UAM FUNDS
PO BOX 419081
KANSAS CITY, MO 64141-6081
(TOLL FREE) 1-877-UAM-LINK (826-5465)
THE ACADIAN EMERGING
MARKETS PORTFOLIO
INSTITUTIONAL CLASS SHARES
SUPPLEMENT DATED JUNE 22, 1999 TO STATEMENT OF
ADDITIONAL INFORMATION DATED FEBRUARY 16, 1999
The information concerning swap agreements in the portfolio's
statement of additional information is hereby replaced in its entirety
by the following:
SWAP AGREEMENTS
A swap is a financial instrument that typically involves the
exchange of cash flows between two parties on specified dates
(settlement dates), where the cash flows are based on agreed-upon
prices, rates, indices, etc. The nominal amount on which the cash
flows are calculated is called the notional amount. Swaps are
individually negotiated and structured to include exposure to a
variety of different types of investments or market factors, such as
interest rates, foreign currency rates, mortgage securities,
corporate borrowing rates, security prices or inflation rates.
Swap agreements may increase or decrease the overall volatility of
the investments of the portfolio and its share price. The
performance of swap agreements may be affected by a change in
the specific interest rate, currency, or other factors that determine
the amounts of payments due to and from the portfolio. If a swap
agreement calls for payments by the portfolio, the portfolio must
be prepared to make such payments when due. In addition, if the
counter-party's creditworthiness declined, the value of a swap
agreement would be likely to decline, potentially resulting in
losses.
Generally, swap agreements have a fixed maturity date that will
be agreed upon by the parties. The agreement can be terminated
before the maturity date only under limited circumstances, such
as default by one of the parties or insolvency, among others, and
can be transferred by a party only with the prior written consent
of the other party. The portfolio may be able to eliminate its
exposure under a swap agreement either by assignment or by
other disposition, or by entering into an offsetting swap agreement
with the same party or a similarly creditworthy party. If the
counter-party is unable to meet its obligations under the contract,
declares bankruptcy, defaults or becomes insolvent, the portfolio
may not be able to recover the money it expected to receive under
the contract.
A swap agreement can be a form of leverage, which can magnify a
portfolio's gains or losses. In order to reduce the risk associated
with leveraging, a portfolio will cover its current obligations under
swap agreements according to guidelines established by the
Securities and Exchange Commission. If the portfolio enters into a
swap agreement on a net basis, it will segregate assets with a daily
value at least equal to the excess, if any, of the portfolio's accrued
obligations under the swap agreement over the accrued amount
the portfolio is entitled to receive under the agreement. If the
portfolio enters into a swap agreement on other than a net basis, it
will segregate assets with a value equal to the full amount of the
portfolio's accrued obligations under the agreement.
EQUITY SWAPS
In a typical equity index swap, one party agrees to pay another
party the return on a stock, stock index or basket of stocks in
return for a specified interest rate. By entering into an equity
index swap, for example, the index receiver can gain exposure to
stocks making up the index of securities without actually
purchasing those stocks. Equity index swaps involve not only the
risk associated with investment in the securities represented in the
index, but also the risk that the performance of such securities,
including dividends, will not exceed the return on the interest rate
that the portfolio will be committed to pay.
INTEREST RATE SWAPS
Interest rate swaps are financial instruments that involve the
exchange on one type of interest rate for another type of interest
rate cash flow on specified dates in the future. Some of the
different types of interest rate swaps are fixed-for floating rate
swaps, termed basis swaps and index amortizing swaps. Fixed-for
floating rate swap, which involves the exchange of fixed interest
rate cash flows for floating rate cash flows. Termed basis swaps
entail cash flows to both parties based on floating interest rates,
where the interest rate indices are different. Index amortizing
swaps are typically fixed-for-floating swaps where the notional
amount changes if certain conditions are met.
Like a traditional investment in a debt security, a portfolio could
lose money by investing in an interest rate swap if interest rates
change adversely. For example, if the portfolio enters into a swap
where it agrees to exchange a floating rate of interest for a fixed
rate of interest, the portfolio may have to pay more money than it
receives. Similarly, if the portfolio enters into a swap where it
agrees to exchange a fixed rate of interest for a floating rate of
interest, the portfolio may receive less money than it has agreed to
pay.
CURRENCY SWAPS
A currency swap is an agreement between two parties in which
one party agrees to make interest rate payments in one currency
and the other promises to make interest rate payments in another
currency. A portfolio may enter into a currency swap when it has
one currency and desires a different currency. Typically the
interest rates that determine the currency swap payments are
fixed, although occasionally one or both parties may pay a floating
rate of interest. Unlike an interest rate swaps, however, the
principal amounts are exchanged at the beginning of the contract
and returned at the end of the contract. Currency swaps may be
negatively affected by changes in foreign exchange rates and
changes in interest rates, as described above.
