persons from engaging in acts in violation of the above standard and use
reasonable diligence and institute procedures reasonably necessary, to prevent
violations of the Code.
This Code of Ethics is adopted by the Board of Directors of the Fund2 in
compliance with the Rule. This Code of Ethics is based upon the principle that
the Directors and officers of the Fund, and certain affiliated persons of the
Fund and its investment advisers, owe a fiduciary duty to, among others, the
shareholders of the Fund to conduct their affairs, including their personal
securities transactions, in such manner to avoid (i) serving their own personal
interests ahead of shareholders; (ii) taking inappropriate advantage of their
position with the Fund; and (iii) any actual or potential conflicts of interest
or any abuse of their position of trust and responsibility. This fiduciary duty
includes the duty of the investment advisers to the portfolios of the Fund to
report violations of this Code of Ethics to the Fund's Compliance Officer. This
Code may not be the only source of potential restrictions when conducting
personal securities transactions and transactions on behalf of the Fund. If
there are any questions with respect to other potentially applicable
restrictions, contract the Funds' Compliance Officer.
A. DEFINITIONS
1. "Access person" means any director/trustee, officer, general partner
or advisory person of the Fund.
2. "Advisory person" means (a) any employee of the Fund who, in
connection with his regular functions or duties, normally makes,
participates in, or obtains current information regarding
- ---------------------
1 A security is deemed to be "held or to be acquired" if within the most
recent fifteen (15) days it (i) is or has been held by the Fund, or (ii) is
being or has been considered by the Fund or its investment adviser for purchase
by the Fund.
2 Reference to a "Board of Directors" or a "Director" herein shall also
refer to a "Board of Trustees" or a "Trustee", as appropriate.
<PAGE>
the purchase or sale of a security by the Fund, or whose functions
relate to the making of any recommendations with respect to such
purchases or sales; and (b) any natural person in a control
relationship to the Fund who obtains information concerning
recommendations made to the Fund with regard to the purchase or sale
of a security by the Fund.
3. "Affiliated company" means a company which is an affiliated person.
4. "Affiliated person" of another person means (a) any person directly or
indirectly owning, controlling, or holding with power to vote, 5 per
centrum or more of the outstanding voting securities or such other
person; (b) any person 5 per centrum or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or
held with power to vote, by such other person; (c) any person directly
or indirectly controlling, controlled by, or under common control
with, such other person; (d) any officer, director/trustee, partner,
copartner, or employee of such other person; (e) if such other person
is an investment company, any investment adviser thereof or any member
of an advisory board thereof; and (f) if such other person is an
unincorporated investment company not having a Board of Directors, the
depositor thereof.
5. A security is "being considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the
security has been made and communicated, which includes when the Fund
has a pending "buy" or "sell" order with respect to a security, and,
with respect to the person making the recommendation, when such person
seriously considers making such a recommendation. "Purchase or sale of
a security" includes the writing of an option to purchase or sell a
security.
6. "Beneficial ownership" shall be as defined in, and interpreted in the
same manner as it would be in determining whether a person is subject
to the provisions of, Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder which, generally
speaking, encompasses those situations where the beneficial owner has
the right to enjoy some economic benefit from the ownership of the
security. A person is normally regarded as the beneficial owner of
securities held in the name of his or her spouse or minor children
living in his or her household.
7. "Control" means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the
result of an official position with such company. Any person who owns
beneficially, either directly or through one or more controlled
companies, more than 25 per centrum of the voting securities of a
company shall be presumed to control such company. Any person who does
not so own more than 25 per centrum of the voting securities of any
company shall be presumed not to control such company. A natural
person shall be presumed not to be a controlled person.
8. "Disinterested director/trustee" means a director/trustee who is not:
an affiliated person (as defined above) of the Fund; a member of the
immediate family of any natural person who is an affiliated person of
the Fund; an interested person (as defined below) of the Fund, any
investment adviser of the Fund or any principal underwriter for the
Fund.
9. "Interested Person" of another person means--
(a) when used with respect to an investment company--
(i) any affiliated person of such company,
(ii) any member of the immediate family of any natural person
who is an affiliated person of such company,
-2-
<PAGE>
(iii) any interested person of any investment adviser of or
principal underwriter for such company,
(iv) any person or partner or employee of any person who at any
time since the beginning of the last two completed fiscal
years of such company has acted as legal counsel for such
company,
(v) any broker or dealer registered under the Securities
Exchange Act of 1934 or any affiliated person of such a
broker or dealer, and
(vi) any natural person whom the Commission by order shall have
determined to be an interested person by reason of having
had, at any time since the beginning of the last two
completed fiscal years of such company, a material business
or professional relationship with such company or with the
principal executive officer of such company or with any
other investment company having the same investment adviser
or principal underwriter or with the principal executive
officer of such other investment company:
Provided, That no person shall be deemed to be an interested person of
an investment company solely by reason of (aa) his being a member of
its Board of Directors or advisory board or an owner of its
securities, or (bb) his membership in the immediate family of any
person specified in clause (aa) of this proviso.
10. "Investment Personnel" means (a) any portfolio manager of the Fund as
defined in (12) below; and (b) securities analysts, traders and other
personnel who provide information and advice to the portfolio manager
or who help execute the portfolio manager's decisions.
11. "Person" means a natural person or a company.
12. "Portfolio Manager" means an employee of the investment adviser or
sub-investment adviser of the Fund entrusted with the direct
responsibility and authority to make investment decisions affecting an
investment company.
13. "Security" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in
any profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit
for a security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or privilege on any
security (including a certificate of deposit) or on any group or index
of securities (including any interest therein or based on the value
thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to foreign currency,
or, in general, any interest or instrument commonly known as a
"security," or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or
warrant or right to subscribe to or purchase, any of the foregoing.
14. "Security" shall not include securities issued by the government of
the United States or by federal agencies and which are direct
obligations of the United States, bankers' acceptances, bank
certificates of deposit, commercial paper and shares of unaffiliated
registered open-end investment companies (mutual funds).
B. PROHIBITED TRANSACTIONS
1. Access Persons
-3-
<PAGE>
(a) No access person shall engage in any act, practice or course of
conduct, which would violate the provisions of Rule 17j-1 set forth
above.
The Fund's portfolios are managed by subsidiaries of or organizations
otherwise affiliated with United Asset Management Corporation (the
"Management Companies"). Under the organizational structure of the
Management Companies, the entities maintain separate offices,
independent operations and autonomy when making investment decisions.
In view of these circumstances, advisory personnel of the Management
Companies who are defined as "access persons" under the Act, under
normal circumstances would have no knowledge of proposed securities
transactions, pending "buy" or "sell" orders in a security, or the
execution or withdrawal of an order for any other portfolio in the UAM
Family of Funds for which a different Management Company serves as
investment adviser. To restrict the flow of investment information
related to the portfolios of the Fund, the Fund prohibits access
persons at a Management Company from disclosing pending "buy" or
"sell" orders for a portfolio of the Fund to any employees of any
other Management Company until the order is executed or withdrawn. The
Management Companies shall implement procedures designed to achieve
employee awareness of this prohibition.
(b) No access person shall:
(i) purchase or sell, directly or indirectly, any security in
which he has or by reason of such transaction acquires, any
direct or indirect beneficial ownership and which to his or
her actual knowledge at the time of such purchase or sale:
----------------
(A) is being considered for purchase or sale by the Fund,
or
(B) is being purchased or sold by any portfolio of the
Fund; or
(ii) disclose to other persons the securities activities engaged
in or contemplated for the various portfolios of the Fund.
2. Investment Personnel
No investment personnel shall:
(a) accept any gift or other thing of more than de minimis value from any
person or entity that does business with or on behalf of the Fund; for
the purpose of this Code de minimis shall be considered to be the
annual receipt of gifts from the same source valued at $250 or less
per individual recipient, when the gifts are in relation to the
conduct of the Fund's business;
(b) acquire securities, other than fixed income securities, in an initial
public offering, in order to preclude any possibility of such person
profiting from their positions with the Fund;
(c) purchase any securities in a private placement, without prior approval
of the Compliance Officer of the Management Company or other officer
designated by the Board of Directors. Any person authorized to
purchase securities in a private placement shall disclose that
investment when they play a part in any Fund's subsequent
consideration of an investment in the issuer. In such circumstances,
the Fund's decision to purchase securities of the issuer shall be
subject to independent review by investment personnel with no personal
interest in the issuer;
-4-
<PAGE>
(d) profit in the purchase and sale, or sale and purchase, of the same (or
equivalent) securities within sixty (60) calendar days. Trades made in
violation of this prohibition should be unwound, if possible.
Otherwise, any profits realized on such short-term trades shall be
subject to disgorgement to the appropriate portfolio of the investment
company.
Exceptions: The Compliance Officer of the Management Company may allow
exceptions to this policy on a case-by-case basis when the abusive
practices that the policy is designed to prevent, such as frontrunning or
conflicts of interest, are not present and the equity of the situation
strongly supports an exemption. An example is the involuntary sale of
securities due to unforeseen corporate activity such as a merger. [See ss.C
below]. The ban on short-term trading profits is specifically designed to
deter potential conflicts of interest and frontrunning transactions, which
typically involve a quick trading pattern to capitalize on a short-lived
market impact of a trade by one of the Fund's portfolios. The Management
Company shall consider the policy reasons for the ban on short-term trades,
as stated herein, in determining when an exception to the prohibition is
permissible. The granting of an exception to this prohibition shall be
permissible if the securities involved in the transaction are not (i) being
considered for purchase or sale by the portfolio of the Fund that serves as
the basis of the individual's "investment personnel" status or (ii) being
purchased or sold by the portfolio of the Fund that serves as the basis of
the individual's "investment personnel" status and, are not economically
related to such securities; exceptions granted under this provision are
conditioned upon receipt by a duly authorized officer of the Management
Company of a report (Exhibit D) of the transaction and certification by the
respective investment personnel that the transaction is in compliance with
this Code of Ethics (see Exhibit D).
(e) serve on the Board of Directors of any publicly traded company without
prior authorization of the President or other duly authorized officer
of the Fund. Any such authorization shall be based upon a
determination that the board service would be consistent with the
interests of the Fund and its shareholders. Authorization of board
service shall be subject to the implementation by the Management
Company of "Chinese Wall" or other procedures to isolate such
investment personnel from the investment personnel making decisions
about trading in that company's securities.
3. Portfolio Managers
(a) No portfolio manager shall:
(i) buy or sell a security within seven (7) calendar days before and
within two (2) calendar days after any portfolio of the Fund that he
or she manages trades in that security. Any trades made within the
proscribed period shall be unwound, if possible. Otherwise, any
profits realized on trades within the proscribed period shall be
disgorged to the appropriate portfolio of the Fund.
C. EXEMPTED TRANSACTIONS
The prohibitions of Sections B(1)(b), B(2)(d) and B(3)(a) shall not apply to:
1. purchases or sales effected in any account over which the access
person has no direct or indirect influence or control;
2. purchases or sales which are non-volitional on the part of either the
access person or the Fund;
-5-
<PAGE>
3. purchases which are part of an automatic dividend reinvestment plan;
4. purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired;
5. purchases or sales of securities which are not eligible for purchase
by the Fund and which are not related economically to securities
purchased, sold or held by the Fund;
6. transactions which appear upon reasonable inquiry and investigation to
present no reasonable likelihood of harm to the Fund and which are
otherwise in accordance with Rule 17j-1; For example, such
transactions would normally include purchases or sales of:
(a) securities of companies with a market capitalization in excess of
$1 billion;
(b) up to $25,000 principal amount of a fixed income security or 100
shares of an equity security within any three-consecutive month
period (all trades within a three-consecutive month period shall
be integrated to determine the availability of this exemption);
(c) up to 1,000 shares of a security which is being considered for
purchase or sale by a Fund (but not then being purchased or sold)
if the issuer has a market capitalization of over $1 billion and
if the proposed acquisition or disposition by the Fund is less
than one percent of the class outstanding as shown by the most
recent report or statement published by the issuer, or less than
one percent of the average weekly reported volume of trading in
such securities on all national securities exchanges and/or
reported through the automated quotation system of a registered
securities association, during the four calendar weeks prior to
the individual's personal securities transaction; or
(d) any amount of securities if the proposed acquisition or
disposition by the Fund is in the amount of 1,000 or less shares
and the security is listed on a national securities exchange or
the National Association of Securities Dealers Automated
Quotation System.
D. COMPLIANCE PROCEDURES
1. Pre-clearance
All access persons shall receive prior written approval (Exhibit E)
from the Compliance Officer of the Management Company for the
respective portfolios of the Fund, or other officer designated by the
Board of Directors before purchasing or selling securities.
Procedures implemented herein to pre-clear the securities transactions
of access persons shall not apply to a director/trustee of the Fund
who is not an "interested person" of the Fund as defined in this Code,
except where such director/trustee knew or, in the ordinary course of
fulfilling his official duties as a director/trustee of the Fund,
should have known that during the 15-day period immediately preceding
or after the date of the transaction in a security by the
director/trustee, such security is or was purchased or sold by the
Fund or such purchase or sale by the Fund is or was considered by the
Fund.
Purchases or sales by access persons who are employees of United Asset
Management Corporation are not subject to the pre-clearance procedures
set forth herein, provided that such persons are required to pre-clear
proposed transactions in securities pursuant to a Code of Ethics.
-6-
<PAGE>
Purchases or sales by access persons who are employees of the
administrator or subadministrator for the Fund are not subject to the
pre-clearance procedures set forth herein, provided that such persons
are required to pre-clear proposed transactions in securities pursuant
to a Code of Ethics.
Purchases or sales of securities which are not eligible for purchase
or sale by the Fund or any portfolio of the Fund that serves as the
basis of the individual's "access person" status shall be entitled to
clearance automatically from the Compliance Officer of the Fund. This
provision shall not relieve any access person from compliance with
pre-clearance procedures.
2. Disclosure of Personal Holdings
All investment personnel shall disclose to the Compliance Officer of
the Management Company all personal securities holdings upon the later
of commencement of employment or adoption of this Code of Ethics and
thereafter on an annual basis as of December 31. This initial report
shall be made on the form attached as Exhibit A and shall be delivered
to the Compliance Officer of the Management Company and, upon request,
to the Compliance Officer of the Fund.
3. Certification of Compliance with Code of Ethics
(a) Every access person shall certify annually that:
(i) they have read and understand the Code of Ethics and
recognize that they are subject thereto;
(ii) they have complied with the requirements of the Code of
Ethics; and
(iii) they have reported all personal securities transactions
required to be reported pursuant to the requirements of the
Code of Ethics.
The annual report shall be made on the form attached as Exhibit B and
delivered to the Compliance Officers of the Fund and the Management
Company.
4. Reporting Requirements
(a) Every access person shall report to the Compliance Officer of the
Fund and the Management Company the information described in,
Sub-paragraph (4)(b) of this Section with respect to transactions
in any security in which such person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
in the security; provided, however, that an access person shall
not be required to make a report with respect to transactions
effected for any account over which such person does not have any
direct or indirect influence.
(b) Reports required to be made under this Paragraph (4) shall be
made not later than 10 days after the end of the calendar quarter
in which the transaction to which the report relates was
effected. Every access person shall be required to submit a
report for all periods, including those periods in which no
securities transactions were effected. A report shall be made on
the form attached hereto as Exhibit C or on any other form
containing the following information:
-7-
<PAGE>
(i) the date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom
the transaction was effected.
Duplicate copies of the broker confirmation of all personal
transactions and copies of periodic statements for all
securities accounts may be appended to Exhibit C to fulfill
the reporting requirement.
(c) Any such report may contain a statement that the report shall not
be construed as an admission by the person making such report
that he or she has any direct or indirect beneficial ownership in
the security to which the report relates.
(d) The Compliance Officer of the Fund shall notify each access
person that he or she is subject to these reporting requirements,
and shall deliver a copy of this Code of Ethics to each such
person upon request.
(e) Reports submitted to the Fund pursuant to this Code of Ethics
shall be confidential and shall be provided only to the officers
and Directors of the Fund, Fund counsel or regulatory authorities
upon appropriate request.
(f) Each director/trustee who is not an "interested person" of the
Fund as defined in the Act need only report a transaction in a
security if such director/trustee, at the time of that
transaction knew, or, in the ordinary course of fulfilling his
official duties as a director/trustee, should have known that,
during the 15-day period immediately preceding or after the date
of the transaction by the director/trustee, such security was
purchased or sold by the Fund or was being considered for
purchase by the Fund or by its investment adviser or
sub-investment adviser. Such reports will include the information
described in Sub-paragraph (4)(b) of this Section.
5. Conflict of Interest
Every access person, except officers and Directors of the Fund, shall
notify the Compliance Officer of the Management Company of any
personal conflict of interest relationship which may involve the Fund,
such as the existence of any economic relationship between their
transactions and securities held or to be acquired by any portfolio of
the Fund. Officer and Directors of the Fund shall notify the
Compliance Officer of the Fund of any personal conflict of interest
relationship which may involve the Fund. Such notification shall occur
in the pre-clearance process.
E. REPORTING OF VIOLATIONS TO THE BOARD OF DIRECTORS
1. The Compliance Officer of the Fund shall promptly report to the Board
of Directors all apparent violations of this Code of Ethics and the
reporting requirements thereunder.
2. When the Compliance Officer of the Fund finds that a transaction
otherwise reportable to the Board of Directors under Paragraph (1) of
this Section could not reasonably be found to have resulted
-8-
<PAGE>
in a fraud, deceit or manipulative practice in violation of Rule 17j-
1(a), he may, in his discretion, lodge a written memorandum of such
finding and the reasons therefor with the reports made pursuant to
this Code of Ethics, in lieu of reporting the transaction to the Board
of Directors.
3. The Board of Directors, or a Committee of Directors created by the
Board of Directors for that purpose, shall consider reports made to
the Board of Directors hereunder and shall determine whether or not
this Code of Ethics has been violated and what sanctions, if any,
should be imposed.
F. ANNUAL REPORTING TO THE BOARD OF DIRECTORS
1. The Compliance Officer of the Fund shall prepare an annual report
relating to this Code of Ethics to the Board of Directors. Such annual
report shall:
(a) summarize existing procedures concerning personal investing and
any changes in the procedures made during the past year;
(b) identify any violations requiring significant remedial action
during the past year; and
(c) identify any recommended changes in the existing restrictions or
procedures based upon the Fund's experience under its Code of
Ethics, evolving industry practices or developments in applicable
laws or regulations.
G. SANCTIONS
Upon discovering a violation of this Code, the Board of Directors may
impose such sanctions as they deem appropriate, including, among other
things, a letter of censure or suspension or termination of the
employment of the violator.
H. RETENTION OF RECORDS
The Fund shall maintain the following records as required under Rule
17j-l; reports received by a Management Company on behalf of the Fund
shall be maintained as required under Rule 17j-l:
(a) a copy of any Code of Ethics in effect within the most recent
five years;
(b) a list of all persons required to make reports hereunder within
the most recent five years, as shall be updated by the Compliance
Officer of the Fund;
(c) a copy of each report made by an access person hereunder for a
period of five years from the end of the fiscal year in which it
was made;
(d) each memorandum made by the Compliance Officer of the Fund
hereunder, for a period of five years from the end of the fiscal
year in which it was made; and
(e) a record of any violation hereof and any action taken as a result
of such violation, for a period of five years following the end
of the fiscal year in which the violation occurred.
Dated: December 14, 1995.
-9-
<PAGE>
Revised: January 23, 1997
September 23, 1998
April 6, 1999
-10-
<PAGE>
Exhibit A
THE UAM FUNDS
CODE OF ETHICS
INITIAL REPORT OF ACCESS PERSON
To the Compliance Officer of the Management Company on behalf of The UAM Funds
("the Fund"):
1. I hereby acknowledge receipt of a copy of the Code of Ethics for The UAM
Funds (the "Fund").
2. I have read and understand the Code and recognize that I am subject
thereto as an "access person" of the Fund.
3. Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may
involve the Fund, such as any economic relationship between my
transactions and securities held or to be acquired by the Fund or any of
its portfolios.
4. As of the date below I had a direct or indirect beneficial ownership in
the following securities:
<TABLE>
<CAPTION>
==========================================================================================================
SECURITY No. of PRICE OF TYPE OF BROKER, DEALER DATE ACCOUNT
SHARES SHARES PURCHASE OR BANK ESTABLISHED
(include (Direct or Indirect) THROUGH WHOM
interest rate EFFECTED
and maturity
date, if
applicable)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
</TABLE>
Do not report transactions in direct obligations of the U.S. government,
---
bankers' acceptances, bank certificates of deposit, commercial paper, high
quality short-term debt instruments and unaffiliated registered open-end
investment companies (mutual funds).
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control, (ii) excludes other transactions not required to
be reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Date: ______________________ Signature: _____________________________________
(First date of access Access Person
person status)
Name: _____________________________________
Title: _____________________________________
Date: ______________________ Signature: _____________________________________
Compliance Officer
Name: _____________________________________
Title: _____________________________________
-11-
<PAGE>
-12-
<PAGE>
Exhibit B
THE UAM FUNDS
ACCESS PERSONS
Securities Transactions Report For the Calendar Quarter Ended: _________
To the Compliance Officer of the Management Company on behalf of The UAM Funds
("the Fund"):
During the quarter referred to above, the following transactions were effected
in securities of which I had, or by reason of such transaction acquired, direct
or indirect beneficial ownership, and which are required to be reported pursuant
to the Code of Ethics adopted by the Fund.
<TABLE>
<CAPTION>
====================================================================================================================
NATURE OF BROKER, DEALER OR
SECURITY PRICE OF SHARES TRANSACTION BANK THROUGH WHOM DATE ACCOUNT
DATE OF No. of (Purchase, Sale, EFFECTED ESTABLISHED
(include interest TRANSACTION SHARES Other)
rate and maturity
date, if
applicable)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
</TABLE>
This report (i) excludes transactions with respect to which I had no direct or
indirect influence or control, (ii) excludes other transactions not required to
be reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify that I have
no knowledge of the existence of any personal conflict of interest relationship
which may involve the Fund, such as the existence of any economic relationship
between my transactions and securities held or to be acquired by the Fund or any
of its portfolios.
Do not report transactions in direct obligations of the U.S. government,
bankers' acceptances, bank certificates of deposit, commercial paper, high
quality short-term debt instruments and unaffiliated registered open-end
investment companies (mutual funds).
Directors who are not interested persons of the Fund are not required to make a
report except where such director/trustee knew or should have known that during
the 15-day period immediately preceding or after the date of the transaction in
a security by the director/trustee, such security is or was purchased or sold by
the Fund or such purchase or sale by the Fund is or was considered by the Fund
or an adviser.
Date: ______________________ Signature: _____________________________________
(First date of access Access Person
person status)
Name: _____________________________________
Title: _____________________________________
Date: ______________________ Signature: _____________________________________
Compliance Officer
Name: _____________________________________
Title: _____________________________________
<PAGE>
Exhibit C
THE UAM FUNDS
ACCESS PERSONS
Securities Transactions Report For the Calendar Quarter Ended: _________
To the Compliance Officer of The UAM Funds ("the Fund") (with a copy to the
Compliance Officer of the Management Company):
During the quarter referred to above, the following transactions were
effected in securities of which I had, or by reason of such transaction
acquired, direct or indirect beneficial ownership, and which are required to be
reported pursuant to the Code of Ethics adopted by the Fund.
<TABLE>
<CAPTION>
===============================================================================================================================
SECURITY DATE OF No. of DOLLAR NATURE OF PRICE BROKER/DEALER
TRANSACTION SHARES AMOUNT OF TRANSACTION OR BANK THROUGH
TRANSACTION (Purchase, Sale, WHOM EFFECTED
Other)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================================
</TABLE>
This report (i) excludes transactions with respect to which I had no
direct or indirect influence or control, (ii) excludes other transactions not
required to be reported, and (iii) is not an admission that I have or had any
direct or indirect beneficial ownership in the securities listed above.
Except as noted on the reverse side of this report, I hereby certify that
I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Fund, such as the existence of any economic
relationship between my transactions and securities held or to be acquired by
the Fund or any of its Series.
NOTE: Do not report transactions in U.S. Government securities, bankers'
---- ---
acceptances, bank certificates of deposit, commercial paper and unaffiliated
registered open-end investment companies (mutual funds).
Directors who are not interested persons of the Fund are not required to
make a report except where such director/trustee knew or should have known that
during the 15-day period immediately preceding or after the date of the
transaction in a security by the director/trustee, such security is or was
purchased or sold by the Fund or such purchase or sale by the Fund is or was
considered by the Fund or an adviser.
Date: ______________________ Signature: ______________________________________
Print Name:___________________________
Title:________________________________
Employer's Name:______________________
Date: ______________________ Signature: ______________________________________
Compliance Officer
<PAGE>
Exhibit D
THE UAM FUNDS
INVESTMENT PERSONNEL
Securities Transactions Report Relating to Short-Term Trading
(see Section B(2)(d), Code of Ethics)
For the Sixty-Day Period from to :
To the Compliance Officer of the Management Company on behalf of The UAM Funds
("the Fund"):
During the 60 calendar day period referred to above, the following
purchases and sales, or sales and purchases, of the same (or equivalent)
securities were effected or are proposed to be effected in securities of which I
have, or by reason of such transaction acquired, direct or indirect beneficial
ownership.
<TABLE>
<CAPTION>
===============================================================================================================================
SECURITY DATE OF No. of DOLLAR NATURE OF PRICE BROKER/DEALER
TRANSACTION SHARES AMOUNT OF TRANSACTION (OR OR BANK THROUGH
(OR PROPOSED TRANSACTION (Purchase, Sale, PROPOSED WHOM EFFECTED
TRANSACTION) Other) PRICE)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================================
</TABLE>
This report (i) excludes transactions with respect to which I have or had
no direct or indirect influence or control, (ii) excludes other transactions not
required to be reported, and (iii) is not an admission that I have or had any
direct or indirect beneficial ownership in the securities listed above.
With respect to the (1) portfolio of the Fund that serves as the basis
for my "investment personnel" status with the Fund (the "Portfolio"); and (2)
transactions in the securities set forth in the table above, I hereby certify
that:
(a) I have no knowledge of the existence of any personal conflict of
interest relationship which may involve the Portfolio, such as
frontrunning transactions or the existence of any economic
relationship between my transactions and securities held or to be
acquired by the Portfolio;
(b) such securities, including securities that are economically
related to such securities, involved in the transaction are not
(i) being considered for purchase or sale by the Portfolio, or
(ii) being purchased or sold by the Portfolio; and
<PAGE>
(c) are in compliance with the Code of Ethics of the Fund.
Date: ___________________ Signature: ____________________________________
Print Name:_________________________
Title:______________________________
Employer's Name:____________________
- --------------------------------------------------------------------------------
In accordance with the provisions of Section B(2)(d) of the Code of Ethics of
the Fund, the transaction proposed to be effected as set forth in this Report
is:
Authorized: [ ]
Unauthorized: [ ]
Date: ___________________ Signature: ____________________________________
Compliance Officer
- --------------------------------------------------------------------------------
<PAGE>
Exhibit E
THE UAM FUNDS
ACCESS PERSONS
Personal Securities Transactions Pre-clearance Form
(see Section D(1), Code of Ethics)
To the Compliance Officer of the Management Company on behalf of The UAM Funds
("the Fund"):
I hereby request pre-clearance of the following proposed transactions:
<TABLE>
<CAPTION>
===================================================================================================================
SECURITY NO. OF DOLLAR NATURE OF PRICE BROKER/ AUTHORIZED
SHARES AMOUNT OF TRANSACTION (OR PROPOSED DEALER
(include TRANSACTION (Purchase, PRICE) OR BANK THROUGH
interest rate Sale, WHOM EFFECTED
and maturity Other)
date, if YES NO
applicable)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
===================================================================================================================
</TABLE>
Date: ______________________ Signature: _____________________________________
(First date of access Access Person
person status)
Name: _____________________________________
Title: _____________________________________
Date: ______________________ Signature: _____________________________________
Compliance Officer
Name: _____________________________________
Title: _____________________________________
-17-
