<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
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RICE, HALL, JAMES PORTFOLIOS
INSTITUTIONAL CLASS SHARES
INVESTMENT ADVISER: RICE, HALL, JAMES & ASSOCIATES
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PROSPECTUS--SEPTEMBER 16, 1996
INVESTMENT OBJECTIVES
UAM Funds, Inc. (hereinafter referred to as "UAM Funds" or the "Fund") is an
open-end, management investment company, known as a "mutual fund" and organized
as a Maryland corporation. The Fund consists of multiple series of shares (known
as "Portfolios"), each of which has different investment objectives and
investment policies. Several of the Fund's Portfolios offer two separate classes
of shares: Institutional Class Shares and Institutional Service Class Shares.
The Rice, Hall, James Portfolios currently offer one class of shares. The
securities offered in this Prospectus are Institutional Class Shares of two
diversified, no-load Portfolios (collectively the "Rice, Hall, James Portfolios"
or singularly a "Portfolio") of the Fund managed by Rice, Hall, James &
Associates.
RICE, HALL, JAMES SMALL CAP PORTFOLIO. THE OBJECTIVE OF THE RICE, HALL,
JAMES SMALL CAP PORTFOLIO IS TO PROVIDE MAXIMUM CAPITAL APPRECIATION, CONSISTENT
WITH REASONABLE RISK TO PRINCIPAL BY INVESTING PRIMARILY IN SMALL MARKET
CAPITALIZATION COMPANIES.
RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO. THE OBJECTIVE OF THE RICE, HALL,
JAMES SMALL/MID CAP PORTFOLIO IS TO PROVIDE MAXIMUM CAPITAL APPRECIATION,
CONSISTENT WITH REASONABLE RISK TO PRINCIPAL BY INVESTING PRIMARILY IN SMALL/MID
MARKET CAPITALIZATION (SMALL/MID CAP) COMPANIES.
There can be no assurance that either of the Rice, Hall, James Portfolios
will meet its stated objective. A discussion of the risks of investing in the
Rice, Hall, James Portfolios is included in this Prospectus.
ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets forth
concisely information that you should know before you invest. A "Statement of
Additional Information" containing additional information about the Fund has
been filed with the Securities and Exchange Commission. Such Statement is dated
September 16, 1996 and has been incorporated by reference into this Prospectus.
A copy of the Statement may be obtained, without charge, by writing to the Fund
or by calling the telephone number shown above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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FUND EXPENSES
The following table illustrates the expenses and fees that shareholders of
the Rice, Hall, James Portfolios will incur. The Fund does not charge
shareholder transaction expenses. However, transaction fees may be charged if
you are a customer of a broker-dealer or other financial intermediary who has
established a shareholder servicing relationship with the Fund on behalf of
their customers. Please see "Purchase of Shares" for further information.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
RICE, HALL, RICE, HALL,
JAMES JAMES
SMALL CAP SMALL/MID CAP
PORTFOLIO PORTFOLIO
---------------- ----------------
<S> <C> <C>
Sales Load Imposed on Purchases........................................... NONE NONE
Sales Load Imposed on Reinvested Dividends................................ NONE NONE
Deferred Sales Load....................................................... NONE NONE
Redemption Fees........................................................... NONE NONE
Exchange Fees............................................................. NONE NONE
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
RICE, HALL, RICE, HALL,
JAMES JAMES
SMALL CAP SMALL/MID CAP
PORTFOLIO PORTFOLIO
---------------- ----------------
<S> <C> <C>
Investment Advisory Fees.................................................. 0.75% 0.80%
Administrative Fees....................................................... 0.43% 0.17%
12b-1 Fees................................................................ NONE NONE
Distribution Costs........................................................ NONE NONE
Other Expenses............................................................ 0.37% 0.29%
Advisory Fees Waived...................................................... (0.15)% (.01)%
---------------- ----------------
Total Operating Expenses (After Fee Waiver)............................... 1.40%* 1.25%**
---------------- ----------------
---------------- ----------------
</TABLE>
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* Absent the Adviser's fee waiver, annualized Total Operating Expenses for the
Rice, Hall, James Small Cap Portfolio for the fiscal year ended October 31,
1995 would have been 1.55%. The fees and expenses set forth above are based
on the Rice, Hall, James Small Cap Portfolio's operations during the fiscal
year ended October 31, 1995 except they have been restated to reflect current
administrative fees. The annualized Total Operating Expenses excludes the
effect of expense offsets. If expense offsets were included, the annualized
Total Operating Expenses would not significantly differ.
** The fees and expenses with respect to the Rice, Hall, James Small/Mid Cap
Portfolio are based on estimated amounts for its first year of operations
assuming average daily net assets of $25 million. Absent the Adviser's fee
waiver, the annualized Total Operating Expenses for the first year of
operations of the Rice, Hall, James Small/Mid Cap Portfolio are estimated to
be 1.26%. If expense offsets were included, the annualized Total Operating
Expenses would not significantly differ. As of the date of this Prospectus,
the Rice, Hall, James Small/Mid Cap Portfolio had not commenced operations.
The purpose of the above table is to assist the investor in understanding
the various expenses and fees that an investor in the Rice, Hall, James
Portfolios will bear directly or indirectly. The Adviser has voluntarily agreed
to waive a portion of its advisory fees and to assume as the Adviser's own
expense operating expenses otherwise payable by the Portfolios, if necessary, in
order to reduce the Portfolios' expense ratios. As of the date of this
Prospectus, the Adviser has agreed to keep the Rice, Hall, James Small Cap and
the Rice, Hall, James Small/Mid Cap Portfolios Institutional Class Shares from
exceeding 1.40% and 1.25%, of average daily net assets, respectively. The Fund
will not reimburse the Adviser for any advisory fees waived or expenses that the
Adviser may bear on behalf of the Portfolios.
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The following example illustrates the expenses that a shareholder would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Portfolio charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Rice, Hall, James Small Cap Portfolio............................ $ 14 $ 44 $ 77 $ 168
Rice, Hall, James Small/Mid Cap Portfolio........................ $ 13 $ 40 * *
</TABLE>
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* As the Rice, Hall, James Small/Mid Cap Portfolio is not yet operational, the
Fund has not projected expenses beyond the three-year period shown.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
PROSPECTUS SUMMARY
INVESTMENT ADVISER
Rice, Hall, James & Associates (the "Adviser"), a registered investment
adviser founded in 1974, serves as investment adviser to the Rice, Hall, James
Portfolios . The Adviser presently manages over $1 billion in assets, primarily
on behalf of institutional and individual investors. See "Investment Adviser."
HOW TO INVEST
The Fund offers shares of common stock, par value $.001, of the Portfolios
through UAM Fund Distributors, Inc. (the "Distributor"), to investors without a
sales commission at net asset value next determined after the purchase order is
received in proper form. Share purchases may be made by sending investments
directly to the Fund. The minimum initial investment for the Rice, Hall, James
Portfolios is $2,500; the minimum for subsequent investments is $100. The
officers of the Fund may make certain exceptions to the initial and minimum
investment amounts. See "Purchase of Shares."
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net
investment income in the form of quarterly dividends. Any realized net capital
gains will also be distributed annually. Distributions will be reinvested in the
Portfolio's shares automatically unless an investor elects to receive cash
distributions. See "Dividends, Capital Gains Distributions and Taxes."
HOW TO REDEEM
Shares of each Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemption
request. A Portfolio's share price will fluctuate with market and economic
conditions. Therefore, your investment may be worth more or less when redeemed
than when purchased. See "Redemption of Shares."
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. (the "Administrator"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), is responsible for performing and
overseeing administration, fund accounting, dividend disbursing and transfer
agency services provided to the Fund and its Portfolios by third-party service
providers. The Administrator has entered into a Mutual Funds Service Agreement
with Chase Global Funds Services Company (the "Sub-Administrator" or
"Sub-Transfer Agent") to provide the Fund with certain services relating to the
day-to-day administration of the Fund's operation. See "Administrative
Services."
RISK FACTORS
The value of a Portfolio's shares will fluctuate in response to changes in
market and economic conditions as well as the financial conditions and prospects
of the issuers in which a Portfolio invests. Prospective investors should
consider the following factors that could effect each Portfolio's rate of
return: (1) The small and mid-sized capitalization corporations in which the
Portfolios will invest are more vulnerable to financial and other risks than
larger corporations and the securities of such small and mid-sized
capitalization corporations may involve a higher degree of risk and price
volatility than investments in the general equity markets. (2) Both Portfolios
may invest a portion of their assets in derivatives including futures contracts
and options. (See "Additional Investment Policies.") (3) Both Portfolios may
invest in securities of foreign issuers, which may involve greater risks than
investments in domestic securities, such as foreign currency risks. (See
"Additional Investment Policies.") (4) In general, a Portfolio will not trade
for short-term profits, but when circumstances warrant, investments may be sold
3
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without regard to the length of time held. High rates of portfolio turnover may
result in additional cost and the realization of capital gains. (See "Additional
Investment Policies.") (5) In addition, both Portfolios may use various
investment practices that involve special consideration, including investing in
repurchase agreements, when-issued, forward delivery and delayed settlement
securities and lending of securities. (See "Additional Investment Policies.")
FINANCIAL HIGHLIGHTS
The following table provides selected per share data and ratios for a share
outstanding throughout the periods presented of the Rice, Hall, James Small Cap
Portfolio and is part of the Portfolio's Financial Statements included in the
Portfolio's October 31, 1995 Annual Report and April 30, 1996 Semi-Annual Report
to Shareholders which are incorporated by reference into the Portfolio's
Statement of Additional Information. The Portfolio's October 31, 1995 Financial
Statements have been examined by Price Waterhouse LLP whose opinion thereon
(which is unqualified) is also incorporated by reference into the Statement of
Additional Information. The Portfolio's April 30, 1996 Financial Statements are
unaudited. The following information should be read in conjunction with the
Portfolio's October 31, 1995 Annual Report and April 30, 1996 Semi-Annual Report
to Shareholders. The Rice, Hall, James Small/Mid Cap Portfolio had not commenced
operations as of the date of this Prospectus.
RICE, HALL, JAMES SMALL CAP PORTFOLIO
<TABLE>
<CAPTION>
JULY 1, SIX MONTHS
1994** TO YEAR ENDED ENDED
OCTOBER OCTOBER 31, APRIL 30, 1996
31,1994 1995 (UNAUDITED)
------------ ----------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $10.00 $ 11.14 $ 15.87
Income From Investment Operations
Net Investment Income (Loss)......................... 0.01+ (0.07)+ (0.05)
Net Realized and Unrealized Gain on Investments...... 1.13 4.81 3.13
------ ----------- -------
Total From Investment Operations................... 1.14 4.74 3.08
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Distributions
Net Investment Income................................ -- (0.01) (0.00)##
Net Realized Gain.................................... -- -- (0.00)##
In Excess of Net Investment Income................... -- (0.00)## (2.77)
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Total Distributions................................ -- (0.01) (2.77)
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Net Asset Value, End of Period......................... $11.14 $ 15.87 $ 16.18
------ ----------- -------
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Total Return........................................... 11.40%++ 42.59%++ 22.85%
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Ratios and Supplemental Data
Net Assets, End of Period (Thousands).................. $8,287 $18,910 $28,887
Ratio of Expenses to Average Net Assets................ 1.40%*+ 1.40%#+ 1.40%*#
Ratio of Net Investment Income (Loss) to Average Net
Assets................................................ 0.30%*+ (0.63)%+ (0.78)%*
Portfolio Turnover Rate................................ 5% 180% 105%
Average Commission Rate###............................. N/A N/A $0.0518
</TABLE>
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* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $0.05
and $0.01 per share for the period ended October 31, 1994 and for the year
ended October 31, 1995, respectively.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# For the year ended October 31, 1995 and the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would not significantly differ.
## Value is less than $0.01 per share.
### For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
4
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PERFORMANCE CALCULATIONS
Each Portfolio may advertise or quote total return data. Total return will
be calculated on an average annual total return basis, and may also be
calculated on an aggregate total return basis, for various periods. Average
annual total return reflects the average annual percentage change in value of an
investment in a Portfolio over a measuring period. Aggregate total return
reflects the total percentage change in value over a measuring period. Both
methods of calculating total return assume that dividends and capital gains
distributions made by a Portfolio during the period are reinvested in that
Portfolio's shares.
The Annual Report to the Shareholders of the Rice, Hall, James Small Cap
Portfolio for the Fund's most recent fiscal year end contains additional
performance information that includes a comparison with an appropriate index.
The Annual Report is available without charge upon request to the Fund by
writing to the address or calling the phone number on the cover of this
Prospectus.
INVESTMENT OBJECTIVES
The objective of the RICE, HALL, JAMES SMALL CAP PORTFOLIO is to provide
maximum capital appreciation, consistent with reasonable risk to principal by
investing primarily in small market capitalization companies. The Adviser
intends to pursue this objective through investment primarily in common stocks
of companies whose market capitalizations range between $40 million and $500
million.
The objective of the RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO is to provide
maximum capital appreciation, consistent with reasonable risk to principal by
investing primarily in small/mid market capitalization companies. The Adviser
intends to pursue this objective through investment primarily in common stocks
of companies whose market capitalizations range between $300 million and $2.5
billion.
There can be no assurance that either of the Rice, Hall, James Portfolios
will achieve its stated objective.
PORTFOLIO CHARACTERISTICS AND INVESTMENT POLICIES
The RICE, HALL, JAMES SMALL CAP PORTFOLIO will invest, under normal
circumstances, at least 65% of its total assets in equity securities of
companies with market capitalizations of $40 million to $500 million, at the
time of initial purchase. The equity securities in which the Portfolio will
invest will consist of common stocks and securities convertible into common
stocks, including convertible preferred stocks and convertible bonds. The
Adviser will strive to accomplish its investment objective with broad
diversification. The Adviser believes that the Portfolio will provide a level of
diversification and investment opportunity that may be difficult for individual
investors to accomplish on their own.
The Adviser will use a selection process that emphasizes smaller, emerging
companies which have the potential to become market leaders in their industries.
The Adviser will focus on securities of companies with:
-- Strong management
-- Leading products or services
-- Distribution to a large marketplace or growing niche market
-- Anticipated above-average revenue and earnings growth rates
-- Potential for improvement in profit margins
-- Strong cash flow and/or improving financial position
The list of potential investments is further filtered by the use of
traditional fundamental security analysis and valuation methods including, but
not limited to, analysis of relative returns on capital and equity, reward to
risk ratios and earnings per share growth rates relative to price earnings
ratios. The Adviser believes that many companies with smaller capitalizations
have greater potential than their larger counterparts to deliver above-average
revenue and earnings growth rates that have not yet been recognized by
investors.
The Adviser expects that a majority of investments in the Portfolio will be
in U.S.-based companies, however, from time to time shares of foreign based
companies may be purchased if they meet the Portfolio's investment criteria.
Under normal circumstances, investments in foreign based companies will comprise
no more than 15% of portfolio assets.
5
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It is anticipated that cash reserves will represent a relatively small
percentage of portfolio assets (less than 20% under most circumstances). In
unusual circumstances, or for temporary defensive purposes when market or
economic conditions may warrant, the Portfolio may invest all or a portion of
its assets in short-term investments, cash and cash equivalents. When the
Portfolio is in a defensive position, it may not be pursuing its investment
objective.
The RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO will invest, under normal
circumstances, at least 65% of its total assets in equity securities of
companies with market capitalizations of $300 million to $2.5 billion, at the
time of initial purchase. The equity securities in which the Portfolio will
invest will consist of common stock and securities convertible into common
stocks, including convertible preferred stocks and convertible bonds.
The small/mid cap area of the market, defined by the Adviser as companies
with market capitalizations less than $2.5 billion but greater than $300
million, has more than three times the number of securities than the market
comprised of companies with market capitalizations greater than $2.5 billion.
The Adviser believes that the small/ mid cap market has less analyst coverage
which means there is greater pricing inefficiency for such securities than for
more closely followed, usually larger capitalization companies. The Adviser's
investment selections for the Portfolio will tend to be from relatively
underfollowed securities.
The Adviser practices a fundamentally driven bottom up research approach.
This approach focuses on identifying stocks of growth companies that are selling
at a discount to the companies' projected earnings growth rates. Specifically,
the Adviser requires that equity securities in which the Portfolio invests have
price/earnings ratios that are lower than the 3 to 5 year projected earnings
growth rate. In addition, the stocks must possess catalysts, which are defined
by the Adviser as fundamental events that ultimately lead to increases in
revenue growth rates, expanding profit margins and/or increases in earnings
growth rates that are generally not anticipated by the market. Such events can
include new product introductions or applications, discovery of niche markets,
new management, corporate or industry restructures, regulatory change and end
market expansion. Most importantly, the Adviser must be convinced that such
change will lead to greater investor recognition and a subsequent rise in the
stock prices within a 12 to 24 month period. The key is discovering undervalued
companies where fundamental changes are occurring that are temporarily going
unnoticed by investors.
The Adviser expects that a majority of investments in the Portfolio will be
in U.S.-based companies, however, from time to time, shares of foreign based
companies may be purchased if they meet the Portfolio's investment criteria.
Under normal circumstances, investments in foreign based companies will comprise
no more than 15% of portfolio assets.
It is anticipated that cash reserves will represent a relatively small
percentage of portfolio assets (no more than 20% under most circumstances). In
unusual circumstances, or for temporary defensive purposes when market or
economic conditions may warrant, the Portfolio may invest all or a portion of
its assets in short-term investments, cash and cash equivalents. When the
Portfolio is in a defensive position, it may not be pursuing its investment
objective.
ADDITIONAL INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
From time to time, in order to earn a return on uninvested assets, meet
anticipated redemptions, or for temporary defensive purposes, each Portfolio may
invest a portion of its assets in the following money market instruments,
consistent with its investment policies as set forth above.
(1) Time deposits, certificates of deposit (including marketable variable rate
certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified period of time
at a stated interest rate. Time deposits maturing in more than seven days
will not be purchased by a Portfolio, and time deposits maturing from two
business days through seven calendar days will not exceed 15% of the total
assets of a Portfolio.
Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan associations collateralized by funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. 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).
6
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A Portfolio will not invest in securities issued by a commercial bank unless
(i) the bank has total assets of at least $1 billion, or the equivalent in other
currencies, (ii) in the case of U.S. banks, it is a member of the Federal
Deposit Insurance Corporation, and (iii) in the case of foreign branches of U.S.
banks, the security is, in the opinion of the Adviser, of an investment quality
comparable with other debt securities which may be purchased by each Portfolio;
(2) Commercial paper rated A-1 or A-2 by Standard & Poor's Corporation ("S&P")
or Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("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;
(3) Short-term corporate obligations rated A or better by Moody's or by S&P;
(4) U.S. Government obligations including bills, notes, bonds and other debt
securities issued by the U.S. Treasury. These are direct obligations of the
U.S. Treasury, supported by the full faith and credit pledge of the U.S.
Government and differ mainly in interest rates, maturities and dates of
issue;
(5) U.S. Government agency securities issued or guaranteed by U.S. Government
sponsored instrumentalities and Federal agencies. Generally, such securities
are evaluated on the creditworthiness of their issuing agency or guarantor
and are not backed by the direct full faith and credit pledge of the U.S.
Government. These include securities issued by the Federal Home Loan Banks,
Federal Land Bank, Farmers Home Administration, Federal Farm Credit Banks,
Federal Intermediate Credit Bank, Federal National Mortgage Association,
Federal Financing Bank, the Tennessee Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
For temporary defensive purposes, when market or economic conditions may
warrant, each Portfolio may invest all or a portion of its assets in cash and
cash equivalents and in such situations may not be investing to achieve its
objective.
The Fund has received permission from the Securities and Exchange Commission
(the "Commission") to deposit the daily uninvested cash balances of the Fund's
Portfolios, as well as cash for investment purposes, into one or more joint
accounts and to invest the daily balance of the joint accounts in the following
short-term investments: fully collateralized repurchase agreements,
interest-bearing or discounted commercial paper including dollar-denominated
commercial paper of foreign issuers, and any other short-term money market
instruments including variable rate demand notes and other tax-exempt money
market instruments. By entering into these investments on a joint basis, it is
expected that a Portfolio may earn a higher rate of return on investments
relative to what it could earn individually.
The Fund has received permission from the Commission to allow each of its
Portfolios to invest the greater of 5% of its total assets or $2.5 million in
the Fund's DSI Money Market Portfolio for cash management purposes. (See
"Investment Companies.")
REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' acceptances
and other securities outlined above under "Short-Term Investments." Each
Portfolio may acquire repurchase agreements as long as the Fund's Board of
Directors evaluate the creditworthiness of the brokers or dealers with which the
Portfolio will enter into repurchase agreements. In a repurchase agreement, a
Portfolio purchases a security and simultaneously commits to resell that
security at a future date to the seller (a qualified bank or securities dealer)
at an agreed upon price plus an agreed upon market rate of interest (itself
unrelated to the coupon rate or date of maturity of the purchased security).
Under a repurchase agreement, the seller will be required to maintain the value
of the securities subject to the agreement at not less than 100% of the
repurchase price of such securities. The value of the securities purchased will
be evaluated daily, and the Adviser will, if necessary, require the seller to
maintain additional securities to ensure that the value is in compliance with
the previous sentence. The Adviser will consider the creditworthiness of a
seller in determining whether a Portfolio should enter into a repurchase
agreement.
In effect, by entering into a repurchase agreement, a Portfolio is lending
its funds to the seller at the agreed upon interest rate, and receiving a
security as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
7
<PAGE>
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, a
Portfolio may incur a loss upon disposition of them. If the seller of the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of a Portfolio and
therefore subject to sale by the trustee in bankruptcy. Finally, it is possible
that a Portfolio may not be able to substantiate its interest in the underlying
securities. While the Fund's management acknowledges these risks, it is expected
that they can be controlled through stringent security selection criteria and
careful monitoring procedures. Credit screens will be established and maintained
for dealers and dealer-banks before portfolio transactions are executed for each
Portfolio.
The Fund has received permission from the Commission to pool the daily
uninvested cash balances of the Fund's Portfolios in order to invest in
repurchase agreements on a joint basis. By entering into repurchase agreements
on a joint basis, it is expected that a Portfolio will incur lower transactions
costs and potentially obtain higher rates of interest on such repurchase
agreements. Each Portfolio's participation in the income from jointly purchased
repurchase agreements will be based on that Portfolio's percentage share in the
total repurchase agreement.
FOREIGN SECURITIES AND FOREIGN CURRENCIES
Each Portfolio may invest up to 15% of its assets, under normal
circumstances, in equity or debt securities of foreign issuers or securities
denominated in foreign currencies and forward contracts for such currencies.
These types of investments entail risks in addition to those involved in
investments in securities of domestic issuers.
Investing in foreign securities, including American Depositary Receipts
("ADRs"), and/or currencies may represent a greater degree of risk than
investing in domestic securities due to possible exchange rate fluctuations,
possible exchange controls, less publicly-available information, more volatile
markets, less securities regulation, less favorable tax provisions (including
possible withholding taxes), war or expropriation. In particular, the dollar
value of portfolio securities of non-U.S. issuers fluctuates with changes in
market and economic conditions abroad and with changes in relative currency
values.
ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or pool of
securities issued by a foreign issuer (the "underlying issuer") and deposited
with the depositary. ADRs may be "sponsored" or "unsponsored". Sponsored ADRs
are established jointly by a depositary and the underlying issuer, whereas
unsponsored ADRs may be established by a depositary without participation by the
underlying issuer. Holders of an unsponsored ADR generally bear all the costs
associated with establishing the unsponsored ADR. The depositary of an
unsponsored ADR is under no obligation to distribute shareholder communications
received from the underlying issuer or to pass through to the holders of the
unsponsored ADR voting rights with respect to the deposited security or pool of
securities.
While a Portfolio may enter into forward foreign currency exchange contracts
("forward contracts") when, in the Adviser's judgement, the specific foreign
currency covered by a forward contract is likely to appreciate against the U.S.
dollar, unanticipated changes in currency prices may result in a loss to a
Portfolio. In addition, forward contracts are traded over-the-counter, and
typically not in organized markets. As a result, a Portfolio may be unable to
liquidate a forward contract prior to its stated maturity date or it may be
required to enter into an offsetting contract (which it may be unable to do). In
addition, the other party to a forward contract may require a Portfolio to
deposit collateral upon entering into a forward contract, and to deposit
additional collateral if exchange rates move adversely to a Portfolio's
position. For additional information regarding foreign securities, please see
the Statement of Additional Information.
LENDING OF SECURITIES
Each Portfolio may lend its investment securities to qualified institutional
investors who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. A Portfolio will not loan
portfolio securities to the extent that greater than one-third of its assets at
fair market value, would be committed to loans. By lending its investment
securities, a Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. A Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and
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Regulations or interpretations of the Commission thereunder, which currently
require that (a) the borrower pledge and maintain with the Portfolio collateral
consisting of cash, an irrevocable letter of credit issued by a domestic U.S.
bank or securities issued or guaranteed by the United States Government having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of the
securities fails financially. These risks are similar to the ones involved with
repurchase agreements as discussed above. All relevant facts and circumstances,
including the creditworthiness of the broker, dealer or institution, will be
considered in making decisions with respect to the lending of securities,
subject to review by the Fund's Board of Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Board of Directors. The Portfolio will continue to
retain any voting rights with respect to the loaned securities. If a material
event occurs affecting an investment on a loan, the loan must be called and the
securities voted. For additional information regarding the lending of
securities, please see the Statement of Additional Information.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
Each Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. Such transactions will be limited to
no more than 20% of each Portfolio's assets. "When-issued" or "forward delivery"
refers to securities whose terms and indenture are available, and for which a
market exists, but which are not available for immediate delivery. When-issued
or forward delivery transactions may be expected to occur a month or more before
delivery is due. Delayed settlement is a term used to describe settlement of a
securities transaction in the secondary market which will occur sometime in the
future. Generally, no payment or delivery is made by the Portfolio until it
receives payment or delivery from the other party to any of the above
transactions. The Portfolio will maintain a separate account of cash or liquid
securities at least equal to the value of purchase commitments until payment is
made. Such segregated securities will either mature or, if necessary, be sold on
or before the settlement date. Typically, no income accrues on securities
purchased on a delayed delivery basis prior to the time delivery of the
securities is made although a Portfolio may earn income on securities it has
deposited in a segregated account.
Each Portfolio may engage in when-issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
When a Portfolio engages in when-issued or forward delivery transactions, it
will do so for the purpose of acquiring securities consistent with its
investment objective and policies and not for the purposes of investment
leverage.
FUTURES CONTRACTS AND OPTIONS
In order to remain fully invested, and to reduce transaction costs, each
Portfolio may utilize appropriate futures contracts and options to a limited
extent. These instruments are commonly referred to as "derivatives." For
example, in order to remain fully exposed to the movements of the market, while
maintaining liquidity to meet potential shareholder redemptions, a Portfolio may
invest a portion of its assets in bond or interest rate futures contracts.
Because futures contracts only require a small initial margin deposit, a
Portfolio would then be able to keep a cash reserve available to meet potential
redemptions, while at the same time being effectively fully invested. Also,
because transaction costs associated with futures and options may be lower than
the costs of investing in securities directly, it is expected that the use of
index futures and options to facilitate cash flows may reduce a Portfolio's
overall transactions costs. A Portfolio will enter into futures contracts and
options for bona fide hedging purposes only and for other purposes so long as
aggregate initial margins and premiums required in connection with non-hedging
positions do not exceed 5% of the Portfolio's total assets.
The primary risks associated with the use of futures and options are (1)
imperfect correlation between the change in market value of the securities held
by a Portfolio and the prices of futures and options relating to the securities
purchased or sold by a Portfolio; and (2) possible lack of a liquid secondary
market for a futures contract or option and the resulting inability to close a
futures position which could have an adverse impact on a Portfolio's ability to
hedge. In the opinion of the Directors, the risk that a Portfolio will be unable
to close out a futures
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position or options contract will be minimized by only entering into futures
contracts or options transactions traded on national exchanges and for which
there appears to be a liquid secondary market. For additional information
regarding futures contracts and options, please see the Statement of Additional
Information.
PORTFOLIO TURNOVER
The rate of portfolio turnover will depend upon market and other conditions,
and it will not be a limiting factor when the Adviser believes that portfolio
changes are appropriate. However, it is expected that the annual portfolio
turnover rate for the Rice, Hall, James Small Cap Portfolio and for the Rice,
Hall, James Small/Mid Cap Portfolio will not exceed 250% and 150%, respectively.
High rates of portfolio turnover necessarily result in correspondingly heavier
brokerage and portfolio trading costs which are paid by a Portfolio. In addition
to Portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains. To the extent net short-term capital gains are
realized, any distributions resulting from such gains are considered ordinary
income for federal income tax purposes. See "Dividends, Capital Gains
Distributions and Taxes" for more information on taxation. The table set forth
in "Financial Highlights" presents the Rice, Hall, James Small Cap Portfolio's
historical portfolio turnover ratios.
INVESTMENT COMPANIES
As permitted by the 1940 Act, each Portfolio reserves the right to invest up
to 10% of its total assets, calculated at the time of investment, in the
securities of other open-end or closed-end investment companies consistent with
the Portfolio's investment objective and policies. No more than 5% of the
investing Portfolio's total assets may be invested in the securities of one
investment company nor may it acquire more than 3% of the voting securities of
any other investment company. The Portfolio will indirectly bear its
proportionate share of any management fees paid by an investment company in
which it invests in addition to the advisory fee paid by the Portfolio.
The Fund has received permission from the Commission to allow each of its
Portfolios to invest the greater of 5% of its total assets or $2.5 million in
the Fund's DSI Money Market Portfolio for cash management purposes provided that
the investment is consistent with the Portfolio's investment policies and
restrictions. Based upon the Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advisory
fee and any other fees earned as a result of the Portfolio's investment in the
DSI Money Market Portfolio. The investing Portfolio will bear expenses of the
DSI Money Market Portfolio on the same basis as all of its other shareholders.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Fund's Directors
may change such policies without an affirmative vote of a "majority of the
outstanding voting securities of the Portfolio," as defined in the 1940 Act.
INVESTMENT LIMITATIONS
The Rice, Hall, James Portfolios have adopted certain limitations which are
designed to reduce exposure to risk in specific situations. Each Portfolio will
not:
(a) with respect to 75% of its assets, invest more than 5% of its total
assets at the time of purchase in the securities of a single issuer
(other than obligations issued by or guaranteed as to principal and
interest by the U.S. government or any agency or instrumentality
thereof);
(b) with respect to 75% of its assets, purchase more than 10% of any class
of the outstanding voting securities of any issuer;
(c) acquire any security of companies within one industry, if as a result of
such acquisition, more than 25% of the value of the Portfolio's total
assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or instruments issued by U.S. banks when
the Portfolio adopts a temporary defensive position;
(d) invest more than 5% of its assets at the time of purchase in the
securities of companies that have (with predecessors) a continuous
operating history of less than 3 years;
(e) make loans except (1) by purchasing debt securities in accordance with
its investment objectives and policies or by entering into repurchase
agreements or (2) by lending its portfolio securities to banks, brokers,
dealers and other financial institutions so long as such loans are not
inconsistent with the 1940 Act or the rules and regulations or
interpretations of the Commission thereunder;
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(f) (1) borrow, except from banks and as a temporary measure for
extraordinary or emergency purposes and then, in no event, in excess of
33 1/3% of the Portfolio's gross assets valued at the lower of market or
cost, and (2) the Portfolio may not purchase additional securities when
borrowings exceed 5% of total assets; or
(g) pledge, mortgage or hypothecate any of its assets to an extent greater
than 33 1/3% of its total assets at fair market value.
The Portfolios' investment objectives and investment limitations (a), (b),
(c), (e), and (f.1), set forth above, are fundamental and may be changed only
with the approval of the holders of a majority of the outstanding shares of each
Portfolio of the Fund. If a percentage limitation on investment or utilization
of assets as set forth above is adhered to at the time an investment is made, a
later change in percentage resulting from changes in the value or total cost of
the Portfolio's assets will not be considered a violation of the restriction.
PURCHASE OF SHARES
Shares of a Portfolio may be purchased, without sales commission, at the net
asset value per share next determined after an order is received by the Fund and
payment is received by the Custodian. (See "Valuation of Shares.") The required
minimum initial investment in the Rice, Hall, James Portfolios is $2,500. There
may be certain exceptions as may be determined from time to time by the officers
of the Fund.
INITIAL INVESTMENTS BY MAIL
An account may be opened by completing and signing an Account Registration
Form, and mailing it, together with a check payable to UAM FUNDS, INC., to:
UAM Funds, Inc.
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
The carbon copy (manually signed) of the Account Registration Form must be
sent or delivered to:
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
Payment for the purchase of shares received by mail will be credited to your
account at the net asset value per share of a Portfolio next determined after
receipt. Such payment need not be converted into Federal Funds (monies credited
to the Fund's Custodian Bank by a Federal Reserve Bank) before acceptance by the
Fund.
INITIAL INVESTMENTS BY WIRE
Shares of a Portfolio may also be purchased by wiring Federal Funds to the
Fund's Custodian Bank (see instructions below). In order to insure prompt
crediting of the Federal Funds wire, it is important to follow these steps:
(a) Telephone the Fund (toll-free 1-800-638-7983) and provide the
account name, address, telephone number, social security or taxpayer
identification number, the name of the Portfolio, the amount being wired and
the name of the bank wiring the funds. (Investors with existing accounts
should also notify the Fund prior to wiring funds.) An account number and a
wire control number will then be provided to you;
(b) Instruct your bank to wire the specified amount to the Fund's
Custodian at:
The Chase Manhattan Bank
ABA #021000021
UAM Funds
Credit DDA #9102772952
(Your Account Registration)
(Your Account Number)
(Wire Control Number)
(c) A completed Account Registration Form must be forwarded to the Fund
and UAM Fund Distributors, Inc. at the addresses shown thereon as soon as
possible. Federal Funds purchases will be accepted only on a day on which
the New York Stock Exchange and the Custodian Bank are open for business.
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ADDITIONAL INVESTMENTS
You may add to your account at any time by purchasing shares at net asset
value by mailing a check to the UAM Funds Service Center (payable to "UAM Funds,
Inc.") at the above address or by wiring monies to the Custodian Bank using the
instructions outlined above. The minimum additional investment is $100. It is
very important that your account number, account name, and the name of the
Portfolio of which shares are to be purchased are specified on the check or wire
to insure proper crediting to your account. In order to insure that your wire
orders are invested promptly, you are requested to notify the Fund (toll-free
1-800-638-7983) prior to the wire date. Mail orders should include, when
possible, the "Invest by Mail" stub which accompanies any Fund confirmation
statement.
OTHER PURCHASE INFORMATION
The purchase price of the shares is the net asset value per share next
determined after the order and payment is received. (See "Valuation of Shares.")
An order received prior to the 4:00 p.m. close of the New York Stock Exchange
(the "NYSE") will be executed at the price computed on the date of receipt. An
order or payment received not in proper form or after the 4:00 p.m. close of the
NYSE will be executed at the price computed on the next day the NYSE is open
after proper receipt.
The Fund reserves the right, in its sole discretion, to suspend the offering
of shares of the Portfolios or reject purchase orders when, in the judgement of
management, such suspension or rejection is in the best interests of the Fund.
Purchases will be made in full and fractional shares calculated to three
decimal places. In the interest of economy and convenience, certificates for
shares will not be issued except at the written request of the shareholder.
Certificates for fractional shares, however, will not be issued.
Shares of the Portfolios may be purchased by customers of broker-dealers or
other financial intermediaries ("Service Agents") which have established a
shareholder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on the purchase or
redemption of Portfolio shares by their customers and may charge their customers
transaction or other account fees on the purchase and redemption of Portfolio
shares. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or different
conditions regarding purchases and redemptions. Shareholders who are customers
of Service Agents should consult their Service Agent for information regarding
these fees and conditions. Amounts paid to Service Agents may include
transaction fees and/or service fees paid by the Fund from the Fund assets
attributable to the Service Agent, and which would not be imposed if shares of
the Portfolio were purchased directly from the Fund or the Distributor. The
Service Agents may provide shareholder services to their customers that are not
available to a shareholder dealing directly with the Fund. A salesperson and any
other person entitled to receive compensation for selling or servicing Portfolio
shares may receive different compensation with respect to one particular class
of shares over another in the Fund.
Service Agents may enter confirmed purchase orders on behalf of their
customers. If you buy shares of a Portfolio in this manner, the Service Agent
must receive your investment order before the close of trading on the NYSE, and
transmit it to the Fund's Sub-Transfer Agent prior to the close of the
Sub-Transfer Agent's business day and to the Distributor to receive that day's
share price. Proper payment for the order must be received by the Sub-Transfer
Agent no later than the time when the Portfolio is priced on the following
business day. Service Agents are responsible to their customers, the Fund and
the Fund's Distributor for timely transmission of all subscription and
redemption requests, investment information, documentation and money.
IN-KIND PURCHASES
If accepted by the Fund, shares of the Portfolios may be purchased in
exchange for securities which are eligible for acquisition by the Portfolio, as
described in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as set forth under "Valuation of Shares" at the time of
the next determination of net asset value after such acceptance. Shares issued
in exchange for securities will be issued at net asset value determined as of
the same time. All dividends, interest, subscription, or other rights pertaining
to such securities shall become the property of the Portfolio and must be
delivered to the Fund by the investor upon receipt from the issuer. Securities
acquired through in-kind purchase will be acquired for investment and not for
immediate resale.
The Fund will not accept securities in exchange for shares of a Portfolio
unless: (1) such securities are, at the time of the exchange, eligible for
investment by the Portfolio and current market quotations are readily available
for such securities; (2) the investor represents and agrees that all securities
offered to be exchanged are not subject to any restrictions upon their sale by
the Portfolio under the Securities Act of 1933, or otherwise; and (3) the value
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of any such securities (except U.S. Government securities) being exchanged
together with other securities of the same issuer owned by the Portfolio will
not exceed 5% of the net assets of the Portfolio immediately after the
transaction.
A gain or loss for Federal income tax purposes will be realized by investors
who are subject to Federal taxation upon the exchange depending upon the cost of
the securities or local currency exchanged. Investors interested in such
exchanges should contact the Adviser.
REDEMPTION OF SHARES
Shares of each Portfolio may be redeemed by mail or telephone at any time,
without cost, at the net asset value next determined after receipt of the
redemption request. No charge is made for redemptions. Any redemption may be
more or less than the purchase price of your shares depending on the market
value of the investment securities held by the Portfolios.
BY MAIL
Each Portfolio will redeem its shares at the net asset value next determined
on the date the request is received in "good order". Your request should be
addressed to:
UAM Funds Service Center
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
"Good order" means that the request to redeem shares must include the
following documentation:
(a) The stock certificates, if issued;
(b) A letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, signed by all registered owners
of the shares in the exact names in which they are registered;
(c) Any required signature guarantees (see "Signature Guarantees" below);
and
(d) Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit
sharing plans and other organizations.
Shareholders who are uncertain of requirements for redemption should contact
the UAM Funds Service Center.
SIGNATURE GUARANTEES
To protect your account, the Fund and the Fund's Sub-Transfer Agent from
fraud, signature guarantees are required for certain redemptions. Signature
guarantees are required for (1) redemptions where the proceeds are to be sent to
someone other than the registered shareowner(s) or the registered address, or
(2) share transfer requests. The purpose of signature guarantees is to verify
the identity of the party who has authorized a redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Sub-Transfer Agent. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at least
$100,000. Credit unions must be authorized to issue signature guarantees.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
BY TELEPHONE
Provided you have previously established the telephone redemption privilege
by completing an Account Registration Form, you may request a redemption of your
shares by calling the Fund and requesting the redemption proceeds be mailed to
you or wired to your bank. The Fund and the Sub-Transfer Agent will employ
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<PAGE>
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 prior to 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. Neither the Fund
nor the Sub-Transfer Agent will be responsible for any loss, liability, cost or
expense for following instructions received by telephone that it reasonably
believes to be genuine. To change the name of the commercial bank or the account
designated to receive redemption proceeds, a written request must be sent to the
Fund at the address above. Requests to change the bank or account must be signed
by each shareholder and each signature must be guaranteed. You cannot redeem
shares by telephone if you hold stock certificates for these shares. Please
contact one of the Fund's representatives at the Sub-Transfer Agent for further
details.
FURTHER REDEMPTION INFORMATION
Normally, the Fund will make payment for all shares redeemed under this
procedure within one business day of receipt of the request, but in no event
will payment be made more than seven days after receipt of a redemption request
in good order. The Fund may suspend the right of redemption or postpone the date
at times when either the NYSE or Custodian Bank are closed, or under any
emergency circumstances as determined by the Commission.
If the Fund's Board of Directors determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption proceeds in whole or
in part by a distribution in-kind of liquid securities held by a Portfolio in
lieu of cash in conformity with applicable rules of the Commission. Investors
may incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of either Rice, Hall, James Portfolio may be
exchanged for Institutional Class Shares of the other Rice, Hall, James
Portfolio. In addition, Institutional Class Shares of each Rice, Hall, James
Portfolio may be exchanged for any other Institutional Class Shares of a
Portfolio included in the UAM Funds which is comprised of the Fund and UAM Funds
Trust. (See the list of Portfolios of the UAM Funds -- Institutional Class
Shares at the end of this Prospectus.) Exchange requests should be made by
calling the Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds Service
Center, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA
02208-2798. The exchange privilege is only available with respect to Portfolios
that are registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling the
UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Sub-Transfer Agent will be
responsible for the authenticity of the exchange instructions received by
telephone. Exchanges may also be subject to limitations as to amounts or
frequency and to other restrictions established by the Board of Directors to
assure that such exchanges do not disadvantage the Fund and its shareholders.
For additional information regarding responsibility for the authenticity of
telephoned instructions, see "Redemption of Shares -- By Telephone" above.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
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TRANSFER OF REGISTRATION
Shareholders may transfer the registration of shares to another person by
writing to the UAM Funds at the above address. As in the case of redemptions,
the written request must be received in good order before any transfer can be
made. (See "Redemption of Shares" for a definition of "good order.")
VALUATION OF SHARES
Each Portfolio's net asset value per share is determined by dividing the sum
of the total market value of the Portfolio's investments and other assets, less
any liabilities, by the total outstanding shares of the Portfolio. The net asset
value per share is determined as of the close of the NYSE on each day that the
NYSE is open for business (currently 4:00 p.m. Eastern time).
Equity securities listed on a U.S. securities exchange for which market
quotations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Securities listed on a
foreign exchange are valued at their closing price. Unlisted equity securities
and listed securities not traded on the valuation date for which market
quotations are readily available are valued not exceeding the current asked
prices nor less than the current bid prices.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the over-the-counter
market. Net asset value includes interest on fixed income securities, which is
accrued daily. In addition, bonds and other fixed income securities may be
valued on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices but take into account institutional size trading in similar groups of
securities and any developments related to the specific securities. Securities
not priced in this manner are valued at the most recently quoted bid price, or
when stock exchange valuations are used, at the latest quoted sale price on the
day of valuation. If there is no such reported sale, the latest quoted bid price
will be used. The value of securities purchased with remaining maturities of 60
days or less is determined using amortized cost valuation, when the Board of
Directors determines that amortized cost reflects fair value. In the event that
amortized cost does not approximate fair value, market prices as determined
above will be used.
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 Fund's Board of Directors. For purposes of
calculating net asset value per share, all assets and liabilities initially
expressed in foreign currencies will be converted into U.S. dollars at the
prevailing market rate.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Portfolio will normally distribute substantially all of its net
investment income to shareholders in the form of quarterly dividends. If any net
capital gains are realized, the Portfolios will normally distribute such gains
with the annual dividend distribution.
Undistributed net investment income is included in a Portfolio's net assets
for the purpose of calculating net asset value per share. Therefore, on the
"ex-dividend" date, the net asset value per share excludes the dividend (i.e.,
is reduced by the per share amount of the dividend). Dividends paid shortly
after the purchase of shares by an investor, although in effect a return of
capital, are taxable to shareholders.
Each Portfolio's dividend and capital gains distributions will be
automatically reinvested in additional shares unless the Fund is notified in
writing that the shareholder elects to receive distributions in cash.
FEDERAL TAXES
Each Portfolio intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended, and if it
qualifies, will not be liable for Federal income taxes to the extent it
distributes its net investment income and net realized capital gains. For
qualification as a regulated investment company the Portfolio intends to comply
with the diversification requirements imposed by the Internal Revenue Code. In
doing so, the Portfolio will diversify its holdings so that, at the close of
each quarter of its taxable year, at least 50% of the market value of its total
assets is represented by cash (including cash items and receivables), United
States
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Government securities, and other securities, with such other securities limited
in respect of any one issuer, for purposes of this calculation to an amount not
greater than 5% of the value of the Portfolio's total assets and no more than
10% of the outstanding voting securities of the issuer.
Dividends, either in cash or reinvested in shares, paid by a Portfolio from
net investment income will be taxable to shareholders as ordinary income and
will not qualify for the 70% dividends received deduction for corporations.
Whether paid in cash or additional shares of a Portfolio and regardless of
the length of time the shares in the Portfolio have been owned by the
shareholder, distributions from long-term capital gains are taxable to
shareholders as such but are not eligible for the dividends received deduction.
Shareholders are notified annually by the Fund as to Federal tax status of
dividends and distributions paid by a Portfolio. Such dividends and
distributions may also be subject to state and local taxes.
A redemption of shares is a taxable event for Federal income tax purposes. A
shareholder may also be subject to state and local taxes on such redemptions.
Each Portfolio intends to declare and pay dividend and capital gains
distributions so as to avoid imposition of the Federal Excise Tax. To do so,
each Portfolio expects to distribute an amount equal to (1) 98% of its calendar
year ordinary income, (2) 98% of its capital gains net income (the excess of
short and long-term capital gains over short and long-term capital losses) for
the one-year period ending October 31st, and (3) 100% of any undistributed
ordinary or capital gains net income from the prior year. Dividends declared in
October, November and December to shareholders of record in such a month will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of such calendar year, provided that the dividends are paid before
February 1 of the following year.
The Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gains distributions, and redemptions) paid
to shareholders who have not complied with IRS taxpayer identification
regulations. In order to avoid this withholding requirement, you must certify on
the Account Registration Form or on a separate form supplied by the Fund that
your Social Security or Taxpayer Identification Number provided is correct and
that you are not currently subject to backup withholding or that you are exempt
from backup withholding.
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on distributions
from the Fund. Shareholders should consult with their tax advisers with respect
to the tax status of distributions from the Fund in their state and locality.
INVESTMENT ADVISER
Rice, Hall, James & Associates was founded in 1974 and is located at 600
West Broadway, Suite 1000, San Diego, CA 92101. The Adviser is a wholly-owned
subsidiary of United Asset Management Corporation ("UAM") and provides
investment management services to individual and institutional investors. As of
the date of this Prospectus, the Adviser had over $1 billion in assets under
management.
Under Investment Advisory Agreements (the "Agreements") with the Fund, dated
as of January 24, 1994 for the Rice, Hall, James Small Cap Portfolio and
September 16, 1996 for the Rice, Hall, James Small/Mid Cap Portfolio, the
Adviser, subject to the control and supervision of the Fund's Board of Directors
and in conformance with the stated investment objective and policies of each
Portfolio, manages the investment and reinvestment of the assets of the
Portfolios. In this regard, it is the responsibility of the Adviser to make
investment decisions for each Portfolio and to place purchase and sale orders
for each Portfolio's investments.
The investment professionals responsible for the day-to-day management of
the Portfolios are as follows:
SAMUEL R. TROZZO is Chairman of the Adviser with over thirty-six years'
investment experience. Prior to founding Rice, Hall, James & Associates in 1974,
Mr. Trozzo was Vice President and Senior Investment Officer of Southern
California First National Bank. He is a former member of the State of California
Board of Administration/Investment Committee Public Employees Retirement System.
He is a graduate of Kent State University.
16
<PAGE>
THOMAS W. MCDOWELL, JR. is President and Chief Executive Officer of the
Adviser with over fifteen years' investment experience. Mr. McDowell joined
Rice, Hall, James in 1984. Prior to that time, he was Investment Officer,
Security Analyst and Portfolio Manager at California First Bank. He earned his
B.A. degree from the University of California, Los Angeles and his M.B.A. from
San Diego State University.
DAVID P. TESSMER is Partner and Co-Director of Research of the Adviser with
thirty years' investment experience. Prior to joining Rice, Hall, James in 1986,
Mr. Tessmer was Vice President and Senior Portfolio Manager at The Pacific
Century Group, San Diego. He earned his B.S. degree in Investment Management at
Northwestern University and his M.B.A. in Finance at Columbia Graduate School of
Business.
TIMOTHY A. TODARO is Partner and Co-Director of Research of the Adviser with
sixteen years' investment experience. Mr. Todaro joined Rice, Hall, James in
1983. Prior to that time, he was Senior Investment Analyst at Comerica Bank,
Detroit, Michigan. Mr. Todaro earned his B.A. in Economics at the University of
California, San Diego and his M.B.A. degree in Finance/International Business at
the University of Wisconsin, Madison. He is a Chartered Financial Analyst.
GARY S. RICE is Partner of the Adviser with thirteen years' investment
experience. Mr. Rice was an Account Administrator with the Trust Division at
Federated Investors, Inc., Pittsburgh, Pennsylvania prior to joining Rice, Hall,
James in 1983. He earned his B.A. degree in Economics/Business Administration at
Vanderbilt University.
MICHELLE P. CONNELL is Partner of the Adviser with twelve years' investment
experience. Prior to joining Rice, Hall, James in 1995, she was Senior
Investment Analyst with Linsco/Private Ledger. Previously, she was the director
of Finance and Operations at the San Diego Natural History Museum. Ms. Connell
has a B.A. degree in accounting from Seattle University and her M.B.A. from San
Diego State University. She is a level III Chartered Financial Analyst
candidate.
As compensation for the services rendered by the Adviser under the
Agreements, the Portfolios pay the Adviser annual fees, in monthly installments,
calculated by applying the following annual percentage rates to the Portfolios'
average daily net assets for the month:
<TABLE>
<S> <C>
Rice, Hall, James Small Cap Portfolio.................... 0.75%
Rice, Hall, James Small/Mid Cap Portfolio................ 0.80%
</TABLE>
Although the advisory fee rates payable by the Portfolios are higher than
the rates payable by most mutual funds, the Fund believes they are comparable to
the rates paid by many other funds with similar investment objectives and
policies and are appropriate for these Portfolios in light of their investment
objectives.
The Adviser has agreed to waive all or part of its advisory fee and to
assume as the Adviser's own expense operating expenses otherwise payable by the
Rice, Hall, James Small Cap Portfolio, if necessary, in order to keep its total
annual operating expenses from exceeding 1.40% of its average daily net assets.
The Adviser has voluntarily agreed to waive all or part of its advisory fee and
to assume as the Adviser's own expense operating expenses otherwise payable by
the Rice, Hall, James Small/Mid Cap Portfolio, if necessary, in order to keep
its total annual operating expenses from exceeding 1.25% of its average daily
net assets. The Fund will not reimburse the Adviser for advisory fees waived or
expenses that the Adviser may bear on behalf of the Portfolios.
In addition, the Adviser may compensate its affiliated companies for
referring investors to the Portfolios. The Distributor, UAM, the Adviser, or any
of their 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, a Portfolio or any Class of Shares
of 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 Distributor, the Adviser and certain of their other affiliates also
participate, at the date of this Prospectus, in an arrangement with Smith Barney
Inc. under which Smith Barney provides certain defined contribution plan
marketing and other shareholder services and receives from such entities .15 of
1% of the daily net asset value of Institutional Class Shares held by Smith
Barney's eligible customer accounts in addition to amounts payable to all
selling dealers. The Fund also compensates Smith Barney for services it provides
to certain defined contribution plan shareholders that are not otherwise
provided by the Administrator.
17
<PAGE>
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of UAM, is
responsible for performing and overseeing administrative, fund accounting,
dividend disbursing and transfer agent services provided to the Fund and its
portfolios. UAMFSI's principal office is located at 211 Congress Street, Boston,
MA 02110. UAMFSI has subcontracted some of these services to Chase Global Funds
Services Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, by a
Mutual Funds Service Agreement dated April 15, 1996. CGFSC is located at 73
Tremont Street, Boston, MA 02108.
Each Portfolio pays UAMFSI a two part monthly fee: a Portfolio specific fee
which is retained by UAMFSI and a sub-administration fee which UAMFSI in turn
pays to CGFSC (Sub-Administrator, Sub-Transfer Agent and Sub-Dividend Disbursing
Agent). The following Portfolio specific fees are calculated from the aggregate
net assets of each Portfolio:
<TABLE>
<CAPTION>
RATE
-----
<S> <C>
Rice, Hall, James Small Cap Portfolio.................... 0.04%
Rice, Hall, James Small/Mid Cap Portfolio................ 0.04%
</TABLE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
0.19 of 1% of the first $200 million of combined Fund assets;
0.11% of 1% of the next $800 million of combined Fund assets;
0.07 of 1% of combined Fund assets in excess of $1 billion but less than $3
billion;
0.05 of 1% of combined Fund assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative
assets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years. If
a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
DISTRIBUTOR
The Distributor, a wholly-owned subsidiary of UAM with its principal office
located at 211 Congress Street, Boston, Massachusetts 02110, distributes the
shares of the Fund. Under the Distribution Agreement (the "Agreement"), the
Distributor, as agent of the Fund, agrees to use its best efforts as sole
distributor of the Fund's shares. The Distributor does not receive any fee or
other compensation under the Agreement with respect to the Rice, Hall, James
Portfolios. The Agreement continues in effect so long as such continuance is
approved at least annually by the Fund's Board of Directors, including a
majority of those Directors who are not parties to such Agreement or interested
persons of any such party. The Agreement provides that the Fund will bear the
costs of the registration of its shares with the Commission and various states
and the printing of its prospectuses, statements of additional information and
reports to shareholders.
PORTFOLIO TRANSACTIONS
Each Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to all
transactions for the Portfolios.
The Adviser may, however, consistent with the interests of the Portfolios,
select brokers on the basis of the research, statistical and pricing services
they provide to the Portfolios. Information and research received from such
brokers will be in addition to, and not in lieu of, the services required to be
performed by the Adviser under the Investment Advisory Agreements. A commission
paid to such brokers may be higher than that which another qualified broker
would have charged for effecting the same transaction, provided that such
commissions are paid in compliance with the Securities Exchange Act of 1934, as
amended, and that the Adviser determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Adviser to the Portfolios and the Adviser's other clients.
It is not the Fund's practice to allocate brokerage or effect principal
transactions with dealers on the basis of sales of shares which may be made
through broker-dealer firms. However, the Adviser may place portfolio orders
with qualified broker-dealers who recommend a Portfolio or who act as agents in
the purchase of shares of a Portfolio for their clients.
18
<PAGE>
Some securities considered for investment by a Portfolio may also be
appropriate for other clients served by the Adviser. If a purchase or sale of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Board of Directors.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund was
changed to "UAM Funds, Inc." The Fund's Articles of Incorporation, as amended,
permit the Board of Directors to issue three billion shares of common stock,
with a $.001 par value. The Directors have the power to designate one or more
series ("Portfolios") or Classes of shares of common stock and to classify or
reclassify any unissued shares with respect to such Portfolios, without further
action by shareholders. Currently the Fund is offering shares of 31 Portfolios.
The Board of Directors may create additional Portfolios and Classes of shares of
the Fund in the future at its discretion.
The shares of each Portfolio and Class of the Fund are fully paid and
nonassessable and have no preference as to conversion, exchange, dividends,
retirement or other features and have no pre-emptive rights. The shares of each
Portfolio and Class have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so. A shareholder is entitled
to one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his name on the books of the Fund. Both
Institutional Class and Institutional Service Class Shares represent an interest
in the same assets of a Portfolio and are identical in all respects except that
the Service Class Shares bear certain expenses related to shareholder servicing,
may bear expenses related to the distribution of such shares and have exclusive
voting rights with respect to matters relating to such distribution
expenditures. Information about the Service Class Shares of the Portfolios,
along with the fees and expenses associated with such shares, is available upon
request by contacting the Fund at 1-800-638-7983. Annual meetings will not be
held except as required by the 1940 Act and other applicable laws. The Fund has
undertaken that its Directors will call a meeting of shareholders if such a
meeting is requested in writing by the holders of not less than 10% of the
outstanding shares of the Fund. To the extent required by the undertaking, the
Fund will assist shareholder communications in such matters.
CUSTODIAN
The Chase Manhattan Bank serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP serves as the independent accountants for the Fund and
audits its financial statements annually.
SUB-ADMINISTRATOR, SUB-TRANSFER AND SUB-DIVIDEND DISBURSING AGENT
Chase Global Funds Services Company, 73 Tremont Street, Boston, MA 02108,
acts as sub-administrator, sub-transfer agent and sub-dividend disbursing agent
for the Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by Price Waterhouse LLP.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by writing to the Fund at the address
listed on the cover of this Prospectus or by calling 1-800-638-7983.
LITIGATION
The Fund is not involved in any litigation.
19
<PAGE>
DIRECTORS AND OFFICERS
The Officers of the Fund manage its day-to-day operations and are
responsible to the Fund's Board of Directors. The Directors set broad policies
for the Fund and elect its Officers. The following is a list of the Directors
and Officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years.
<TABLE>
<S> <C>
MARY RUDIE BARNEBY* Director and Executive Vice President of the Fund; President of UAM
1133 Avenue of the Americas Retirement Plan Services, since 1993; former President of UAM Fund
New York, NY 10036 Distributors, Inc.; formerly responsible for Defined Contribution Plan
Age 44 Services at a division of the Equitable Companies, Dreyfus Corporation and
Merrill Lynch.
JOHN T. BENNETT, JR. Director of the Fund; President of Squam Investment Management Company,
College Road - RFD 3 Inc. and Great Island Investment Company, Inc.; President of Bennett
Meredith, NH 03253 Management Company from 1988 to 1993.
Age 67
J. EDWARD DAY Director of the Fund; retired Partner in the Washington office of the law
5804 Brookside Drive firm Squire, Sanders & Dempsey; Director, Medical Mutual Liability
Chevy Chase, MD 20815 Insurance Society of Maryland; formerly, Chairman of the Montgomery
Age 81 County, Maryland Revenue Authority.
PHILIP D. ENGLISH Director of the Fund; President and Chief Executive Officer of Broventure
16 West Madison Street Company, Inc.; Chairman of the Board of Chektec Corporation and Cyber
Baltimore, MD 21201 Scientific, Inc.
Age 48
WILLIAM A. HUMENUK Director of the Fund; Partner in the Philadelphia office of the law firm
4000 Bell Atlantic Tower Dechert Price & Rhoads; Director, Hofler Corp.
1717 Arch Street
Philadelphia, PA 19103
Age 54
NORTON H. REAMER* Director, President and Chairman of the Fund; President, Chief Executive
One International Place Officer and Director of United Asset Management Corporation; Director,
Boston, MA 02110 Partner or Trustee of each of the Investment Companies of the Eaton Vance
Age 60 Group of Mutual Funds.
PETER M. WHITMAN, JR.* Director of the Fund; President and Chief Investment Officer of Dewey
One Financial Center Square Investors Corporation ("DSI") since 1988; Director and Chief
Boston, MA 02111 Executive Officer of H. T. Investors, Inc., formerly a subsidiary of DSI.
Age 53
WILLIAM H. PARK* Vice President of the Fund; Executive Vice President and Chief Financial
One International Place Officer of United Asset Management Corporation.
Boston, MA 02110
Age 49
GARY L. FRENCH* Treasurer of the Fund; President and Chief Executive Officer of UAM Fund
211 Congress Street Services, Inc.; President of UAM Fund Distributors, Inc.; formerly Vice
Boston, MA 02110 President--Operations Development and Control of Fidelity Investment
Age 45 Institutional Services from February 1995 to August 1995; Treasurer of the
Fidelity Group of Mutual Funds from 1991 to February 1995.
MICHAEL E. DEFAO* Secretary to the Fund; Vice President and General Counsel of UAM Fund
211 Congress Street Services, Inc. and UAM Fund Distributors, Inc.; formerly an Associate of
Boston, MA 02110 Ropes & Gray (a law firm) from 1993 to February 1996.
Age 28
ROBERT R. FLAHERTY* Assistant Treasurer of the Fund; Vice President of UAM Fund Services,
211 Congress Street Inc.; formerly Manager of Fund Administration and Compliance of
Boston, MA 02110 Sub-Administrator from March 1995 to July 1996; formerly Senior Manager of
Age 32 Deloitte & Touche LLP from 1985 to 1995.
KARL O. HARTMANN* Assistant Secretary of the Fund; Senior Vice President and General Counsel
73 Tremont Street of Sub- Administrator; formerly Senior Vice President, Secretary and
Boston, MA 02108 General Counsel of Leland, O'Brien, Rubinstein Associates, Inc. from
Age 41 November 1990 to November 1991.
</TABLE>
- --------------------------
*These people are deemed to be "interested persons" of the Fund as that term is
defined in the 1940 Act.
20
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
ACADIAN ASSET MANAGEMENT, INC.
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC.
BHM&S Total Return Bond Portfolio
CHICAGO ASSET MANAGEMENT COMPANY
Chicago Asset Management Value/Contrarian Portfolio
Chicago Asset Management Intermediate Bond Portfolio
COOKE & BIELER, INC.
C&B Balanced Portfolio
C&B Equity Portfolio
C. S. MCKEE & COMPANY, INC.
McKee U.S. Government Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
DEWEY SQUARE INVESTORS CORPORATION
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FIDUCIARY MANAGEMENT ASSOCIATES, INC.
FMA Small Company Portfolio
FIRST PACIFIC ADVISORS, INC.
FPA Crescent Portfolio
INVESTMENT COUNSELORS OF MARYLAND, INC.
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
INVESTMENT RESEARCH COMPANY
IRC Enhanced Index Portfolio
MURRAY JOHNSTONE INTERNATIONAL LTD.
MJI International Equity Portfolio
NEWBOLD'S ASSET MANAGEMENT, INC.
Newbold's Equity Portfolio
NWQ INVESTMENT MANAGEMENT COMPANY
NWQ Balanced Portfolio
NWQ Value Equity Portfolio
RICE, HALL JAMES & ASSOCIATES
Rice, Hall, James Small Cap Portfolio
Rice, Hall, James Small/Mid Cap Portfolio
SIRACH CAPITAL MANAGEMENT, INC.
Sirach Equity Portfolio
Sirach Fixed Income Portfolio
Sirach Growth Portfolio
Sirach Short-Term Reserves Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
SPECTRUM ASSET MANAGEMENT, INC.
SAMI Preferred Stock Income Portfolio
Enhanced Monthly Income Portfolio
STERLING CAPITAL MANAGEMENT COMPANY
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
THOMPSON, SIEGEL & WALMSLEY, INC.
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
21
<PAGE>
UAM FUNDS
UAM FUNDS SERVICE CENTER
C/O CHASE GLOBAL FUNDS SERVICES COMPANY
P.O. BOX 2798
BOSTON, MA 02208-2798
1-800-638-7983
-----------------
PROSPECTUS
DATED SEPTEMBER 16, 1996
INVESTMENT ADVISER
RICE, HALL, JAMES & ASSOCIATES
600 WEST BROADWAY, SUITE 1000
SAN DIEGO, CA 92101
(619) 239-9005
-----------------
DISTRIBUTOR
UAM FUND DISTRIBUTORS, INC.
211 CONGRESS STREET
BOSTON, MA 02110
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Fund Expenses..................................... 2
Prospectus Summary................................ 3
Financial Highlights.............................. 4
Performance Calculations.......................... 5
Investment Objectives............................. 5
Portfolio Characteristics and Investment
Policies......................................... 5
Additional Investment Policies.................... 6
Investment Limitations............................ 10
Purchase of Shares................................ 11
Redemption of Shares.............................. 13
<CAPTION>
PAGE
---------
<S> <C>
Shareholder Services.............................. 14
Valuation of Shares............................... 15
Dividends, Capital Gains Distributions and
Taxes............................................ 15
Investment Adviser................................ 16
Administrative Services........................... 18
Distributor....................................... 18
Portfolio Transactions............................ 18
General Information............................... 19
Directors and Officers............................ 20
UAM Funds-Institutional Class Shares.............. 21
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR ITS REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
PART B
UAM FUNDS
RICE, HALL, JAMES SMALL CAP PORTFOLIO
RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
INSTITUTIONAL CLASS SHARES
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 16, 1996
This Statement is not a Prospectus but should be read in conjunction with
the Prospectus of the UAM Funds, Inc. (the "UAM Fund" or the "Fund") for the
Rice, Hall, James Small Cap and Rice, Hall, James Mid Cap Portfolios'
Institutional Class Shares dated September 16, 1996. To obtain the Prospectus,
please call the UAM Funds Service Center:
1-800-638-7983
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Investment Objectives and Policies............................................................................... 2
Purchase of Shares............................................................................................... 8
Redemption of Shares............................................................................................. 8
Shareholder Services............................................................................................. 9
Investment Limitations........................................................................................... 9
Management of the Fund........................................................................................... 10
Investment Adviser............................................................................................... 11
Portfolio Transactions........................................................................................... 12
Administrative Services.......................................................................................... 13
Performance Calculations......................................................................................... 13
General Information.............................................................................................. 16
Financial Statements............................................................................................. 17
Appendix -- Description of Securities and Ratings................................................................ A-1
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Rice, Hall, James Small Cap and Rice, Hall, James Small/Mid Cap Portfolios
(the "Portfolios") as set forth in the Rice, Hall, James Portfolios' Prospectus:
SECURITIES LENDING
The Portfolios may lend their investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending their investment
securities, the Portfolios attempt to increase their income through the receipt
of interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolios. The Portfolios may lend their investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "Commission") thereunder, which currently require that
(a) the borrower pledge and maintain with each Portfolio collateral consisting
of cash, an irrevocable letter of credit issued by a domestic U.S. bank or
securities issued or guaranteed by the United States Government having a value
at all times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolios at any time, and (d) the
Portfolios receive reasonable interest on the loan (which may include the
Portfolios investing any cash collateral in interest bearing short-term
investments). All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Directors.
At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Directors. The Portfolios will continue to retain
any voting rights with respect to the loaned securities. If a material event
occurs affecting an investment on a loan, the loan must be called and the
securities voted.
INVESTMENTS IN FOREIGN SECURITIES
Investors in the Portfolios should recognize that investing in foreign
companies involves certain special considerations which are not typically
associated with investing in U.S. companies. Since the securities of foreign
companies are frequently denominated in foreign currencies, the Portfolios may
be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and may incur costs in connection with conversions
between various currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Portfolios will endeavor to achieve the most favorable
execution costs in their portfolio transactions, fixed commissions on many
foreign stock exchanges are generally higher than negotiated commissions on U.S.
exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable, the
non-recoverable portion of foreign withholding taxes will reduce the income
received from the companies comprising the Portfolios' investments. However,
these foreign withholding taxes are not expected to have a significant impact.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The U.S. dollar value of the assets of each Portfolio may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and a Portfolio may incur costs in connection
2
<PAGE>
with conversions between various currencies. Each Portfolio will conduct their
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market, or through
entering into forward foreign currency exchange contracts ("forward contracts")
to purchase or sell foreign currencies. A forward contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage for such
trades.
Each Portfolio may enter into forward contracts in several circumstances.
When a Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, or when a Portfolio anticipates the receipt
in a foreign currency of dividends or interest payments on a security which it
holds, a Portfolio may desire to "lock-in" the U.S. dollar price of the security
or the U.S. dollar equivalent of such dividend or interest payment, as the case
may be. By entering into a forward contract for a fixed amount of dollars, for
the purchase or sale of the amount of foreign currency involved in the
underlying transactions, such Portfolio will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
Additionally, when a Portfolio anticipates that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract for a fixed amount of dollars, to sell the amount
of foreign currency approximating the value of some or all of such Portfolio's
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible since the future value of securities in foreign currencies
will change as a consequence of market movements in the value of these
securities between the date on which the forward contract is entered into and
the date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. The Portfolios do not intend to enter into such
forward contracts to protect the value of portfolio securities on a regular or
continuous basis. The Portfolios will not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate such Portfolio to deliver an amount of foreign currency
in excess of the value of such Portfolio securities or other assets denominated
in that currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Adviser believes that
it is important to have the flexibility to enter into such forward contracts
when it determines that the best interests of the performance of each Portfolio
will thereby be served. The Fund's Custodian will place cash or liquid
securities into a segregated account of each Portfolio in an amount equal to the
value of each Portfolio's total assets committed to the consummation of forward
contracts. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account on a daily
basis so that the value of the account will be equal to the amount of such
Portfolio's commitments with respect to such contracts.
The Portfolios generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, a Portfolio may
either sell the security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency.
It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for a Portfolio to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that such Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, such Portfolio will incur a gain or loss (as described below) to
the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between a Portfolio entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, such Portfolio
will realize a gain to the extent that the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, such Portfolio would suffer a loss to the extent that
the price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
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Each Portfolio's dealings in forward contracts will be limited to the
transactions described above. Of course, the Portfolios are not required to
enter into such transactions with regard to their foreign currency-denominated
securities. It also should be realized that this method of protecting the value
of portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which one can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.
FUTURES CONTRACTS
The Portfolios may enter into futures contracts for the purposes of hedging,
remaining fully invested and reducing transactions costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agency.
Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract previously
"purchased") in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
acceptable securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Generally, margin deposits are structured as percentages (e.g., 5%) of
the market value of the contracts being traded. After a futures contract
position is opened, the value of the contract is marked to market daily. If the
futures contract price changes to the extent that the margin on deposit does not
satisfy margin requirements, payment of additional "variation" margin will be
required. Conversely, change in the contract value may reduce the required
margin, resulting in a repayment of excess margin to the contract holder.
Variation margin payments are made to and from the futures broker for as long as
the contract remains open. The Portfolios expect to earn interest income on
their margin deposits.
Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators". Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates. Each Portfolio intends to use futures contracts only for
hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or that the
Fund's commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed 5% of the liquidation value of each
Portfolio. The Portfolios will only sell futures contracts to protect securities
they own against price declines or purchase contracts to protect against an
increase in the price of securities they intend to purchase. As evidence of this
hedging interest, each Portfolio expects that approximately 75% of its futures
contracts purchases will be "completed"; that is, equivalent amounts of related
securities will have been purchased or are being purchased by a Portfolio upon
sale of open futures contracts.
Although techniques other than the sale and purchase of futures contracts
could be used to control the Portfolios' exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this exposure.
While the Portfolios will incur commission expenses in both opening and closing
out future positions, these costs are lower than transaction costs incurred in
the purchase and sale of the underlying securities.
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RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
Each Portfolio will not enter into futures contract transactions to the
extent that, immediately thereafter, the sum of its initial margin deposit on
open contracts exceeds 5% of the market value of its total assets. In addition,
a Portfolio will not enter into futures contracts to the extent that its
outstanding obligations to purchase securities under these contracts would
exceed 20% of its total assets.
RISK FACTORS IN FUTURES TRANSACTIONS
Each Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements, a
Portfolio would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if a Portfolio has insufficient cash,
it may have to sell securities to meet daily margin requirements at a time when
it may be disadvantageous to do so. In addition, a Portfolio may be required to
make delivery of the instruments underlying futures contracts it holds. The
inability to close futures positions also could have an adverse impact on a
Portfolio's ability to effectively hedge.
The risk of loss in trading futures contracts in some strategies can be
substantial due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss (as well as gain) to the investor. For example, if at the time of purchase,
10% of the value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in a total loss
of the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in excess of the amount
invested in the contract. However, because the futures strategies of each
Portfolio is engaged in only for hedging purposes, the Adviser does not believe
that a Portfolio is subject to the risks of loss frequently associated with
futures transactions. A Portfolio would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the underlying
financial instrument and sold it after the decline.
Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying the futures
contracts have different maturities than such Portfolio's securities being
hedged. It is also possible that a Portfolio could lose money on futures
contracts and also experience a decline in value of portfolio securities. There
is also the risk of loss by a Portfolio of margin deposits in the event of
bankruptcy of a broker with whom such Portfolio has an open position in a
futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and, therefore, does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days, with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
OPTIONS
Each Portfolio may purchase and sell put and call options on futures
contracts for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid secondary market). In addition, the
purchase of an option also entails the risk that changes in the value of the
underlying security or contract will not be fully reflected in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract on which it is based or the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. For example, there are significant differences
between the securities, futures and options markets that could result in an
imperfect correlation between these markets, causing a given transaction not to
achieve its objective. A decision as to whether, when, and how to use options
involves the exercise of skill and judgement by the Adviser, and even a
well-conceived transaction may be unsuccessful because of market behavior or
unexpected events.
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OPTIONS ON FOREIGN CURRENCIES
Each Portfolio may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, a Portfolio may purchase put
options on the foreign currency. If the value of the currency does decline, a
Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to a Portfolio deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, a Portfolio could sustain losses on transaction in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
Each Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the anticipated decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, a Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
Each Portfolio intends to write covered call options on foreign currencies.
A call option written on a foreign currency by a Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by the Custodian) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if a Portfolio has a call
on the same foreign currency and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written of (b) is greater than the exercise price
of the call written if the difference is maintained by the Portfolio in cash or
liquid securities in a segregated account with the Custodian.
Each Portfolio also intends to write call options on foreign currencies that
are not covered for cross-hedging purposes. A call option on a foreign currency
is for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which a Portfolio
owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, a Portfolio collateralizes the option by maintaining in a
segregated account with the Custodian, cash or liquid securities in an amount
not less than the value of the underlying foreign currency in U.S. dollars
marked to market daily.
RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS
AND OPTIONS ON FOREIGN CURRENCIES
Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to the regulation of the Commission. Similarly, options on currencies
may be
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traded over-the-counter. In an over-the-counter trading environment, many of the
protection afforded to exchange participants will not be available. For example,
there are no daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although the
purchase of an option cannot lose more than the amount of the premium plus
related transaction costs, this entire amount could be lost. Moreover, the
option writer and a trader of forward contracts could lose amounts substantially
in excess of their initial investments, due to the margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Furthermore, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-counter
market, potentially permitting a Portfolio to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward
contracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (1) other complex foreign
political and economic factors, (2) lesser availability than in the United
States of data on which to make trading decisions, (3) delays in a Portfolio's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (4) the imposition of different exercise
and settlement terms and procedures and margin requirements than in the United
States, and (5) lesser trading volume.
FEDERAL TAX TREATMENT OF FORWARD CURRENCY AND FUTURES CONTRACTS
Except for transactions the Portfolios have identified as hedging
transactions, each Portfolio is required for Federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses on
regulated futures contracts as of the end of each taxable year as well as those
actually realized during the year. In most cases, any such gain or loss
recognized with respect to a regulated futures contract is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss without
regard to the holding period of the contract.
In order for each Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"), at least 90% of its gross income for a taxable
year must be derived from certain qualifying income, i.e., dividends, interest,
income derived from loans of securities and gains from the sale or other
disposition of stock, securities or foreign currencies, or other related income,
including gains from options, futures and forward contracts, derived with
respect to its business investing in stock, securities or currencies. Any net
gain realized from the closing out of futures contracts will, therefore,
generally be qualifying income for purposes of the 90% requirement.
Qualification as a regulated investment company also requires that less than 30%
of a Portfolio's gross income be derived from the sale or other disposition of
stock, securities, options, futures or forward contracts (including certain
foreign currencies not directly related to the Fund's business of investing in
stock or securities) held less than three months. In order to avoid realizing
excessive gains on securities held for less than three months, a Portfolio may
be required to defer the closing out of futures contracts beyond the time when
it would otherwise be advantageous to do so. It is
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anticipated that unrealized gains on futures contracts which have been open for
less than three months as of the end of a Portfolio's taxable year, and which
are recognized for tax purposes, will not be considered gains on securities held
for less than three months for the purposes of the 30% test.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes (including
unrealized gains at the end of a Portfolio's taxable year) on futures
transactions. Such distribution will be combined with distributions of capital
gains realized on a Portfolio's other investments, and shareholders will be
advised on the nature of the payment.
PURCHASE OF SHARES
Shares of each Portfolio may be purchased without a sales commission at the
net asset value per share next determined after an order is received in proper
form by the Fund and payment is received by the Fund's Custodian. The minimum
initial investment required for each Portfolio is $2,500 with certain exceptions
as may be determined from time to time by the officers of the Fund. An order
received in proper form prior to the 4:00 p.m. close of the New York Stock
Exchange ("Exchange") will be executed at the price computed on the date of
receipt; and an order received not in proper form or after the 4:00 p.m. close
of the Exchange will be executed at the price computed on the next day the
Exchange is open after proper receipt. The Exchange will be closed on the
following days: Thanksgiving Day, November 28, 1996; Christmas Day, December 25,
1996; New Year's Day, January 1, 1997; Presidents' Day, February 17, 1997; Good
Friday, March 28, 1997; Memorial Day, May 26, 1997; Independence Day, July 4,
1997; and Labor Day, September 1, 1997.
Each Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgement of
management such rejection is in the best interests of the Fund, and (3) to
reduce or waive the minimum for initial and subsequent investment for certain
fiduciary accounts, such as employee benefit plans or under circumstances where
certain economies can be achieved in sales of a Portfolio's shares.
REDEMPTION OF SHARES
Each Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that either the Exchange or custodian bank is
closed or trading on the Exchange is restricted as determined by the Commission,
(2) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for a Portfolio
to dispose of securities owned by it or to fairly determine the value of its
assets, and (3) for such other periods as the Commission may permit. The Fund
has made an election with the Commission to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid, in whole or in part, in investment securities or in cash as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "Valuation of Shares" and a redeeming shareholder would
normally incur brokerage expenses if these securities were converted to cash.
No charge is made by a Portfolio for redemptions. Any redemption may be more
or less than the shareholder's initial cost depending on the market value of the
securities held by a Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and the Fund's transfer agent (the
"Transfer Agent") from fraud, signature guarantees are required for certain
redemptions. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s)
and/or the registered address or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A
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complete definition of eligible guarantor institution is available from the
Transfer Agent. Broker-dealers guaranteeing signatures must be a member of a
clearing corporation or maintain net capital of at least $100,000. Credit unions
must be authorized to issue signature guarantees. Signature guarantees will be
accepted from any eligible guarantor institution which participates in a
signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
SHAREHOLDER SERVICES
The following supplements the shareholder services information set forth in
the Rice, Hall, James Portfolios' Prospectus:
EXCHANGE PRIVILEGE
Institutional Class Shares of each Rice, Hall, James Portfolio may be
exchanged for Institutional Class Shares of the other Rice, Hall, James
Portfolio. In addition, Institutional Class Shares of each Rice, Hall, James
Portfolio may be exchanged for any other Institutional Class Shares of a
Portfolio included in the UAM Funds which is comprised of the Fund and UAM Funds
Trust. (See the list of Portfolios of the UAM Funds - Institutional Class Shares
at the end of the Prospectus.) Exchange requests should be made by calling the
Fund (1-800-638-7983) or by writing to UAM Funds, UAM Funds Service Center, c/o
Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The
exchange privilege is only available with respect to Portfolios that are
registered for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sale commission or charge of any kind. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. You may
obtain a Prospectus for the Portfolio(s) you are interested in by calling the
UAM Funds Service Center at 1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged are held by the Fund for the account of the shareholder and the
registration of the two accounts will be identical. Requests for exchanges
received prior to 4:00 p.m. (Eastern Time) will be processed as of the close of
business on the same day. Requests received after 4:00 p.m. will be processed on
the next business day. Neither the Fund nor the Sub-Administrator, the Fund's
Transfer Agent, will be responsible for the authenticity of the exchange
instructions received by telephone. Exchanges may also be subject to limitations
as to amounts or frequency and to other restrictions established by the Board of
Directors to assure that such exchanges do not disadvantage the Fund and its
shareholders.
For Federal income tax purposes an exchange between Portfolios is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Fund's Portfolios to another person
or entity by making a written request to the Fund. The request should clearly
identify the account and number of shares to be transferred, and include the
signature of all registered owners and all stock certificates, if any, which are
subject to the transfer. The signature on the letter of request, the stock
certificate or any stock power must be guaranteed in the same manner as
described under "Redemption of Shares". As in the case of redemptions, the
written request must be received in good order before any transfer can be made.
INVESTMENT LIMITATIONS
The following limitations supplement those set forth in the Prospectus.
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall be determined
immediately after and as a result of a Portfolio's acquisition of such security
or other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered
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when determining whether the investment complies with a Portfolio's investment
limitations. Investment limitations (1), (2), (3), (4) and (5) are classified as
fundamental. The Portfolios' fundamental investment limitations cannot be
changed without approval by a "majority of the outstanding shares" (as defined
in the 1940 Act) of each Portfolio. The Portfolios will not:
(1) invest in physical commodities or contracts on physical commodities;
(2) purchase or sell real estate or real estate limited partnerships,
although it may purchase and sell securities of companies which deal in
real estate and may purchase and sell securities which are secured by
interests in real estate;
(3) make loans except (i) by purchasing debt securities in accordance with
its investment objectives and (ii) by lending its portfolio securities
to banks, brokers, dealers and other financial institutions so long as
such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the Commission thereunder;
(4) underwrite the securities of other issuers;
(5) issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Portfolio from (i)
making any permitted borrowings, mortgages or pledges, or (ii) entering
into options, futures or repurchase transactions;
(6) invest in stock or bond futures and/or options on futures unless (i) not
more than 5% of the Portfolio's assets are required as deposit to secure
obligations under such futures and/or options on futures contracts
provided, however, that in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded in
computing such 5% and (ii) not more than 20% of the Portfolio's assets
are invested in stock or bond futures and options;
(7) purchase on margin or sell short except as specified in (6) above;
(8) purchase or retain securities of an issuer if those officers and
Directors of the Fund or its investment adviser owning more than 1/2 of
1% of such securities together own more than 5% of such securities;
(9) invest more than an aggregate of 15% of the assets of the Portfolio,
determined at the time of investment, in securities subject to legal or
contractual restrictions on resale or securities for which there are no
readily available markets;
(10) invest for the purpose of exercising control over management of any
company;
(11) write or acquire options or interests in oil, gas or other mineral
exploration or development programs; and
(12) invest in warrants, valued at the lower of cost or market, not exceeding
5.0% of the value of a Portfolio's net assets. Included within that
amount, but not to exceed 2.0% of the value of a Portfolio's net assets,
may be warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by a Portfolio in units or attached to
securities may be deemed to be without value.
MANAGEMENT OF THE FUND
OFFICERS AND DIRECTORS
The Fund's officers, under the supervision of the Board of Directors, manage
the day-to-day operations of the Fund. The Directors set broad policies for the
Fund and elect its officers. A list of the Directors and officers of the Fund
and a brief statement of their present positions and principal occupations
during the past 5 years is set forth in the Portfolios' Prospectus. As of May
31, 1996, the Directors and officers of the Fund owned less than 1% of the
Fund's outstanding shares.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays each Director, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $4,500 per quarter. In addition, each unaffiliated Director receives
a $2,000 meeting fee which is aggregated for all of the Directors and allocated
proportionately among the Portfolios of the Fund and UAM Funds Trust as well as
the AEW Commercial Mortgage Securities Fund, Inc. and reimbursement for travel
and other expenses incurred while attending Board meetings. Directors who are
also officers or affiliated persons receive no remuneration for their service as
Directors. The Fund's officers and
10
<PAGE>
employees are paid by either the Adviser, United Asset Management Corporation
("UAM"), the Administrator or the Sub-Administrator and receive no compensation
from the Fund. The following table shows aggregate compensation paid to each of
the Fund's unaffiliated Directors by the Fund and total compensation paid by the
Fund, UAM Funds Trust and AEW Commercial Mortgage Securities Fund, Inc.
(collectively the "Fund Complex") in the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
(3) (5)
TOTAL COMPENSATION
(2) PENSION OR RETIREMENT (4) FROM REGISTRANT
(1) AGGREGATE BENEFITS ACCRUED AS ESTIMATED ANNUAL AND
NAME OF PERSON, COMPENSATION PART OF FUND BENEFITS UPON FUND COMPLEX PAID
POSITION FROM REGISTRANT EXPENSES RETIREMENT TO DIRECTORS
- ------------------------------------------- --------------- ------------------------- ----------------------- ------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr.
Director $ 24,435 0 0 $ 26,750
J. Edward Day
Director $ 24,435 0 0 $ 26,750
Philip D. English
Director $ 24,435 0 0 $ 26,750
William A. Humenuk
Director $ 24,435 0 0 $ 26,750
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of May 31, 1996, the following persons or organizations held of record or
beneficially 5% or more of the shares of the Portfolios:
RICE, HALL, JAMES SMALL CAP PORTFOLIO: Robert P. Gregory, Trustee, FBO
Gregory & Cook Profit Sharing Plan, c/o Rotan Mosle, 4544 Post Oak Place #140,
Houston, TX, 5%*.
The persons or organizations owning 25% or more of the outstanding shares of
a Portfolio may be presumed to "control" (as that term is defined in the 1940
Act) such Portfolio. As a result, those persons or organizations could have the
ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders of such Portfolio.
- ------------------------
* Denotes shares held by a trustee or other fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Rice, Hall, James & Associates (the "Adviser") is a wholly-owned subsidiary
of UAM, a holding company incorporated in Delaware in December, 1980 for the
purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August, 1983, UAM has
acquired or organized approximately 45 such wholly-owned affiliated firms (the
"UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended to
meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each of
them.
PHILOSOPHY AND STYLE
RICE, HALL, JAMES SMALL CAP PORTFOLIO
The Adviser applies a value oriented approach to small capitalization growth
stocks. The Rice, Hall, James Small Cap Portfolio is constructed through bottom
up research where stocks selected must possess catalysts-
11
<PAGE>
positive fundamental changes which the Adviser believes should lead to greater
investor recognition and, subsequently, higher stock prices. The Price Earnings
ratios of selected stocks are typically lower than the projected 3 to 5 year
earnings growth rates. Stocks are sold when they reach preset upside targets,
violate preset downside price limits or when a deterioration of the fundamentals
or the catalyst occur.
RICE, HALL, JAMES SMALL/MID CAP PORTFOLIO
The Adviser practices a fundamentally driven bottom up research approach.
This approach focuses on identifying stocks of growth companies that are selling
at a discount to the companies' projected earnings growth rates. Specifically,
the Adviser requires that candidates for inclusion in the Portfolio have
price/earnings ratios that are lower than the 3 to 5 year projected earnings
growth rate. In addition, the stocks must possess catalysts, which are defined
by the Adviser as fundamental events that ultimately lead to increases in
revenue growth rates, expanding profit margins and/or increases in earnings
growth rates that are generally not anticipated by the market. Such events can
include new product introductions or applications, discovery of niche markets,
new management, corporate or industry restructures, regulatory change, end
market expansion, etc. Most importantly, the Adviser must be convinced that such
change will lead to greater investor recognition and a subsequent rise in the
stock prices within a 12 to 24 month period. Stocks are sold when they reach
their upside target, violate the present downside limit or when a deterioration
of the fundamental assumptions or catalysts occurs.
REPRESENTATIVE INSTITUTIONAL CLIENTS
As of the date of this Statement of Additional Information, the Adviser's
representative institutional clients included: University of Kansas Endowment,
San Diego Society of Natural History, American Business Products, City of San
Diego and California Western School of Law.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did not
use any performance based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreements, the Portfolios pay the Adviser an annual fee in monthly
installments, calculated by applying the following annual percentage rate to
each Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
RATE
-----------
<S> <C>
Rice, Hall, James Small Cap Portfolio.................................. 0.75%
Rice, Hall, James Small/Mid Cap Portfolio.............................. 0.80%
</TABLE>
For the period from July 1, 1994 (commencement of operations) to October 31,
1994, the Rice, Hall, James Small Cap Portfolio paid advisory fees of $10,000
which the Adviser waived. For the fiscal year ended October 31, 1995, the
Portfolio paid advisory fees of approximately $85,000. During this period, the
Adviser voluntarily waived advisory fees of approximately $15,000.
PORTFOLIO TRANSACTIONS
Each Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolios and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolios.
In doing so, a Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction. It is not the Fund's practice to allocate brokerage
or effect principal transactions with dealers on the basis of sales of shares
which may be made through broker-dealer firms. However, the Adviser may place
portfolio orders with qualified broker-dealers who recommend the Fund's
Portfolios or who act as agents in the purchase of shares of the Portfolios for
their clients. During the fiscal years ended October 31, 1993, 1994 and 1995,
the entire Fund paid brokerage commissions of approximately $1,592,000,
$2,402,000 and $2,983,000, respectively.
Some securities considered for investment by a Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the
Portfolios and clients in a manner deemed fair and reasonable by the Adviser.
Although there is no specified formula for allocating such transactions, the
various allocation methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Fund's Directors.
12
<PAGE>
ADMINISTRATIVE SERVICES
The Board of Directors of the Fund approved a new Fund Administration
Agreement effective April 15, 1996 between UAM Fund Services, Inc., a
wholly-owned subsidiary of UAM, and the Fund. The Fund's Directors also approved
a Mutual Funds Service Agreement between UAM Fund Services, Inc. and the
Sub-Administrator dated April 15, 1996. The services provided by UAM Fund
Services, Inc. and the Sub-Administrator and the basis of the fees payable by
the Fund under the Fund Administration Agreement are described in the
Portfolios' Prospectus. Prior to April 15, 1996, the Sub-Administrator or its
predecessor, Mutual Funds Service Company, provided certain administrative
services to the Fund under an Administration Agreement between the Fund and U.S.
Trust Company of New York. For the period from July 1, 1994 (commencement of
operation) to October 31, 1994 and for the fiscal year ended October 31, 1995,
administrative fees paid by Rice, Hall, James Small Cap Portfolio totaled
approximately $9,000 and $52,000, respectively. For the Fund's fiscal years 1994
and 1995, the Fund paid the Sub-Administrator, or its predecessor, Mutual Funds
Services Company, a monthly fee for its services which on an annualized basis
equaled 0.20 of 1% of the first $200 million of the aggregate net assets of the
Fund; 0.12 of 1% of the next $800 million of the aggregate net assets of the
Fund; 0.08 of 1% of the aggregate net assets in excess of $1 billion but less
than $3 billion; and 0.06 of 1% of the Portfolios on the basis of their relative
assets and were subject to a graduated minimum fee schedule per Portfolio, which
rose from $2,000 per month upon inception of a Portfolio to $70,000 annually
after two years.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolios may from time to time quote various performance figures to
illustrate past performance. Performance quotations by investment companies are
subject to rules adopted by the Commission, which require the use of
standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the
Commission. Average annual compounded total return quotations used by the Fund
are based on the standardized methods of computing performance mandated by the
Commission. An explanation of the method used to compute or express performance
follows.
TOTAL RETURN
The average annual total return of a Portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis.
The average annual total rates of return for the Institutional Class Shares
of the Rice, Hall, James Small Cap Portfolio from inception and for the one year
period ended on the date of the Financial Statements included herein are as
follows:
<TABLE>
<CAPTION>
SINCE INCEPTION
THROUGH YEAR
ONE YEAR ENDED ENDED INCEPTION
APRIL 30, 1996 APRIL 30, 1996 DATE
--------------- --------------- -------------
<S> <C> <C> <C>
Rice, Hall, James Small Cap Portfolio........................... 54.98% 44.02% 7/1/94
</TABLE>
These figures are calculated according to the following formula:
P(1+T)(n) = ERV
where:
<TABLE>
<S> <C> <C>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of
the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year periods (or
fractional portion thereof).
</TABLE>
Institutional Class Shares of the Rice, Hall, James Small/Mid Cap Portfolio
were not offered as of April 30, 1996. Accordingly, no total return figures are
available.
13
<PAGE>
COMPARISONS
To help investors better evaluate how an investment in the Portfolio of the
Fund might satisfy their investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. The following publications, indices and averages may be used:
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow Jones
Industrial Average), 15 utilities company stocks and 20 transportation
stocks. Comparisons of performance assume reinvestment of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index composed of 400 industrial stocks, 40 financial stocks,
40 utilities stocks and 20 transportation stocks. Comparisons of
performance assume reinvestment of dividend.
(c) S&P Midcap 400 Index -- consists of 400 domestic stocks chosen for
market size (medium market capitalization of $993 million as of February
1995), liquidity and industry group representation. It is a
market-weighted index with each stock affecting the index in proportion
to its market value.
(d) The New York Stock Exchange composite or component indices -- unmanaged
indices of all industrial, utilities, transportation and finance stocks
listed on the New York Stock Exchange.
(e) Wilshire 5000 Equity index or its component indices -- represents the
return on the market value of all common equity securities for which
daily pricing is available. Comparisons of performance assume
reinvestment of dividends.
(f) Lipper -- Mutual Fund Performance Analysis and Lipper -- Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(g) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents, including
North America.
(h) Goldman Sachs 100 Convertible Bond Index -- currently includes 67 bonds
and 33 preferred. The original list of names was generated by screening
for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(i) Salomon Brothers GNMA Index -- includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.
(j) Salomon Brothers High Grade Corporate Bond Index -- consists of publicly
issued, non-convertible corporate bonds rated AA or AAA. It is a
value-weighted, total return index, including approximately 800 issues
with maturities of 12 years or greater.
(k) Salomon Brothers Broad Investment Grade Bond -- is a market-weighted
index that contains approximately 4,700 individually priced investment
grade corporate bonds rated BBB or better, U.S. Treasury/ agency issues
and mortgage pass through securities.
(l) Lehman Brothers LONG-TERM Treasury Bond -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of 10
years or greater.
(m) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only and
does not include income.
(n) Value Line -- composed of over 1,600 stocks in the Value Line Investment
Survey.
(o) Russell 2000 Index -- consists of the smallest 2,000 companies in the
Russell 3000 Index, a U.S. equity index of the 3,000 large U.S.
companies, with an average market capitalization of $1.74 billion.
14
<PAGE>
(p) Russell Midcap Index -- consists of the smallest 800 companies in the
Russell 1000 Index, a U.S. equity index of the 1,000 largest companies in
the Russell 3000 Index, with an average capitalization is $1.96 billion.
(q) Composite indices -- 70% Standard & Poor's 500 Stock Index and 30%
NASDAQ Industrial Index; 35% Standard & Poor's 500 Stock Index and 65%
Salomon Brothers High Grade Bond Index; all stocks on the NASDAQ system
exclusive of those traded on an exchange, and 65% Standard & Poor's 500
Stock Index and 35% Salomon Brothers High Grade Bond Index.
(r) CDA Mutual Fund Report published by CDA Investment Technologies, Inc. --
analyzes price, current yield, risk, total returnand average rate of
return (average compounded growth rate) over specified time periods for
the mutual fund industry.
(s) Mutual Fund Source Book published by Morningstar, Inc. -- analyzes
price, yield, risk and total return for equity funds.
(t) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Wall Street Journal and Weisenberger Investment
Companies Service -- publications that rate fund performance over
specified time periods.
(u) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change over time
in the price of goods and services in major expenditure groups.
(v) Stocks, Bonds, Bills and Inflation, published by Ibbotson Associates --
historical measure of yield, price and total return for common and small
company stock, long-term government bonds, U. S. Treasury bills and
inflation.
(w) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings & Loan League Fact Book.
(x) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill Lynch,
Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg L.P.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in the Portfolio,
that the averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Portfolio to calculate its performance. In addition, there can be no assurance
that the Fund will continue this performance as compared to such other averages.
15
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name "ICM Fund, Inc." as a Maryland
corporation on October 11, 1988. On January 18, 1989, the name of the Fund was
changed to "The Regis Fund, Inc." On October 31, 1995, the name of the Fund was
changed to "UAM Funds, Inc." The Fund's principal executive office is located at
One International Place, Boston, MA 02110; however, all investor correspondence
should be directed to the Fund at UAM Funds Service Center, c/o Chase Global
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The Fund's
Articles of Incorporation, as amended, authorize the Directors to issue
3,000,000,000 shares of common stock, $.001 par value. The Board of Directors
has the power to designate one or more series ("Portfolios") or classes of
common stock and to classify or reclassify any unissued shares with respect to
such Portfolios, without further action by shareholders. Currently, the Fund is
offering shares of 30 Portfolios.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of a Portfolio's net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed income
and capital gains. (See discussion under "Dividends, Capital Gains Distributions
and Taxes" in the Prospectus.) The amounts of any income dividends or capital
gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares of a
Portfolio by an investor may have the effect of reducing the per share net asset
value of the Portfolio by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise in
writing, all dividend and capital gains distributions are automatically received
in additional shares of a Portfolio at net asset value (as of the business day
following the record date). This will remain in effect until the Fund is
notified by the shareholder in writing at least three days prior to the record
date that either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option (both
income dividends and capital gains distributions in cash) has been elected. An
account statement is sent to shareholders whenever an income dividend or capital
gains distribution is paid.
Each Portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for Federal tax purposes. Any net capital gains
recognized by a Portfolio will be distributed to its investors without need to
offset (for Federal income tax purposes) such gains against any net capital
losses of another Portfolio.
FEDERAL TAXES
In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company under the Code, at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities, and gains from the
sale of securities or foreign currencies or other income derived with respect to
its business of investing in such securities or currencies. In addition, gains
realized on the sale or other disposition of securities held for less than three
months must be limited to less than 30% of a Portfolio's annual gross income.
Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
16
<PAGE>
FINANCIAL STATEMENTS
The Financial Statements of the Rice, Hall, James Small Cap Portfolio for
the fiscal year ended October 31, 1995 and the Financial Highlights for the
respective periods presented which appear in the Portfolio's 1995 Annual Report
to Shareholders and the report thereon of Price Waterhouse LLP, the Fund's
independent accountants, also appearing therein, previously filed electronically
with the Commission (Accession Number: 0000950109-96-000061), are incorporated
by reference. The Financial Statements of the Rice, Hall, James Small Cap
Portfolio for the period ended April 30, 1996 and the Financial Highlights for
the respective period presented which appear in the Portfolio's Semi-Annual
Report to Shareholders, previously filed electronically with the Commission
(Accession Number: 0000842286-96-000001, are also incorporated by reference.
17
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of its
highest bond ratings: AAA -- judged to be the best quality; carry the smallest
degree of investment risk: AA -- judged to be of high quality by all standards;
A -- possess many favorable investment attributes and are to be considered as
higher medium grade obligations; BAA -- considered as lower medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Corporation ("S&P") description of its
highest bond ratings: AAA -- highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
- -- regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assess a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the GNMA are, in effect,
backed by the full faith and credit of the United States through provisions in
their charters that they may make "indefinite and unlimited" drawings on the
U.S. Treasury, if needed to service its debt. Debt from certain other agencies
and instrumentalities, including the Federal Home Loan Bank and FNMA, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the FHLMC, are federally chartered institutions under Government
supervision, but their debt securities are backed only by the credit worthiness
of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
The Portfolios may invest in commercial paper (including variable amount
master demand notes) rated A-1 or better by S&P or Prime-1 by Moody's or by S&P.
Commercial paper refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangement between the issuer and a commercial
bank acting as agent for the payees of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. As
variable amount master demand notes are direct lending arrangements between a
lender and a borrower, it is not generally contemplated that such instruments
will be traded, and there is no secondary market for these notes, although they
are redeemable (and thus immediately repayable by the borrower) at face value,
plus accrued interest, at any time. In connection with a Portfolio's investment
in variable amount master demand notes, the Adviser's investment management
staff will monitor, on an ongoing basis, the earning power, cash flow and other
liquidity ratios of the issuer and the borrower's ability to pay principal and
interest on demand.
A-1
<PAGE>
Commercial paper rated A-1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation of
the management of the issuer; (2) economic evaluation of the issuer's industry
or industries and the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer acceptance; (4) liquidity; (5) amount and quality of
long term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of issuer of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may increase or decrease periodically.
Frequently, dealers selling variable rate certificates of deposit to the
Portfolios will agree to repurchase such instruments, at the Portfolios' option,
at par on or near the coupon dates. The dealers' obligations to repurchase these
instruments are subject to conditions imposed by various dealers. Such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolios are also able
to sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A 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. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.
V. DESCRIPTION OF FOREIGN INVESTMENTS
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Since the securities of foreign companies are frequently
denominated in foreign currencies, a Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.
Although the Fund will endeavor to achieve the most favorable execution
costs in its portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries a portion of these taxes are recoverable, the
non-recoverable portion of foreign withholding taxes will reduce the income
received from the companies comprising the Fund's Portfolios. However, these
foreign withholding taxes are not expected to have a significant impact.
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