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UAM FUNDS
Prospectus
August 31, 1998
CLIPPER FOCUS PORTFOLIO
Institutional Class Shares
UAM
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TABLE OF CONTENTS
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PAGE
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Fund Expenses.............................................................. 2
Prospectus Summary......................................................... 4
Risk Factors............................................................... 5
Investment Objective....................................................... 5
Investment Policies........................................................ 5
Other Investment Policies.................................................. 7
Investment Limitations..................................................... 10
Purchase of Shares......................................................... 11
Redemption of Shares....................................................... 15
Shareholder Services....................................................... 17
Valuation of Shares........................................................ 19
Performance Calculations................................................... 19
Dividends, Capital Gains Distributions and Taxes........................... 20
Investment Adviser......................................................... 21
Adviser's Historical Performance........................................... 23
Administrative Services.................................................... 24
Distributor................................................................ 25
Portfolio Transactions..................................................... 25
General Information........................................................ 26
UAM Funds -- Institutional Class Shares.................................... 28
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UAM FUNDS CLIPPER FOCUS PORTFOLIO
INSTITUTIONAL CLASS SHARES
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PROSPECTUS -- AUGUST 31, 1998
UAM Funds Trust (the "Fund") is an open-end, management investment company
known as a "mutual fund." The Fund consists of multiple series (known as
"Portfolios") each of which has different investment objectives and policies.
The Clipper Focus Portfolio currently offers two separate classes of shares:
Institutional Class Shares and Institutional Service Class Shares ("Service
Class Shares"). Shares of each class represent equal, pro rata interests in a
Portfolio and accrue dividends in the same manner except that Service Class
Shares bear fees payable by the class (at the rate of .25% per annum) to fi-
nancial institutions for services they provide to the owners of such shares.
The securities offered in this Prospectus are Institutional Class Shares of
one non-diversified, no-load Portfolio of the Fund managed by Pacific Finan-
cial Research, Inc.
THE CLIPPER FOCUS PORTFOLIO. The objective of the Portfolio (the "Portfo-
lio") is to provide long-term growth of capital. The Portfolio seeks to
achieve its objective by investing in a concentrated portfolio of the stocks
that, in the opinion of the Adviser, are significantly undervalued.
There can be no assurance the Portfolio will achieve its stated objective.
Keep this Prospectus for future reference. It contains information that you
should know before you invest. A "Statement of Additional Information" (SAI)
containing additional information about the Clipper Focus Portfolio has been
filed with the Securities and Exchange Commission. The SAI is dated August 31,
1998 and has been incorporated by reference into this Prospectus. For a free
copy of the SAI contact the UAM Funds Service Center at 1-800-638-7983.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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FUND EXPENSES
The Portfolio does not charge shareholder transaction fees. However, the
following table illustrates expenses and fees that a shareholder of the Port-
folio's Institutional Class Shares would incur. Transaction fees may be
charged if a broker-dealer or other financial intermediary deals with the Fund
on your behalf. (See "PURCHASE OF SHARES.")
SHAREHOLDER TRANSACTION EXPENSES
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THE CLIPPER FOCUS
PORTFOLIO
INSTITUTIONAL CLASS
SHARES
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Sales Load Imposed on Purchases.......................... NONE
Sales Load Imposed on Reinvested Dividends............... NONE
Deferred Sales Load...................................... NONE
Redemption Fees.......................................... NONE
Exchange Fee............................................. NONE
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ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
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THE CLIPPER FOCUS
PORTFOLIO
INSTITUTIONAL CLASS
SHARES
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Investment Advisory Fees (After Fee Waiver).............. 0.94%*
12b-1 Fees............................................... NONE
Other Expenses........................................... 0.46%
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Total Operating Expenses (After Fee Waiver).............. 1.40%*
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* The adviser has voluntarily agreed to waive a portion of its advisory fees
and to assume expenses otherwise payable by the Portfolio to reduce expense
ratios. As of the date of this prospectus, the Adviser has agreed to keep
the Portfolio's Institutional Class Shares Total Fund Operating Expenses
from exceeding 1.40%. Absent the Adviser's fee waiver, Investment Advisory
Fees would be 1.00% and Total Operating Expenses would be 1.46%. The Adviser
may change or terminate these voluntary expense arrangements at any time.
The table shows various fees and expenses an investor would bear directly or
indirectly. The expenses and fees set forth above for the Portfolio are based
on estimates for the initial fiscal period of the Portfolio's Institutional
Class shares. For purposes of calculating the fees set forth above, the table
assumes that the Portfolio's average daily net assets will be $100 million.
2
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EXAMPLE
The following example illustrates expenses 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. The Portfolio
charges no redemption fees of any kind.
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<CAPTION>
1 YEAR 3 YEARS
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The Clipper Focus Portfolio Institutional Class Shares....... $14 $44
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THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
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PROSPECTUS SUMMARY
Please read the complete Prospectus carefully before investing. If you have
any questions after reading the Prospectus, please contact the UAM Funds Serv-
ice Center at 1-800-638-7983.
INVESTMENT ADVISER
Pacific Financial Research, Inc., the investment adviser to the Portfolio
(the "Adviser"), has been in the investment management business since 1980.
The Adviser provides investment advice to corporate pension funds, endowments,
foundations, and individuals. The Adviser currently manages over $5.5 billion
in assets. (see "INVESTMENT ADVISER.")
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Fund Distributors, Inc. (the
"Distributor"), to investors at net asset value without a sales commission.
Share purchases may be made by sending investments directly to the Fund. The
minimum initial investment is $2,500. The minimum for subsequent investments
is $100. The minimum initial investment for IRA accounts is $500. The minimum
initial investment for spousal IRA accounts is $250. Certain exceptions to the
initial or minimum investment amounts may be permitted by the officers of the
Fund. (See "PURCHASE OF SHARES.")
DIVIDENDS AND DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income in quarterly dividends. The Portfolio will distribute any realized
net capital gains annually. Distributions will be reinvested in Portfolio
shares automatically unless an investor elects to receive cash distributions.
(See "DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")
REDEMPTIONS AND EXCHANGES
Shares of the Portfolio may be redeemed at any time, without cost, at the
net asset value of the Portfolio next determined after receipt of the redemp-
tion request. The redemption price may be more or less than the purchase
price. Shares of the Portfolio may be exchanged for shares of the same class
of any other Portfolio of the UAM Funds. (See "REDEMPTION OF SHARES" and "EX-
CHANGE PRIVILEGE.")
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of United As-
set Management Corporation, is responsible for performing and overseeing ad-
ministration, fund accounting, dividend disbursing and transfer agency ser-
vices provided to the Fund and its Portfolios by third-party service provid-
ers. (See "ADMINISTRATIVE SERVICES.")
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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 pros-
pects of the issuers in which a Portfolio invests. Prospective investors
should consider the following: (1) the Portfolio may invest in securities of
foreign issuers, which will be subject to additional risk factors not applica-
ble to securities of U.S. issuers (See "INVESTMENT POLICIES -- FOREIGN INVEST-
MENTS"); (2) in general, the Portfolio will not trade for short-term profits,
but when circumstances warrant, investments may be sold without regard to the
length of time held. High rates of portfolio turnover may result in additional
transaction costs and the realization of capital gains (See "PORTFOLIO TURN-
OVER"); (3) the Portfolio may use various investment practices, including in-
vesting in repurchase agreements, when-issued, forward delivery and delayed
settlement securities and lending of securities (See "OTHER INVESTMENT POLI-
CIES"); (4) since the Portfolio is non-diversified and may invest in a smaller
number of issuers, the value of the Portfolio's shares may fluctuate more than
other mutual funds because of changes in financial condition or market assess-
ment of a single issuer.
INVESTMENT OBJECTIVE
The objective of the Portfolio is to provide long-term capital growth. The
Portfolio seeks to achieve its objective by investing in a concentrated port-
folio of the stocks that, in the opinion of the Adviser, are undervalued.
There can be no assurance that the Portfolio will achieve its stated objec-
tive.
INVESTMENT POLICIES
The Adviser will seek to meet the investment objective of the Portfolio by
investing primarily in securities that are considered by the Adviser to have
potential for long-term capital appreciation. Among such investments, the
Portfolio will emphasize the purchase of common stock, convertible long-term
corporate debt obligations, convertible preferred stock, and warrants that the
Adviser believes are undervalued and appear to offer the potential of further-
ing the Portfolio's goal of long-term capital growth.
Balance sheet strength and the ability to generate earnings and free cash
flow are the major factors in appraising an investment, and little weight is
given to current dividend income. Investors should understand that market
risks are inherent in all securities in varying degrees. Therefore, there can
be no assurance that the Adviser will be successful in meeting the investment
objective of the Portfolio.
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As to any specific investment, the Adviser's investment approach is very re-
search intensive and includes meeting with management, competitors and custom-
ers, and preparing detailed valuation models for each company researched. The
valuation models attempt to calculate a company's intrinsic value based on
private market transactions and discounted cash flow valuations. The Adviser
focuses on dominant companies generating excess cash flow with good management
in industries that are often "out-of-favor" in the investment community. How-
ever, there can be no assurance that the judgement of the Adviser as to in-
trinsic value is correct.
Companies are only added to the Portfolio when their share price trades be-
low the Adviser's estimate of intrinsic value. Companies are sold when their
share price reaches the Adviser's estimate of intrinsic value. This investment
discipline is no guarantee by the Adviser against a loss of capital.
The Adviser believes that concentrated portfolios produce superior long-term
performance. The Adviser concentrates on its best investment ideas; therefore,
the Portfolio will be more concentrated than the average equity fund. The
Portfolio is defined as a "non-diversified" mutual fund. (See "INVESTMENT LIM-
ITATIONS".) The Portfolio generally contains between 15 to 35 stocks. These
positions are generally held for extended periods of time.
The Portfolio may invest in special situations in which the Adviser believes
the value of the securities of the particular company will appreciate within a
reasonable period because of unique circumstances applicable to that company.
Special situations affect companies of all sizes and generally occur regard-
less of general business conditions or movements of the market as a whole.
Special situations might include liquidations, reorganizations, recapitaliza-
tions, mergers or temporary financial liquidity restraints, material litiga-
tion, technological breakthroughs or temporary production or product introduc-
tion problems, natural disaster, sabotage or employee error, new management or
management policies, or any other events that could change or temporarily ham-
per the ongoing operations of a company. Special situations often involve much
greater risk than is inherent in ordinary investment securities. Of course,
there is no guarantee that investing in companies subject to special situa-
tions will help the Portfolio achieve its objective since the market price of
such securities may never reflect any perceived intrinsic values.
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.
The Adviser expects the Portfolio to remain fully invested and expects that
cash reserves will not exceed 5% of the Portfolio's total assets.
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OTHER INVESTMENT POLICIES
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated redemp-
tions, or for temporary defensive purposes, the Portfolio may invest a portion
of its assets in domestic and foreign money market instruments including cer-
tificates of deposit, bankers' acceptances, time deposits, U.S. Government ob-
ligations, U.S. Government agency securities, short-term corporate debt secu-
rities, and commercial paper rated A-1 or A-2 by Standard & Poor's Ratings
Services or Prime-1 or Prime-2 by Moody's Investors Service or if unrated, de-
termined by the Adviser to be of comparable quality.
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 10% of the total assets of a Portfolio. Each
Portfolio will not invest in any security 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 Fed-
eral 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 invest-
ment quality comparable with other debt securities which may be purchased by
each Portfolio.
The Fund has received permission from the Securities and Exchange Commission
(the "SEC") to deposit the daily uninvested cash balances of the Fund's Port-
folios, as well as cash for investment purposes, into one or more joint ac-
counts 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 tax-exempt money instruments. By en-
tering into these investments on a joint basis, 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 SEC for each of its Portfolios to
invest, for cash management purposes, the greater of 5% of its total assets or
$2.5 million in the Fund's DSI Money Market Portfolio (See "INVESTMENT
COMPANIES").
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit, and certain bankers' accept-
ances and other securities outlined above under "SHORT-TERM INVESTMENTS." In a
repurchase agreement, the Portfolio buys a security and simultaneously commits
to sell that security back at an agreed upon price plus an agreed upon market
rate of interest. Under a repurchase agreement, the seller is required to
maintain the value
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of securities subject to the agreement at not less than 100% of the repurchase
price. The value of the securities 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 use of
repurchase agreements involves certain risks. For example, a default by the
seller of the agreement may cause the Portfolio to experience a loss or delay
in the liquidation of the collateral securing the repurchase agreement. The
Portfolio might also incur disposition costs in liquidating the collateral.
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. The Fund has received permission from the SEC to pool
daily uninvested cash balances of the Fund's Portfolios in order to invest in
repurchase agreements on a joint basis. By entering into joint repurchase
agreements, the Portfolio may incur lower transaction costs and earn higher
rates of interest on joint repurchase agreements. Each Portfolio's contribu-
tion would determine its return from a joint repurchase agreement. (See "SHORT
TERM INVESTMENTS.")
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified institutional
investors as a means of earning income. The Portfolio will not loan securities
to the extent that greater than onethird of its total assets at fair market
value would be committed to loans. During the term of a loan, the Portfolio is
subject to a gain or loss depending on any increase or decrease in the market
price of the securities loaned. Lending of securities is subject to review by
the Fund's Board of Trustees. All relevant facts and circumstances, including
the creditworthiness of the broker, dealer or institution, will be considered
by the Adviser in making decisions about securities lending.
An investment company may pay reasonable negotiated fees in connection with
loaned securities so long as such fees are set forth in a written contract and
approved by its Board of Trustees. The Portfolio will continue to retain any
voting rights with respect to loaned securities. If a material event occurs
affecting an investment on loan, the loan must be called and the securities
voted.
WHEN-ISSUED, FORWARD DELIVERY AND DELAYED SETTLEMENT SECURITIES
The Portfolio may purchase and sell securities on a "when-issued," "delayed
settlement," or "forward delivery" basis. When-issued or forward delivery re-
fers to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When-issued
and forward delivery transactions may be expected to occur a month or more be-
fore 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. No pay-
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ment or delivery is made by the Portfolio until it receives payment or deliv-
ery from the other party to any of the above transactions. It is possible that
the market price of the securities at the time of delivery may be higher or
lower than the purchase price. The Portfolio will maintain a separate account
of cash or liquid securities at least equal to the value of purchase commit-
ments 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 is made although the Portfolio may earn income on securities it has
deposited in a segregated account.
The Portfolio engages in these types of purchases in order to buy securities
that fit with its investment objectives at attractive prices -- not to in-
crease its investment leverage.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Portfolio is not expected to exceed 75%.
In addition to Portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. (See "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES" for more information on taxation.) The Portfolio will
not normally engage in shortterm trading, but reserves the right to do so.
INVESTMENT COMPANIES
The 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. No more than 5% of the investing Portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other invest-
ment company. The Portfolio will indirectly bear its proportionate share of
any management fees paid by an investment company in which it invests in addi-
tion to the advisory fee paid by the Portfolio.
The Fund has received permission from the SEC to allow each of its Portfo-
lios to invest, for cash management purposes, the greater of 5% of its total
assets or $2.5 million in the Fund's DSI Money Market Portfolio provided that
the investment is consistent with the Portfolio's investment policies and re-
strictions. Based upon a Portfolio's assets invested in the DSI Money Market
Portfolio, the investing Portfolio's adviser will waive its investment advi-
sory 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 share-
holders.
FOREIGN SECURITIES
Investing in foreign securities, including ADRs, may involve additional
risks and considerations which are not typically associated with investing in
securities issued by U.S. companies. Since stocks of foreign companies are
normally denom-
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inated in foreign currencies, the Portfolio may be affected favorably or unfa-
vorably by changes in currency rates and exchange control regulations, and may
incur costs in connection with conversions between various currencies.
As non-U.S. companies are not generally subject to uniform accounting, au-
diting and financial reporting standards and practices comparable to those ap-
plicable to U.S. companies, comparable information may not be readily avail-
able about certain foreign companies. Securities of some non-U.S. companies
may be less liquid and more volatile than securities of comparable U.S. compa-
nies. There is generally less government supervision and regulation of stock
exchanges, brokers and listed companies than in the U.S. In addition, in cer-
tain foreign countries, there is the possibility of expropriation or confisca-
tory taxation, political or social instability, or diplomatic developments
which could affect U.S. investments in those countries. Additionally, there
may be difficulty in obtaining and enforcing judgments against foreign is-
suers.
ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or pool of se-
curities by a foreign issuer (the "underlying issuer") and deposited with the
depositary. While ADRs are U.S. dollar-denominated, the underlying companies
are still subject to the risks above.
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 is-
suer. 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.
Except as specified above and as described under "INVESTMENT LIMITATIONS,"
the foregoing investment policies are non-fundamental and the Trustees may
change such policies without an affirmative vote of a majority of the out-
standing voting securities of a Portfolio, as defined in the Investment Com-
pany Act of 1940 ("1940 Act").
INVESTMENT LIMITATIONS
The Portfolio will not:
(a) invest more than 5% of its assets at the time of purchase in the secu-
rities of companies that have (with predecessors) a continuous operat-
ing history of less than 3 years;
(b) Invest more than 25% of its assets within a single industry; however,
there are no limitations on investments issued or guaranteed by the
U.S. Government and its agencies when the Portfolio adopts a temporary
defensive position.
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(c) make loans except by purchasing debt securities in accordance with its
investment objective and policies or entering into repurchase agree-
ments or by lending its portfolio securities to banks, brokers, deal-
ers and other financial institutions so long as the loans are made in
compliance with the 1940 Act, as amended, or the rules and regulations
or interpretations of the SEC;
(d) (1) borrow, except from banks and as a temporary measure for extraor-
dinary 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
(e) 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 investment objectives of the Portfolio are non-fundamental and may be
changed without shareholder approval. Except for limitations (b), (c) and
(d)(1), the Portfolio's investment limitations and policies described in this
Prospectus and in the SAI are non-fundamental and may be changed by the Fund's
Board of Trustees upon reasonable notice to investors. All other investment
limitations described here and in the SAI are fundamental policies and may be
changed only with the approval of the holders of a majority of the outstanding
shares of the Portfolio. If a percentage limitation on investment or utiliza-
tion 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 to-
tal cost of the Portfolio's assets will not be considered a violation of the
restriction.
The Portfolio is a "non-diversified" mutual fund and therefore is not re-
quired to meet any diversification requirements under the Investment Company
Act of 1940, as amended. The Fund nevertheless intends to comply with the di-
versification standards applicable to regulated investment companies under the
Internal Revenue Code of 1986, as amended ("the Code").
PURCHASE OF SHARES
Shares of the Portfolio are offered through UAM Fund Distributors, Inc. (the
"Distributor"), without a 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 minimum initial investment
required is $2,500. The minimum initial investment for IRA accounts is $500.
The minimum initial investment for spousal IRA accounts is $250. Certain ex-
ceptions may be permitted by the officers of the Fund.
Shares of the Portfolios may be purchased by customers of brokers-dealers or
other financial intermediaries ("Service Agents") which have established a
share-
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holder servicing relationship with the Fund on behalf of their customers.
Service Agents may impose additional or different conditions on purchases or
redemptions of Portfolio shares and may charge transaction or other account
fees. Each Service Agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding additional or different
purchase or redemption conditions. Shareholders who are customers of Service
Agents should consult their Service Agent for information regarding these fees
and conditions. Amounts paid to Service Agents may include transaction fees
and/or service fees paid by the Fund from the Fund assets attributable to the
Service Agent, which would not be imposed if shares of the Portfolio were pur-
chased directly from the Fund or the Distributor. Service Agents may provide
shareholder services to their customers that are not available to a share-
holder dealing directly with the Fund. A salesperson and any other person en-
titled 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, or if applicable, their designees, that have entered into
agreements with the Fund or its agent may enter confirmed purchase or redemp-
tion orders on behalf of clients and customers, with payment to follow no
later than the Portfolio's pricing on the following business day. If payment
is not received by UAM Funds Service Center by such time, the Service Agent
could be held liable for resulting fees or losses. A Portfolio may be deemed
to have received a purchase or redemption order when a Service Agent, or, if
applicable, its authorized designee, accepts the order. Orders received by the
Fund in proper form will be priced at the Portfolio's net asset value next
computed after they are accepted by the Service Agent or its authorized desig-
nee. Service Agents are responsible to their customers and the Fund for timely
transmission of all subscription and redemption requests, investment informa-
tion, documentation and money.
INITIAL INVESTMENTS
BY MAIL
. Complete and sign an Account Registration Form and mail it together with
a check made payable to "UAM Funds" to:
UAM Funds Trust
UAM Funds Service Center
P.O. Box 419081
Kansas City, MO 64141-6081
Payment for purchases of shares received by mail will be credited to an ac-
count at the next share price calculated for the Portfolio after receipt. The
Fund will not accept third-party checks to purchase shares of the Portfolios.
If you purchase shares by check, please be sure that your check is made pay-
able to "UAM Funds."
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BY WIRE
. Telephone the UAM Funds Service Center and provide the account name, ad-
dress, telephone number, social security or taxpayer identification num-
ber, Portfolio selected, amount being wired and the name of the bank
wiring the funds. The call must be received prior to the close of regu-
lar trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m.
Eastern Time) to receive that day's price. An account number and a wire
control number will then be provided to you, in addition to wiring in-
structions. Next,
. Instruct your bank to wire the specified amount to the address below:
United Missouri Bank
ABA #101000695
UAM Funds
DDA Acct. #9870964163
Ref: Portfolio Name___________
Your Account Number___________
Your Account Name___________
Wire Control Number___________
(assigned by UAM Funds Service Center)
. Forward a completed Account Registration Form to the Fund at the address
shown on the form.
. To be sure that a bank wire order is received on the same day it is
sent, investor's bank should wire funds as early in the day as possible.
The bank sending funds may charge for this service. The Fund's agent re-
serves the right to charge investors for receipt of wired funds, but no
charge is currently imposed for this service. It is necessary to obtain
a new wire control number every time money is wired into an account in a
Portfolio. Wire control numbers are effective for one transaction only
and cannot be used more than once. Wired money that is not properly
identified with a currently effective wire control number will be re-
turned to the bank from which it was wired and will not be credited to
the shareholder's account.
ADDITIONAL INVESTMENTS
Additional investments can be made at any time. The minimum additional in-
vestment is $100. Shares can be purchased at net asset value by mailing a
check made payable to "UAM Funds" to the above address or by wiring money to
United Missouri Bank using the instructions outlined above. When making addi-
tional investments, be sure that the account number, account name and the
Portfolio to be purchased are identified on the check or wire. Prior to wiring
additional investments, notify the UAM Funds Service Center by calling the
number on the cover of this Prospectus. Mail orders should include, when pos-
sible, the "Invest by Mail" stub which accompanies any Fund confirmation
statement.
13
<PAGE>
PURCHASE BY AUTOMATED CLEARING HOUSE
If you have made this election, shares of the Portfolio may be purchased via
Automated Clearing House ("ACH"). Investors purchasing via ACH should complete
the bank information section on the Account Application and attach a voided
check or deposit slip to the Account Application. This option must be estab-
lished on your account at least 15 days prior to your initiating an ACH trans-
action. (see "SHAREHOLDER SERVICES -- AUTOMATIC INVESTMENT PLAN.")
OTHER PURCHASE INFORMATION
Investments received by the close of regular trading on the NYSE (generally
4 p.m. Eastern Time) will be invested at the share price calculated after the
NYSE closes on that day. Investments received after the close of the NYSE will
be executed at the price computed on the next day the NYSE is open. The Fund
reserves the right, in its sole discretion, to suspend the offering of shares
of the Portfolio or to reject purchase orders when, in the judgment of manage-
ment, such suspension or rejection is in the best interests of the Fund. The
Portfolio is intended to be a long-term investment vehicle and is not designed
to provide investors with a means of speculation on short-term market move-
ments. A pattern of frequent purchases can be disruptive to efficient portfo-
lio management and, consequently, can be detrimental to a Portfolio's perfor-
mance and its shareholders. Accordingly, if the Fund's management determines
that an investor is engaged in excessive trading, the Fund, with or without
prior notice, may reject in whole or part any purchase request with respect to
such investor's account. Such investor also may be barred from purchasing
other Portfolios of the Fund. Purchases of a Portfolio's shares will be made
in full and fractional shares of the Portfolio calculated to three decimal
places. Certificates for fractional shares will not be issued. Certificates
for whole shares will not be issued except at the written request of the
shareholder.
IN-KIND PURCHASES
If accepted by the Fund, shares of a Portfolio may be purchased in exchange
for securities which are eligible for acquisition by the Portfolio, as de-
scribed in this Prospectus. Securities to be exchanged which are accepted by
the Fund will be valued as described under "VALUATION OF SHARES" at the next
determination of net asset value after acceptance. Shares issued by a Portfo-
lio in exchange for securities will be issued at net asset value determined as
of the same time. All dividends, interest, subscription, or other rights per-
taining 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. Securi-
ties acquired through an inkind 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:
. at the time of exchange, such securities are eligible to be included in
the Portfolio (current market quotations must be readily available for
such securities);
14
<PAGE>
. the investor represents and agrees that all securities offered to be ex-
changed are liquid securities and not subject to any restrictions upon
their sale by the Portfolio under the Securities Act of 1933, or other-
wise; and
. the value of any such securities (except U.S. Government securities) be-
ing exchanged together with other securities of the same issuer owned by
the Portfolio will not exceed 5% of the net assets of the Portfolio im-
mediately after the transaction.
Investors who are subject to federal taxation upon exchange may realize a
gain or loss for federal income tax purposes depending upon the cost of secu-
rities exchanged. Investors interested in such exchanges should contact the
Adviser.
REDEMPTION OF SHARES
Shares of the Portfolio may be redeemed by mail or telephone at any time, at
the net asset value of the Portfolio next determined after receipt of the re-
demption request. Any redemption may be more or less than the purchase price
of the shares depending on the market value of investment securities held by
the Portfolio.
BY MAIL
Address requests for redemption to the UAM Funds Service Center. Requests to
redeem shares must include:
. share certificates, if issued;
. a letter of instruction or an assignment specifying the number of shares
or dollar amount to be redeemed, signed by all registered owners of the
shares in the exact names in which they are registered;
. any required signature guarantees (see "SIGNATURE GUARANTEES"); and
. any other necessary legal documents, if required, in the case of es-
tates, trusts, guardianships, custodianships, corporations, pension and
profit sharing plans and other organizations.
BY TELEPHONE
A redemption request by telephone requires the following:
. establish the telephone redemption privilege (and if desired, the wire
redemption privilege) by completing appropriate sections of the Account
Registration Form; and
. call the Fund and instruct that the redemption proceeds be mailed to you
or wired to your bank.
The following tasks cannot be accomplished by telephone:
. changing the name of the commercial bank or the account designated to
receive redemption proceeds (this can be accomplished only by a written
request signed by each shareholder, with each signature guaranteed);
. redemption of certificated shares by telephone.
15
<PAGE>
The Fund and UAM Funds Service Center will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include re-
quiring the investor to provide certain personal identification at the time an
account is opened, as well as 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 in-
structions of such transaction requests. The Fund or UAM Funds Service Center
may be liable for any losses due to unauthorized or fraudulent telephone in-
structions if the Fund or UAM Funds Service Center do not employ the proce-
dures described above. Neither the Fund nor UAM Funds Service Center will be
responsible for any loss, liability, cost or expense for following instruc-
tions received by telephone that it reasonably believes to be genuine.
SIGNATURE GUARANTEES
Signature guarantees are required for the following redemptions:
. redemptions where the proceeds are to be sent to someone other than the
registered shareowner(s);
. redemptions where the proceeds are to be sent to someplace other than
the registered address; or
. share transfer requests.
Signature guarantees will be accepted from any eligible guarantor institu-
tion which participates in a signature guarantee program. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national securi-
ties exchanges, registered securities associations, clearing agencies and sav-
ings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees.
OTHER REDEMPTION INFORMATION
The Fund ordinarily will make payment for all shared redeemed within seven
days after receipt by the UAM Funds Service Center or a redemption request in
proper form. Although the Fund will redeem shares purchased by check before
the check clears, payment of the redemption proceeds may be delayed for a pe-
riod of up to fifteen days after their purchase, pending determination that
the check has cleared. Investors should consider purchasing shares using a
certified or bank check or money order if they anticipate an immediate need
for redemption proceeds. The Fund may suspend the right of redemption or post-
pone the date at times when either the NYSE and Custodian Bank are closed, or
under any emergency circumstances determined by the SEC.
16
<PAGE>
If the Board of Trustees determines that it would be detrimental to the best
interests of remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in-kind of liquid securities held by a Portfolio in lieu of cash
in conformity with applicable rules of the SEC. Investors may incur brokerage
charges on the sale of portfolio securities received in payment of redemp-
tions.
The Portfolio reserves the right to liquidate any account that is below
fifty percent of the required minimum initial investment amount for a Portfo-
lio as set forth in the Prospectus, where the reduction in value has occurred
due to a redemption or exchange out of the account. If at any time your total
investment does not have a value of at least fifty percent of the required
minimum initial investment amount, you may be notified that the value of your
account is below the Portfolio's minimum account balance requirement. You
would then be allowed 60 days to make an additional investment before the ac-
count is liquidated. Retirement accounts and certain other accounts will not
be subject to automatic liquidation. Reductions in value that result solely
from market activity will not trigger an involuntary redemption.
SHAREHOLDER SERVICES
EXCHANGE PRIVILEGE
Institutional Class Shares of the Portfolio may be exchanged for Institu-
tional Class Shares of any other UAM Funds Portfolio. See the list of Portfo-
lios of the UAM Funds at the end of this Prospectus. Exchange requests should
be made by contacting the UAM Funds Service Center.
Any exchange will be based on the net asset value of the shares involved.
There is no sales commission or charge of any kind for an exchange. Before
making an exchange into a Portfolio, a shareholder should read its Prospectus
and consider the investment objectives of the Portfolio to be purchased. Call
the UAM Funds Service Center for a copy of the Prospectus for the Portfolio(s)
in which you are interested. Exchanges can only be made with Portfolios that
are qualified for sale in a shareholder's state of residence.
Exchange requests may be made either by mail or telephone. Telephone ex-
changes will be accepted only if the certificates for the shares to be ex-
changed have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to the
close of regular trading on the NYSE (generally 4 p.m. Eastern Time) will be
processed as of the close of business on the same day. Requests received after
the close of regular trading on the NYSE will be processed on the next busi-
ness day. The Fund may modify or terminate the exchange program at any time
upon 60 days' written notice to shareholders, and may reject any exchange re-
quest. If the Fund's management determines that an investor is engaged in ex-
cessive trading, the Fund, with or without
17
<PAGE>
prior notice may reject in whole or part any exchange request, with respect to
such investor's account. Such investors also may be barred from exchanging
into other Portfolios of the Fund. For additional information regarding re-
sponsibility for the authenticity of telephoned instructions, see "REDEMPTION
OF SHARES -- BY TELEPHONE" above. An exchange into another UAM Funds portfolio
is a sale of shares and may result in a gain or loss for income tax purposes.
AUTOMATIC INVESTMENT PLAN
An Automatic Investment Plan permits shareholders of a Portfolio with a min-
imum value of $2,500 or more to purchase shares automatically (minimum of $100
per transaction) at regular intervals selected by the shareholder. Provided
the shareholder's bank or other financial institution allows automatic with-
drawals, shares are purchased by transferring funds via the Automated Clearing
House ("ACH"). Investment made through ACH will be automatically transferred
from a shareholder's checking, bank money market or NOW account designated by
the shareholder. Such withdrawals are made electronically, if the sharehold-
er's bank or financial institution so permits, or by pre-authorized checks or
drafts drawn on the shareholder's bank or other account. The bank or financial
institution must be a member of ACH. At the shareholder's option, the account
designated will be debited in the specified amount, and shares will be pur-
chased monthly or quarterly.
To establish an Automatic Investment Plan, a shareholder must complete the
Optional Services Form available from the UAM Funds Service Center at 1-800-
638-7983 and mail it to UAM Funds Service Center. A shareholder may cancel
his/her participation or change the amount of purchase at any time by mailing
written notification to UAM Funds Service Center, P.O. Box 419081, Kansas
City, MO 64141-6081. Notification generally will be effective three business
days following receipt. The Fund may modify or terminate this privilege at any
time, or may charge a service fee, although no such fee is contemplated.
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder whose account balance totals at least $10,000 may establish
a Systematic Withdrawal Plan under which an amount pre-determined by the
shareholder (but at least $100) is automatically redeemed form the sharehold-
er's account either monthly or quarterly. A shareholder may participate in the
Systematic Withdrawal Plan by using ACH. Redemption made through ACH will be
automatically transferred to the shareholder's bank or other similar financial
institution account or a properly designated third party. The bank or finan-
cial institution must be a member of ACH. Redemptions ordinarily are made on
the third business day of the month and payments ordinarily will be transmit-
ted within five business days after the redemption date. Because the prices of
Fund shares fluctuate, the number of shares redeemed to finance systematic
withdrawal payments of a given amount will vary from payment to payment. If a
shareholder owns shares in more than one Portfolio, the shareholder must des-
ignate the Portfolio from which the redemptions
18
<PAGE>
under a Systematic Withdrawal Plan should be made. An additional sheet may be
attached to the Optional Services Form if a shareholder selects more than one
Portfolio. A Systematic Withdrawal Plan may be terminated or suspended at any
time by the Fund. A shareholder may elect at any time, in writing, to termi-
nate participation in the Systematic Withdrawal Plan. Such written election
must be sent to and received by the Fund before a termination becomes effec-
tive. There is currently no charge to the shareholder for a Systematic With-
drawal Plan.
VALUATION OF SHARES
The net asset value of each class of a Portfolio is determined by dividing
the value of the Portfolio's assets attributable to the class, less any lia-
bilities attributable to the class, by the number of shares outstanding at-
tributable to the class. The net asset value per share of each class of the
Portfolio is determined as of the close of the NYSE on each day that the NYSE
is open for business.
Equity securities listed on a securities exchange for which market quota-
tions are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where
the security is primarily traded. Unlisted equity securities and listed secu-
rities not traded on the valuation date for which market quotations are read-
ily available are valued neither exceeding the current asked prices nor less
than the current bid prices. Quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents. The converted value is
based upon the bid price of the foreign currency against U.S. dollars quoted
by any major bank or by a broker.
Bonds and other fixed income securities are valued according to the broadest
and most representative market, which will ordinarily be the overthecounter
market. 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. Securities purchased with remaining
maturities of 60 days or less are valued at amortized cost when the Board of
Trustees determines that amortized cost reflects fair value.
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 Trustees.
PERFORMANCE CALCULATIONS
The Portfolio measures performance by calculating yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance. Yield and total return are calcu-
lated separately for each class of a portfolio.
19
<PAGE>
Yield refers to the income generated by an investment in the Portfolio over
a given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all funds. As this
differs from other accounting methods, the quoted yield may not equal the in-
come actually paid to shareholders.
Total return is the change in value of an investment in the Portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A cu-
mulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of re-
turn that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period.
Performance will be calculated separately for Institutional Class and Serv-
ice Class Shares. Dividends paid by the Portfolio with respect to Institu-
tional Class and Service Class Shares, to the extent any dividends are paid,
will be calculated in the same manner at the same time on the same day and
will be in the same amount, except that service and distribution fees relating
to Service Class Shares will be borne exclusively by that class.
The Portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further de-
scribed in the Portfolio's SAI. This information may also be included in sales
literature and advertising.
The Portfolio's Annual Report to Shareholders for the most recent fiscal
year end contains additional performance information that includes comparisons
with appropriate indices. The Annual Report is available without charge. Con-
tact the UAM Funds Service Center at the address or telephone number on the
cover of this Prospectus.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolio will normally distribute substantially all of its net invest-
ment income (for tax purposes) to shareholders in quarterly dividends. If any
net capital gains are realized, the Portfolio will normally distribute them
annually.
All dividends and capital gains distributions will be automatically rein-
vested in additional shares of the Portfolio unless the Fund is notified in
writing that the shareholder elects to receive the distributions in cash.
FEDERAL TAXES
The Portfolio intends to qualify as a "regulated investment company" under
subchapter M of the Internal Revenue Code of 1986, as amended, for federal
20
<PAGE>
income tax purposes and to meet all other requirements that are necessary for
it (but not its shareholders) to be exempt from federal taxes on income and
gains paid to shareholders in the form of dividends. To do this, the Portfolio
must, among other things, distribute substantially all of its ordinary income
and net capital gains on a current basis and maintain a portfolio of invest-
ments which satisfies certain diversification criteria.
Dividends paid by the Portfolio from net investment income, whether in cash
or reinvested in shares, are taxable to shareholders as ordinary income.
Short-term capital gains will be taxed as ordinary income. Long-term capital
gains distributions are taxed as long-term capital gains. Shareholders will be
notified annually of dividend income earned for tax purposes.
Dividends declared in October, November and December to shareholders of rec-
ord in such a month and paid in January of the following year will be treated
as if they had been paid by the Fund and received by the shareholders on De-
cember 31.
The Fund is required by federal law to withhold 31% of reportable payments
paid to shareholders who have not complied with IRS regulations. In order to
avoid this withholding requirement, you must certify that your Social Security
or Taxpayer Identification Number you have provided is correct and that either
you are not currently subject to backup withholding or you are exempt from
backup withholding. This certification must be made on the Account Registra-
tion Form or on a separate form supplied by the Fund.
Dividends and interest received by the Portfolio may give rise to withhold-
ing and other taxes imposed by foreign countries. These taxes reduce the Port-
folio's dividends but are included in the taxable income reported on your tax
statement if the Portfolio qualifies for this tax treatment and elects to pass
it through to you. Consult a tax adviser for more information regarding deduc-
tions and credits for foreign taxes.
INVESTMENT ADVISER
Pacific Financial Research, Inc., ("PFR") (the "Adviser"), a Massachusetts
corporation, is located at 9601 Wilshire Boulevard, Suite 800, Beverly Hills,
California 90210. The Adviser is a wholly-owned subsidiary of United Asset
Management Corporation ("UAM") and has been providing investment management
services to corporations, pension funds, endowments, foundations, individuals
and institutions since 1981. As of the date of this Prospectus, the Adviser
had over $5.5 billion in assets under management.
The Portfolio is managed by a team of investment professionals. This team is
primarily responsible for the day-to-day management of the Portfolio and a de-
scription of their academic background and business experience follows:
21
<PAGE>
JAMES GIPSON -- Jim received his B.A. and M.A. degrees in Economics with
honors from the University of California, Los Angeles, and his M.B.A. degree
with honors from Harvard Business School. Before entering the investment in-
dustry, he served as an officer in the U.S. Navy and as a consultant for
McKinsey & Co. Before founding PFR in 1980, he was a portfolio manager at
Source Capital Co. and at Batterymarch Financial. He authored Winning the In-
vestment Game: A Guide for All Seasons. Jim is President and is a principal of
PFR.
MICHAEL SANDLER -- Michael received his B.B.A. with distinction, M.B.A. and
J.D. degrees from the University of Iowa. He spent two years with Interna-
tional Harvester as a Manager of Asset Redeployment and one year with Enter-
prise Systems, Inc. as Vice President of Business Development. Michael is a
member of the Iowa Bar. He joined PFR as an analyst in 1984. He currently
serves as Vice President and Portfolio Manager and is a principal of PFR.
BRUCE VEACO -- Bruce graduated summa cum laude from the University of Cali-
fornia, Los Angeles with a B.A. degree in Economics. He spent five years as a
certified public accountant in the Los Angeles office of Price Waterhouse
where he was an Audit Manager. Bruce received his M.B.A. degree from Harvard
Business School before joining PFR in 1986 as an analyst. He currently serves
as Vice President and Portfolio Manager and is a principal of PFR.
DOUGLAS GREY -- Doug received his B.E. cum laude in Mechanical/Materials En-
gineering and Economics from Vanderbilt University, and his M.B.A. from the
University of Chicago. He was a General Motors Scholar and worked for General
Motors as a design analysis engineer. Doug joined PFR as an analyst in 1986.
He currently serves as Vice President and Portfolio Manager and is a principal
of PFR.
PETER QUINN -- Peter received his B.S. degree in Finance from Boston College
and his M.B.A. degree from the Peter F. Drucker Management Center at the
Claremont Graduate School. He joined PFR as Research Associate in 1987. He
currently serves as Vice President and Portfolio Manager and is a principal of
PFR.
Under an Investment Advisory Agreement (the "Agreement") with the Fund,
dated as of August 31, 1998, the Adviser manages the investment and reinvest-
ment of the assets of the Portfolio. The Adviser must adhere to the stated in-
vestment objectives and policies of the Portfolio, and is subject to the con-
trol and supervision of the Fund's Board of Trustees.
As compensation for its services as an Adviser, the Portfolio pays the Ad-
viser an annual fee in monthly installments by applying the following annual
percentage rates to the Portfolio's average daily net asset:
1.00% of the first $500 million of Portfolio's average daily net assets;
0.95% of the next $500 million of Portfolio's average daily net assets;
0.90% of the Portfolio's average daily net assets over $1 billion.
22
<PAGE>
Until further notice, the Adviser has voluntarily agreed to waive a portion
of its advisory fees or assume certain expenses of the Portfolio so that the
total operating expenses of the Portfolio do not exceed 1.40%. The Adviser in-
tends to maintain this expense limitation through the initial fiscal year of
the Portfolio, but may change or cancel it at any time.
The Adviser may compensate its affiliated companies for referring investors
to the Portfolio. The Distributor, UAM, the Adviser, or any of their affili-
ates, may, at its own expense, compensate a Service Agent or other person for
marketing, shareholder servicing, recordkeeping and/or other services per-
formed with respect to the Fund, a Portfolio or any Class of Shares. Payments
made for any of these purposes may be made from its revenues, its profits or
any other source available to it. When such service arrangements are in ef-
fect, they are made generally available to all qualified service providers.
ADVISER'S HISTORICAL PERFORMANCE
Below are certain performance data provided by the Adviser pertaining to the
composite of all separately managed accounts of the Adviser that are managed
with substantially similar (although not necessarily identical) objectives,
policies and strategies as those of the Portfolio (the "95+ Equity compos-
ite"). The investment returns of the Portfolio will differ from those of the
separately managed accounts because such separately managed accounts will have
fees and expenses that differ from those of the Portfolio. All fees and ex-
penses of the managed accounts are less than the estimated operating expenses
of the Portfolio. If the performance of the managed accounts was adjusted to
reflect fees and expenses of the Portfolio, the composite's performance would
have been lower. Further, the separately managed accounts are not subject to
investment limitations, diversification requirements and other restrictions
imposed by the 1940 Act and Internal Revenue Code; such conditions, if appli-
cable, may have lowered the returns for separately managed accounts. The re-
sults presented are not intended to predict or suggest the return to be expe-
rienced by the Portfolio or the return an investor might achieve by investing
in the Portfolio.
PACIFIC FINANCIAL RESEARCH, INC. 95+ EQUITY COMPOSITE RETURNS
<TABLE>
<CAPTION>
PACIFIC FINANCIAL
RESEARCH, INC. S&P 500 INDEX
----------------- -------------
<S> <C> <C>
Total returns for calendar years ended:
1997........................................... 39.0% 33.4%
1996........................................... 24.3% 23.0%
1995........................................... 48.4% 37.6%
1994........................................... -1.7% 1.3%
1993........................................... 9.8% 10.1%
1992........................................... 19.1% 7.6%
1991**......................................... 12.8% 8.4%
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
PACIFIC FINANCIAL
RESEARCH, INC. S&P 500 INDEX
----------------- -------------
<S> <C> <C>
Average annual returns for:
Quarter ended 6/30/98......................... 0.67% 3.30%
1 year ended 6/30/98.......................... 25.54% 30.16%
3 years ended 6/30/98......................... 30.72% 30.24%
5 years ended 6/30/98......................... 24.63% 23.08%
From inception* through 6/30/98............... 23.42% 20.16%
Cumulative total return (9/30/91 through
6/30/98).................................... 313.95% 245.46%
Value of $1 invested from 9/30/91 to
6/30/98).................................... $4.13 $3.45
</TABLE>
- -----------
*Inception date: 9/30/91
**4th quarter only
Notes:
1. The annualized return is calculated from monthly data, allowing for com-
pounding. This methodology is different than the SEC standard which may
produce different results. The market value of each account in the compos-
ite was the sum of the account's total assets, including cash, cash equiv-
alents, short term investments, and securities valued at current market
prices.
2. The S&P 500 is an unmanaged index which assumes reinvestment of dividends
and is generally considered representative of securities similar to those
invested in by the Adviser for the purpose of the composite performance
numbers set forth above.
3. The Adviser's average annual management fee over the period from
October 1, 1991 through June 30, 1998 was approximately 0.75% or 75 basis
points. During the period, fees on the Adviser's individual accounts
ranged from 0.52% to 0.90% (52 basis points to 90 basis points). Net re-
turns to investors vary depending on the management fee.
ADMINISTRATIVE SERVICES
UAM Fund Services, Inc. ("UAMFSI"), a wholly-owned subsidiary of UAM, is re-
sponsible for performing and overseeing administrative, fund accounting, divi-
dend disbursing and transfer agent services provided to the Fund and its Port-
folios. 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.
The 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. The following Portfolio-specific fee is calculated from the ag-
gregate net assets of the Portfolio:
<TABLE>
<CAPTION>
RATE
----
<S> <C>
The Clipper Focus Portfolio............................................ 0.04%
</TABLE>
24
<PAGE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
$60,000 base fee per portfolio;
0.025 of 1% of combined UAM Fund Assets.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, with its
principal office located at 211 Congress Street, Boston, MA 02110, distributes
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 dis-
tributor of Fund shares. The Distributor does not receive any fee or other
compensation under the Agreement with respect to the Shares offered in this
Prospectus. The Agreement continues in effect as long as it is approved at
least annually by the Fund's Board of Trustees. Those approving the Agreement
must include a majority of Trustees who are neither parties to the Agreement
nor interested persons of any such party. The Agreement provides that the Fund
will bear costs of registration of its shares with the SEC and various states
as well as the printing of its prospectuses, its SAIs and its reports to
shareholders.
PORTFOLIO TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select the brokers or deal-
ers that will execute the purchases and sales of investment securities for the
Portfolio. The Agreement directs the Adviser to use its best efforts to obtain
the best available price and most favorable execution for all transactions of
the Portfolio. If consistent with the interests of the Portfolio, the Adviser
may select brokers on the basis of research, statistical and pricing services
these brokers provide to the Portfolio in addition to required Adviser servic-
es. Such brokers may be paid a higher commission than that which another qual-
ified 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 the
commission is reasonable in terms either of the transaction or the overall re-
sponsibility of the Adviser to the Portfolio and the Adviser's other clients.
Although not a typical practice, the Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
If a purchase or sale of securities is consistent with the investment poli-
cies of the Portfolio and one or more other clients served by the Adviser are
considering a purchase at or about the same time, transactions in such securi-
ties 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 al-
locating such transactions, allocations are subject to periodic review by the
Fund's Trustees.
25
<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Delaware business trust on May 18, 1994 under
the name "The Regis Fund II." On October 31, 1995, the name of the Fund was
changed to "UAM Funds Trust." The Fund's Agreement and Declaration of Trust
permits the Fund to issue an unlimited number of shares of beneficial inter-
est, without par value. The Trustees have the power to designate one or more
series ("Portfolios") or classes of shares of beneficial interest without fur-
ther action by shareholders.
At its discretion, the Board of Trustees may create additional Portfolios
and classes of shares. The shares of the Portfolio are fully paid and nonas-
sessable, and have no preference as to conversion, exchange, dividends, re-
tirement or other features and have no pre-emptive rights. They have
noncumulative voting rights, which means that holders of more than 50% of
shares voting for the election of Trustees can elect 100% of the Trustees 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 stand-
ing in his or her 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. Service Class Shares bear certain
expenses related to shareholder servicing, and may bear expenses related to
distribution of such shares. Service Class shares have exclusive voting rights
for matters relating to such distribution expenditures. The Board of Trustees
of the Fund has authorized a third class of shares, Advisor Class Shares,
which is not currently being offered by this Portfolio. For information about
the Service Class Shares of the Portfolio, contact the UAM Funds Service Cen-
ter.
Annual meetings will not be held except as required by the 1940 Act and
other applicable laws. The Fund has undertaken that its Trustees will call a
meeting of shareholders if such a meeting is requested in writing by the hold-
ers of not less than 10% of the outstanding shares of the Fund. The Fund will
assist shareholder communications in such matters to the extent required by
the undertaking.
CUSTODIAN
The Chase Manhattan Bank, N.A. serves as Custodian of the Fund's assets.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP serves as the independent accountant for the
Fund.
REPORTS
Shareholders receive unaudited semi-annual financial statements and annual
financial statements audited by PricewaterhouseCoopers LLP.
26
<PAGE>
SHAREHOLDER INQUIRIES
Shareholder inquiries may be made by contacting the UAM Funds Service Center
at the address or telephone number on the cover of this Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S STATEMENT OF AD-
DITIONAL INFORMATION, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
27
<PAGE>
UAM FUNDS -- INSTITUTIONAL CLASS SHARES
Acadian Emerging Markets Portfolio
Acadian International Equity Portfolio
BHM&S Total Return Bond Portfolio
Cambiar Opportunity Portfolio
Chicago Asset Management Intermediate Bond Portfolio
Chicago Asset Management Value/Contrarian Portfolio
Clipper Focus Portfolio
C&B Balanced Portfolio
C&B Equity Portfolio
C&B Equity Portfolio for Taxable Investors
C&B Mid Cap Equity Portfolio
DSI Balanced Portfolio
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
FMA Small Company Portfolio
FPA Crescent Portfolio
Hanson Equity Portfolio
Heitman Real Estate Portfolio
ICM Equity Portfolio
ICM Fixed Income Portfolio
ICM Small Company Portfolio
Jacobs International Octagon Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
McKee Small Cap Equity Portfolio
McKee U.S. Government Portfolio
MJI International Equity Portfolio
NWQ Balanced Portfolio
NWQ Small Cap Value Portfolio
NWQ Special Equity Portfolio
NWQ Value Equity Portfolio
Pell Rudman Mid-Cap Growth Portfolio
Rice, Hall, James Small Cap Portfolio
Rice, Hall, James Small/Mid Cap Portfolio
SAMI Preferred Stock Income Portfolio
Sirach Bond Portfolio
Sirach Equity Portfolio
Sirach Growth Portfolio
Sirach Special Equity Portfolio
Sirach Strategic Balanced Portfolio
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Small Cap Value Portfolio
TS&W Balanced Portfolio
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
28
<PAGE>
APPLICATION INSTITUTIONAL CLASS SHARES
UAM FUNDS
REGULAR MAIL: UAM Funds Express Mail: UAM Funds
P.O. Box 419081 210 West 10th St.
Kansas City, MO 64141-6081 Kansas City, MO 64105
FOR HELP WITH THIS APPLICATION, OR FOR MORE
INFORMATION, CALL US TOLL FREE: 1-800-638-7983.
Distributed by UAM Fund Distributors, Inc.
1 YOUR ACCOUNT REGISTRATION (Check one box.)
[_] Individual or Joint Account
------------------------------
Owner's Name: First, Initial, Last
- -
------------------
Owner's Social Security Number
------------------------------
Joint Owner's Name: First, Initial, Last
- -
------------------
Joint Owner's Social Security Number
Joint accounts will be registered joint tenants with right of survivorship
unless otherwise indicated.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
[_] Trust [_] Exempt [_] Non-Exempt [_] Qualified Plan
------------------------------
Trustee(s)' Name
------------------------------
Name of Trust Agreement
------------------------------
Beneficiary's Name
-
--------------- -------------
Taxpayer's ID Date of Trust Agreement
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
[_] Custodial/Gift to Minors
------------------------------
Custodian's Name: First, Initial, Last
------------------------------
Minor's Name: First, Initial, Last
------------------------------
Minor's Social Security Number
------------------------------
Minor's State of residence
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
[_] *Corporation, Partnership or Other Entity
Type: [_] Corp.
[_] Partnership [_] Other
------------------------------
Name of Corp. or Other Entity
-
[_] Exempt [_] Non-Exempt
---------------
Taxpayer ID Number
* Please enclose a corporate resolution which identifies individuals
authorized to conduct transactions in this account.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
2 ADDRESS
------------------------------
Street or P.O. Box Number
------------------------------
City State Zip Code
( ) ( )
-------------- --------------
Daytime Phone Evening Phone
Citizenship:
[_] U.S.
[_] Resident-
Alien
[_] Non-
Resident
Alien
---------------
Specify Country
3 INVESTMENT
Fill in the name of the Portfolio EXACTLY AS IT APPEARS ON THE FRONT OF THE
PROSPECTUS.
Fund Code
_______________________ _____ $______
_______________________ _____ $______
TOTAL $______
4 METHOD OF PAYMENT
A.[_] Check (payable to UAM Funds) An Account No. will be assigned.
B.[_] This application confirms my prior wire purchase on (date): _____________
I was assigned the following wire reference control number:____________________
5 DIVIDEND & CAPITAL GAINS
Unless otherwise instructed, all distributions will be reinvested in
additional shares.
<TABLE>
<S> <C> <C>
All dividends
are to be [_] reinvested [_] paid in cash
All capital
gains are to be [_] reinvested [_] paid in cash
</TABLE>
- --------------------------------------------------------------------------------
6 ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Owner's Occupation Owner's Date of Birth
- --------------------------------------------------------------------------------
Employer's Name
- --------------------------------------------------------------------------------
Employer's Address
- --------------------------------------------------------------------------------
Joint Owner's Occupation Joint Owner's Date of Birth
- --------------------------------------------------------------------------------
Joint Owner's Employer's Name
- --------------------------------------------------------------------------------
Joint Owner's Employer's Address
7 BROKER-DEALER/FINANCIAL PLANNER INFORMATION
__________________ __________________
Dealer Name Address of office
(as it appears on servicing
Selling Group account
Agreement)
_____________________________
City State Zip Code
________________________
Address of home office
__________________
________________________ Representative's
City State Zip Code Name, Number,
Branch Number
__________________ __________________
Authorized Representative's
signature of telephone number
dealer
For Internal
Use Only
Source: ______
Code: ________
8 INTERESTED PARTY:
In addition to the account statement
sent to your registered address, you
may also have a Monthly Consolidated
Statement Mailed to up to ten (10)
interested parties (tax adviser,
401(k) Plan Administrator, Financial
Planner, etc.). Please add a sheet
with additional interested party
names and addresses.
__________________ ___________________________________________________________
Name Firm Name (if applicable)
_________________________
Address
- ----------------------- ----- -----------------------------------------------
City State Zip Code
9 AUTOMATIC INVESTMENT PLAN (AIP)
An account balance of at least $2,500 is required.
I hereby authorize and direct the
agent to draw on my (our) bank
account on a periodic basis, as
indicated in section 11, for
investment in my (our) account.
Attached is a voided check of the
bank account I/we wish to use
(Initial investments may not be made
through the Automatic Investment
Plan.) Please note this privilege
will be effective 15 days after UAM
Funds receives this application. If
no date is chosen below, your bank
account will be debited on the 15th
of the month.
PREFERRED INVESTMENT SCHEDULE (PLEASE CHECK ONE):
[_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually
Begin investment on (Enter
month/year):
Debit My (Our) Bank Account and
Invest as Follows ($100 Minimum Per
Account):
$
_____________________________________
Fund Amount
$
_____________________________________
Fund Amount
$
_____________________________________
Fund Amount
Please be sure to complete the back of this form.
UAM Funds Service Center
<PAGE>
10 SYSTEMATIC WITHDRAWAL PLAN (SWP)
An account balance of at least
$10,000 is required.
PREFERRED WITHDRAWAL SCHEDULE:
[_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually
[_] 1st or [_] 15th
_____________________________________
begin withdrawals on (enter
month/year) day of month
I ELECT TO RECEIVE A PERIODIC
PAYMENT OF ($100 MINIMUM PER
ACCOUNT):
$
_____________________________________
Fund Amount
$
_____________________________________
Fund Amount
$
_____________________________________
Fund Amount
11 BANK INFORMATION
FOR ACH, WIRE REDEMPTIONS, AIP AND
SWP
Your bank account information must
be on file in order to exercise
telephone investment privileges. The
account name(s) below must match
exactly at least one name in section
1. A blank, voided check is
necessary to provide account and
bank routing information and must
accompany this application.
_____________________________________
name of bank ABA number
[_] checking [_] savings
_____________________________________
account number account type
_____________________________________
bank address city state zip code
Return the following to the address
below:
1. This completed application.
2. Voided bank check or deposit
slip if applicable.
3. One check made payable to:
UAM Funds
Send to: UAM Funds
P.O. Box 419081
Kansas City, MO 64141-6081
12 TELEPHONE REDEMPTION AND EXCHANGE
I/We authorize Chase Global Funds Services Company to honor any request(s)
believed to be authentic for the following:
[_] Telephone Exchange [_] Telephone Redemption
[_] a. Mail proceeds to name and address in which account is registered.
[_] b. Wire redemption proceeds to bank indicated below.
A VOIDED CHECK OR DEPOSIT SLIP MUST BE ATTACHED.
-------------------------------------
Bank Name
-------------------------------------
Bank Address
----------------- ( )
Account Number ------------------
Bank Phone
-------------------------------------
Name(s) in which Account is Registered
-------------------------------------
Bank Transit Routing Number (ABA #)
13 SIGNATURE(S)
I/We have full authority and legal capacity to purchase Fund shares.
I/We have received the current Prospectus of the Portfolio(s) and agree to
be bound by its (their) terms.
UNDER PENALTY OF PERJURY, I/WE ALSO
CERTIFY THAT --
A. THE NUMBER SHOWN ON THIS FORM IS
A CORRECT TAXPAYER ID NUMBER OR
SOCIAL SECURITY NUMBER.
B. I AM NOT SUBJECT TO BACKUP
WITHHOLDING BECAUSE (I) I HAVE
NOT BEEN NOTIFIED BY THE
INTERNAL REVENUE SERVICE THAT I
AM SUBJECT TO BACKUP WITHHOLDING
AS A RESULT OF A FAILURE TO
REPORT ALL INTEREST OR
DIVIDENDS, OR (II) THE IRS HAS
NOTIFIED ME THAT I AM NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
(CROSS OUT ITEM "B" IF YOU HAVE
BEEN NOTIFIED BY THE IRS THAT
YOU ARE SUBJECT TO BACKUP
WITHHOLDING BECAUSE OF
UNDERREPORTING INTEREST OR
DIVIDENDS ON YOUR TAX RETURN.)
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
- ------------------------- ----------
Signature (Owner, Trustee, Date
etc.)
- ------------------------- ----------
Signature (Joint Owner, Date
Co-trustee, etc.)
- -------------------------------------------------------------------------------
APPLICATION INSTRUCTIONS
- -------------------------------------------------------------------------------
IF YOU NEED ASSISTANCE, A REPRESENTATIVE OF UAM FUNDS WILL BE PLEASED TO HELP
YOU. OUR TOLL-FREE NUMBER IS 1-800-638-7983.
- -------------------------------------------------------------------------------
NEW ACCOUNT APPLICATION. An account can be registered as only one of the
following:
Supply the Social Security Number of the registered account
owner who is to be taxed.
. individual
. joint tenants
Supply minor's Social Security Number.
. Custodial/Gift
to Minor
. a trust Supply the Taxpayer Identification Number of the legal entity
. a or organization that will report income and/or capital gains.
corporation,
partnership,
organization,
fiduciary
Please check the box that corresponds with the type of account you are opening
and fill in the required information exactly as you wish it to appear on the
account.
REDEMPTION AUTHORIZATIONS. Corporations, other organizations, trusts and fidu-
ciaries will be required to furnish additional paperwork to authorize redemp-
tions. Call a representative of UAM Funds at 1-800-638-7983 for more informa-
tion.
YOUR MAILING ADDRESS. Please be sure to provide us with the address at
--------------------
which you wish to receive your mail.
YOUR INVESTMENT. Please be sure to indicate the total amount invested. For
---------------
more than two investments, please attach a separate sheet or an additional
application.
ESTABLISHING YOUR ACCOUNT.
A. Section 4A lets you open your account by check. Your check(s) should be
made payable to UAM Funds. Be sure to enclose your check(s) with this ap-
plication.
B. If you are confirming a new Fund purchase previously made by wire, be
sure to fill in Section 4B and provide the wire reference control number
you were assigned at the time of this purchase. A completed application
must follow all wire purchases.
All applications are subject to acceptance by UAM Funds.
RECEIVING YOUR DIVIDENDS AND CAPITAL GAINS. Check the distribution option
------------------------------------------
you prefer. If you do not select an option, all dividends and capital
gains will be reinvested in your account.
EMPLOYMENT INFORMATION. It is required by the National Association of Se-
----------------------
curities Dealers, Inc. to request this information.
INTERESTED PARTY/BROKER-DEALER. In addition to the account statement sent
------------------------------
to your registered address, you may also have a monthly consolidated
statement mailed to up to ten (10) interested parties. You may add a sheet
with additional interested party names and addresses. This section should
also be completed if you are investing through a Broker-Dealer.
--IMPORTANT--
REGULAR MAIL: UAM Funds
P.O. Box 419081
Kansas City, MO 64141-6081
EXPRESS MAIL: UAM Funds
210 West 10th Street
Kansas City, MO 64105
MORE QUESTIONS? Call a representative of UAM Funds at 1-800-638-7983.
TELEPHONE REDEMPTION AND EXCHANGE. Telephone redemption proceeds mailed to
---------------------------------
a shareholder will be sent only to the address listed on the account. The
Funds' bank wire feature is available for redeeming out of your Fund ac-
count to your bank account. Be sure to check with your bank for proper
wiring instructions. The Funds require the transit/routing number of your
bank or its correspondent if your bank is unable to receive wires direct-
ly. Please complete Section 6 to add the bank wire feature.
Telephone exchanges may be made only if a Fund holds all share certifi-
cates and if the registration of the two accounts will be identical.
YOUR SIGNATURE(S). Please be sure to sign this application. If the account
-----------------
is registered in the name of:
. an individual, the individual should sign
. joint tenants, both should sign
. a trust or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity)
. a corporation or other organization, an officer should sign (please indi-
cate corporate office or title)
<PAGE>
UAM Funds Service Center
P.O. Box 419081
Kansas City, MO 64141-6081
1-800-638-7983
Investment Adviser
Pacific Financial Research, Inc.
9601 Wilshire Boulevard, Suite 800
Beverly Hills, CA 90210
Distributor
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
PROSPECTUS
August 31, 1998
<PAGE>
PART B
UAM FUNDS TRUST
CLIPPER FOCUS PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION -- August 31, 1998
This Statement is not a Prospectus but should be read in conjunction with
the Prospectuses of the UAM Funds Trust (the "UAM Funds" or the "Fund") for the
Clipper Focus Portfolio's (the "Portfolio") dated August 31, 1998 relating to
the Institutional Class Shares and the Institutional Service Class Shares (the
"Service Class Shares"). To obtain a Prospectus, please call the UAM Funds
Service Center: 1-800-638-7983.
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES............................ 2
PURCHASE AND REDEMPTION OF SHARES............................. 3
VALUATION OF SHARES........................................... 4
SHAREHOLDER SERVICES.......................................... 4
INVESTMENT LIMITATIONS........................................ 5
MANAGEMENT OF THE FUND........................................ 6
INVESTMENT ADVISER............................................ 8
SERVICE AND DISTRIBUTION PLANS................................ 9
PORTFOLIO TRANSACTIONS........................................ 11
ADMINISTRATIVE SERVICES....................................... 11
CUSTODIAN..................................................... 12
INDEPENDENT ACCOUNTANTS....................................... 12
DISTRIBUTOR................................................... 12
PERFORMANCE CALCULATIONS...................................... 13
GENERAL INFORMATION........................................... 14
APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS........... 16
APPENDIX B - COMPARISONS, PUBLICATIONS, INDICES AND AVERAGES.. 20
</TABLE>
INVESTMENT ADVISER
Pacific Financial Research, Inc. (Adviser)
DISTRIBUTOR
UAM Fund Distributors, Inc. (Distributor)
ADMINISTRATOR AND TRANSFER AGENT
UAM Fund Services, Inc. (FSI)
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and policies of
the Portfolio as set forth in its Prospectuses for the Institutional Class
Shares and Service Class Shares.
LENDING OF SECURITIES
The 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 Regulations or interpretations of the Securities and
Exchange Commission (the "SEC") 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). The Portfolio will
not loan more than one-third of its total assets (including the value of the
collateral for the loans) at fair market value. 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
in the Prospectuses.
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated
redemptions, or for temporary defensive purposes, the Portfolio may invest a
portion of its assets in the short-term investment described below.
(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 10% of the total assets of the
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).
The Portfolio will not invest in any security 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 the Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated A or better by Moody's or by
S&P;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(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. Government and differ mainly in interest
rates, maturities and dates of issue;
2
<PAGE>
(5) U.S. Government agency securities issued or guaranteed by U.S.
Government sponsored instrumentalities and federal agencies. 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.
PORTFOLIO TURNOVER
The portfolio turnover rates described in the Prospectuses are calculated
by dividing the lesser of purchases or sales of portfolio securities for the
year by the monthly average of the value of the portfolio securities. The
calculation excludes all securities, including options, whose maturities at the
time of acquisition were one year or less. Portfolio turnover may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of shares.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Portfolio may be purchased without 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 is $2,500 with certain exceptions as may be
determined from time to time by officers of the Fund. Other investment minimums
are: initial IRA investment, $500; initial spousal IRA investment, $250; minimum
additional investment for all accounts, $100. An order received in proper form
prior to the close of regular trading on the New York Stock Exchange (the
"Exchange") (generally 4:00 p.m. Eastern Time) will be executed at the price
computed on the date of receipt; and an order received not in proper form or
after the 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: New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The Portfolio reserves the right in its sole discretion (1) to suspend
the offering of its shares, (2) to reject purchase orders when in the judgment
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 the Portfolio's shares.
The Portfolio may suspend redemption privileges or postpone the date of
payment (1) during any period that either the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the SEC, (2)
during any period when an emergency exists as defined by the rules of the SEC 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 SEC may permit. The Fund has made an election with
the SEC to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
the net assets of the Fund at the beginning of such period. Such commitment is
irrevocable without the prior approval of the SEC. Redemptions in excess of the
above limits may be paid, in whole or in part, in investment securities or in
cash as the Board of Trustees may deem advisable; however, payment will be made
wholly in cash unless the Trustees believe that economic or market conditions
exist which would make such a practice detrimental to the best interests of the
Fund. If redemptions are paid in investment securities, such securities will be
valued as set forth in the Prospectuses under "VALUATION OF SHARES," and a
redeeming shareholder would normally incur brokerage expenses if those
securities were converted to cash.
No charge is made by the 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 the Portfolio.
SIGNATURE GUARANTEES
To protect your account, the Fund and UAM Funds Service Center from fraud,
signature guarantees are required for certain redemptions. The purpose of
signature guarantees is to verify the identity of the party who has authorized a
redemption from your account. Signature guarantees are required for (1) all
redemptions when the proceeds are to be paid to someone other than the
registered owner(s) and/or the registered address, or (2) share transfer
requests. The purpose of the signature guarantees is to verify the identity of
the person who has authorized a redemption from your account.
3
<PAGE>
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 Fund's 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.
VALUATION OF SHARES
Equity securities listed on a securities exchange for which market
quotations are readily available are valued at the last quoted sale price of the
day. Price information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted equity securities and listed securities
not traded on the valuation date for which market quotations are readily
available are valued neither exceeding the current asked prices nor less than
the current bid prices. Quotations of foreign securities in a foreign currency
are converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against U.S. dollars quoted by any major bank
or by a broker.
Bonds, other fixed income securities and fixed dividends are valued
according to the broadest and most representative market, which will ordinarily
be the over-the-counter market. 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. Securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost, using methods approved by the Board of Trustees.
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 Trustees.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder Services"
in the Prospectuses.
EXCHANGE PRIVILEGE
Institutional Class Shares of the 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, Inc. (See the list of Portfolios of the UAM
Funds--Institutional Class Shares at the end of the Portfolio's Institutional
Class Shares Prospectus.) Service Class Shares of the Portfolio may be exchanged
for any other Service Class Shares of a Portfolio included in the UAM Funds
which is comprised of the Fund and UAM Funds, Inc. (For those Portfolios
currently offering Service Class Shares, please see the list of Service Class
Shares at the end of the Portfolio's Service Class Shares Prospectus.) Exchange
requests should be made by calling the Fund (1-800-638-7983) or by writing to
UAM Funds Inc., UAM Funds Service Center, P.O. Box 419081, Kansas City, MO
64141-6081. The exchange privilege is only available with respect to Portfolios
that are qualified 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 objective 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.
4
<PAGE>
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 have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received by the close of
regular trading on the Exchange (generally 4:00 p.m. Eastern Time) will be
processed as of the close of business on the same day. Requests received after
these times will be processed on the next business day. Neither the Fund nor
UAM Funds Service Center 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 Fund's Board of Trustees 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 Portfolio to another person 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 "PURCHASE
AND 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 Prospectuses. A
Portfolio's fundamental investment limitations cannot be changed without
approval by a "majority of the outstanding shares" (as defined in the 1940 Act)
of the Portfolio. However, except for the numbered investment limitations noted
as fundamental below, the limitations described below are not fundamental, and
may be changed without the consent of shareholders. 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
the 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 when determining whether the
investment complies with the Portfolio's investment limitation.
AS A MATTER OF FUNDAMENTAL POLICY, THE PORTFOLIO 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 repurchase transactions.
AS A MATTER OF NON-FUNDAMENTAL POLICY, THE PORTFOLIO WILL NOT:
(a) purchase on margin or sell short;
5
<PAGE>
(b) invest more than 15% in aggregate of the net 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;
(c) with respect to 50% of its total assets, purchase the securities of
any issuer (other than obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities) if, as a result, (i)
more than 5% of the value of its total assets would be invested in the
securities of any single issuer, or (ii) it would hold more than 10%
of the outstanding voting securities of such issuer, or (iii) with
respect to the remaining 50% of its total assets, more than 25% of the
value of its total assets would be invested in the securities of any
single issuer;
(d) invest for the purpose of exercising control over management of any
company.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The officers of the Fund manage its day-to-day operations and are responsible to
the Fund's Board of Trustees. The Trustees set broad policies for the Fund and
elect its officers. The following is a list of the Trustees and officers of the
Fund, their addresses and dates of birth and a brief statement of their present
positions, date of birth, address and principal occupations during the past five
years.
<TABLE>
<C> <S>
JOHN T. BENNETT, JR. Trustee of the Fund; President of Squam Investment Management Company, Inc. and
College Road--RFD 3, Great Island Investment Company, Inc.; President of Bennett Management Company
Meredith, NH 03253; from 1988 to 1993.
1/26/29
NANCY J. DUNN Trustee of the Fund; Vice President for Finance and Administration and Treasurer
10 Garden Street, of Radcliffe College since 1991.
Cambridge MA 02138
8/14/51
PHILIP D. ENGLISH Trustee of the Fund; President and Chief Executive Officer of Broventure Company,
16 West Madison Street Inc.; Chairman of the Board of Chektec Corporation and Cyber Scientific, Inc.
Baltimore, MD 21201
8/5/48
WILLIAM A. HUMENUK Trustee of the Fund; Executive Vice President and Chief Administrative Officer of
100 King Street West Philip Services Corp.; Director, Hofler Corp.; Formerly, a Partner in the
P.O. Box 2440, LCD-1, Philadelphia office of the law firm Dechert Price & Rhoads.
Hamilton Ontario, Canada
L8N-456
4/21/42
NORTON H. REAMER* Trustee of the Fund, President and Chairman of the Fund; President, Chief
One International Place Executive Officer and a Director of United Asset Management Corporation; Director,
Boston, MA 02110 Partner or Trustee of each of the Investment Companies of the Eaton Vance Group of
3/21/35 Mutual Funds.
PETER M. WHITMAN, JR.* Trustee of the Fund; President and Chief Investment Officer of Dewey Square
One Financial Center Investors Corporation ("DSI") since 1988; Director and Chief Executive Officer of
Boston, MA 02111 H. T. Investors, Inc., formerly a subsidiary of DSI.
7/1/43
</TABLE>
6
<PAGE>
<TABLE>
<C> <S>
WILLIAM H. PARK Executive Vice President of the Fund; Executive Vice President and Chief Financial
One International Place Officer of United Asset Management Corporation.
Boston, MA 02110
9/19/47
GARY L. FRENCH Treasurer of the Fund; President of UAM Fund Services, Inc. and UAM Fund
211 Congress Street Distributors, Inc., formerly Vice President of Operations, Development and Control
Boston, MA 02110 of Fidelity Investments in 1995; Treasurer of the Fidelity Group of Mutual Funds
7/4/51 from 1991 to 1995.
MICHAEL E. DEFAO Secretary of the Fund; Vice President and General Counsel of UAM Fund Services,
211 Congress Street Inc. and UAM Fund Distributors, Inc.; Associate Attorney of Ropes & Gray (a law
Boston, MA 02110 firm) from 1993 to 1995.
2/28/68
ROBERT R. FLAHERTY Assistant Treasurer of the Fund; Vice President of UAM Fund Services, Inc.;
211 Congress Street formerly Manager of Fund Administration and Compliance of Chase Global Fund
Boston, MA 02110 Services Company from 1995 to 1996; Deloitte & Touche LLP from 1985 to 1995,
9/18/63 Senior Manager.
MICHELLE AZRIALY Assistant Secretary of the Fund; Assistant Treasurer of Chase Global Funds
73 Tremont Street Services Company since 1996. Senior Public Accountant with Price Waterhouse LLP
Boston, MA 02108 from 1991 to 1994.
4/12/69
</TABLE>
- -------------
* Messrs. Reamer and Whitman are deemed to be "interested persons" of the Fund
as that term is defined in the 1940 Act.
REMUNERATION OF TRUSTEES AND OFFICERS
The Fund pays each Trustee, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $1,050 per quarter. In addition, each unaffiliated Trustee receives a
$2,000 meeting fee and reimbursement for travel and other expenses incurred
while attending Board meetings all of which are aggregated for all of the
Trustees and allocated proportionately among the Portfolios of the Fund and UAM
Funds, Inc. (collectively the "Fund Complex"). Trustees who are also officers or
affiliated persons receive no remuneration for their service as Trustees. The
Fund's officers and employees are paid by either the Adviser, United Asset
Management Corporation ("UAM"), UAM Fund Services, Inc. ("UAMFSI") or Chase
Global Funds Services Company ("CGFSC") and receive no compensation from the
Fund.
The following table shows aggregate compensation paid to each of the Fund's
Trustees by the Fund and total compensation paid by the Fund Complex in the
fiscal year ended April 30, 1998. As of June 1, 1998 Trustees and officers of
the Fund owned less than 1% of the Portfolio's outstanding shares.
7
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
PENSION OR TOTAL COMPENSATION
RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT AND
NAME OF PERSON, AGGREGATE COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX
POSITION FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO BOARD MEMBERS
--------------- ---------------------- ------------------- ---------------- ---------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr.
Trustee...................... $6,149 0 0 $33,500
Nancy J. Dunn
Trustee...................... $4,687 0 0 $25,200
Philip D. English
Trustee...................... $6,149 0 0 $33,500
William A. Humenuk
Trustee...................... $6,149 0 0 $33,500
</TABLE>
PRINCIPAL HOLDERS OF SECURITIES
As of the date of this statement of additional information, no person or
organizations held of record or beneficially 5% or more of the shares of the
Portfolio.
Any persons or organizations owning 25% or more of the outstanding shares
of the Portfolio may be presumed to "control" (as that term is defined in the
1940 Act) the 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 the Portfolio.
INVESTMENT ADVISER
CONTROL OF ADVISER
Pacific Financial Research, Inc. (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 over 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 worn leadership and individual investment philosophy and approach. Each
UAM Affiliated Firm also acts as investment advisers to separate series or
Portfolios of UAM Funds, Inc., a registered investment company.
SERVICE PERFORMED BY ADVISER
Pursuant to the Investment Advisory Agreement ("Agreement") between the
Fund and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolio's assets, to continuously review, supervise and
administer the Portfolio's investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of such
Portfolio's assets to be held uninvested.
In the absence of (i) willful misfeasance, bad faith, or gross negligence
on the part of the Adviser in the performance of its obligations and duties
under the Agreement, (ii) reckless disregard by the Adviser of its obligations
and duties under the Agreement, or (iii) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services, the
Adviser shall not be subject to any liability whatsoever to the Fund, for any
error of judgment, mistake of law or any other act or omission in the course of,
or connected with, rendering services under the Agreement.
8
<PAGE>
Unless sooner terminated, the Agreement shall continue for periods of
one year so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of those members of the Board of Trustees of the
Fund who are not parties to the Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Trustees of the Fund or (c) by vote of a
majority of the outstanding voting securities of the Portfolio. The Agreement
may be terminated at any time by the Portfolio, without the payment of any
penalty, by vote of a majority of the outstanding voting securities of the
Portfolio on 60 days' written notice to the Adviser. The Agreement may be
terminated by the Adviser at any time, without the payment of any penalty, upon
90 days' written notice to the Fund. The Agreement will automatically and
immediately terminate in the event of its assignment.
ADVISORY FEES
As compensation for its services as an Adviser, the Portfolio pays the
Adviser an annual fee, in monthly installments calculated by applying the
following annual percentage rates to the Portfolio's average daily net assets
for the month:
1.00% of the Portfolio's $500 million of daily net assets;
0.95% of the Portfolio's next $500 million of daily net assets; and
0.90% of the Portfolio's daily net assets in excess of $1 billion.
Until further notice, the Adviser has voluntarily agreed to waive a portion
of its advisory fees or assume certain expenses of the Portfolio so that the
total operating expenses of the Portfolio do not exceed 1.40% for the
Institutional Class Shares and 1.65% for the Institutional Service Class Shares.
The Adviser intends to maintain this expense limitation through the initial
fiscal year of the Portfolio, but may change or cancel it at any time.
SERVICE AND DISTRIBUTION PLANS
As stated in the Portfolio's Service Class Shares Prospectus, the
Distributor may enter into agreements with broker-dealers and other financial
institutions ("Service Agents"), pursuant to which they will provide
administrative support services to Service Class shareholders who are their
customers ("Customers") in consideration of the Fund's payment of 0.15% (on an
annualized basis) of the average daily net asset value of the Service Class
Shares held by the Service Agent for the benefit of its Customers. Such services
include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account records for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by
shareholders;
(h) distributing current copies of Prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting
dividend and other account options and opening any necessary custody
accounts;
(j) providing account maintenance and accounting support for all
transactions; and
9
<PAGE>
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Agent, provided that any such additional
shareholder services must constitute a permissible non-banking
activity in accordance with the then current regulations of, and
interpretations thereof by, the Board of Governors of the Federal
Reserve System, if applicable.
Each agreement with a Service Agent is governed by a Shareholder Service
Plan (the "Service Plan") that has been adopted by the Fund's Board of Trustees.
Pursuant to the Service Plan, the Board of Trustees reviews, at least quarterly,
a written report of the amounts expended under each agreement with Service
Agents and the purposes for which the expenditures were made. In addition,
arrangements with Service Agents must be approved annually by a majority of the
Fund's Trustees, including a majority of the Trustees who are not "interested
persons" of the company as defined in the 1940 Act and have no direct or
indirect financial interest in such arrangements.
The Board of Trustees has approved the arrangements with Service Agents
based on information provided by the Fund's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an efficient
manner. Any material amendment to the Fund's arrangements with Service Agents
must be approved by a majority of the Fund's Board of Trustees (including a
majority of the disinterested Trustees). So long as the arrangements with
Service Agents are in effect, the selection and nomination of the members of the
Fund's Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of the Company will be committed to the discretion of such non-
interested Trustees.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Distribution Plan for the Service Class Shares of the Fund (the "Distribution
Plan"). The Distribution Plan permits the Fund to pay for certain distribution,
promotional and related expenses involved in the marketing of only the Service
Class Shares.
The Distribution Plan permits the Service Class Shares, pursuant to the
Distribution Agreement, to pay a monthly fee to the Distributor for its services
and expenses in distributing and promoting sales of the Service Class Shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature and Prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, and paying distribution
and maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. In addition, the Service Class Shares may make payments
directly to other unaffiliated parties, who either aid in the distribution of
their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service and
Distribution Plans (the "Plans"), is 0.75% of the Service Class Shares' average
daily net assets for the year. The Fund's Board of Trustees may reduce this
amount at any time. Although the maximum fee payable under the 12b-1 Plan
relating to the Service Class Shares is 0.75% of average daily net assets of
such class, the Board of Trustees has determined that the annual fee, payable on
a monthly basis, under the Plans relating to the Service Class Shares, currently
cannot exceed 0.50% of the average daily net assets represented by the Service
Class. While the current fee which will be payable under the Service Plan and
Distribution Plan has been set at 0.25% and 0.15%, respectively, the Plans
permit a full 0.75% on all assets to be paid at any time following appropriate
Board approval.
All of the distribution expenses incurred by the Distributor and others,
such as broker/dealers, in excess of the amount paid by the Service Class Shares
will be borne by such persons without any reimbursement from such Classes.
Subject to seeking best price and execution, the Fund may, from time to time,
buy or sell portfolio securities from or to firms which receive payments under
the Plans. From time to time, the Distributor may pay additional amounts from
its own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and services
agreements have all been approved by the Board of Trustees of the Fund,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the Plans or any related agreements, by vote cast in
person at a meeting duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Distribution Agreement and the
related agreements must be
10
<PAGE>
approved annually by the Board of Trustees in the same manner, as specified
above. The Portfolio's Service Class Shares have not been offered prior to the
date of this Statement.
Each year the Trustees must determine whether continuation of the Plans is
in the best interest of the shareholders of Service Class Shares and that there
is a reasonable likelihood of the Plans providing a benefit to the Class. The
Plans, the Distribution Agreement and the related agreements with any broker-
dealer or others relating to the Class may be terminated at any time without
penalty by a majority of those Trustees who are not "interested persons" or by a
majority vote of the outstanding voting securities of the Class. Any amendment
materially increasing the maximum percentage payable under the Plans must
likewise be approved by a majority vote of the relevant Class' outstanding
voting securities, as well as by a majority vote of those Trustees who are not
"interested persons." Also, any other material amendment to the Plans must be
approved by a majority vote of the Trustees including a majority of the Trustees
of the Fund having no interest in the Plans. In addition, in order for the Plans
to remain effective, the selection and nomination of Trustees who are not
"interested persons" of the Fund must be effected by the Trustees who themselves
are not "interested persons" and who have no direct or indirect financial
interest in the Plans. Persons authorized to make payments under the Plans must
provide written reports at least quarterly to the Board of Trustees for their
review. The NASD has adopted amendments to its Conduct Rules relating to
investment company sales charges. The Fund and the Distributor intend to operate
in compliance with these rules.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and directs the Adviser to use its best efforts to
obtain the best execution with respect to all transactions for the Portfolio.
In doing so, the Portfolio may pay higher commission rates than the lowest rate
available when the Adviser believes it is reasonable to do so in light of the
value of the research, statistical, and pricing services provided by the broker
effecting the transaction.
It is not the Fund's practice to allocate brokerage or effect principal
transactions with dealers on the basis of sales of Fund shares which may be made
through broker-dealer firms. However, the Adviser may place Portfolio orders
with qualified broker-dealers who refer clients to the Adviser.
Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by the Adviser are 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 Trustees.
ADMINISTRATIVE SERVICES
The Board of Trustees of the Fund approved a Fund Administration Agreement,
effective April 15, 1996 ("Fund Administration Agreement") between UAM Fund
Services, Inc. ("UAMFSI"), a wholly owned subsidiary of UAM, and the Fund.
Pursuant to the terms of the Fund Administration Agreement, UAMFSI manages,
administers and conducts the general business activities of the Fund other than
those which have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolio pursuant to the terms of the Agreement.
UAMFSI has subcontracted some of these services to Chase Global Funds
Services Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, pursuant
to a Mutual Funds Service Agreement between UAMFSI and CGFSC (collectively, with
the Fund Administration Agreement between UAMFSI and the Fund, the
"Agreements").
Pursuant to the terms of the Agreements, the 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. The portfolio-
specific fee is calculated at the annual rate of 0.04% of the aggregate net
assets of the Portfolio.
11
<PAGE>
CGFSC's monthly fee for its services is calculated on an annualized basis as
follows:
$60,000 base fee per portfolio; and
0.025 of 1% of combined UAM Fund assets.
UAMFSI bears all expenses in connection with the performance of its
services under the Fund Administration Agreement. Other expenses to be incurred
in the operation of the Fund are borne by the Fund or other parties, including
taxes, interest, brokerage fees and commissions, if any, salaries and fees of
officers and members of the Board who are not officers, directors, shareholders
or employees of UAMFSI, or the Fund's investment adviser or distributor, SEC
fees and state Blue Sky fees, EDGAR filing fees, processing services and related
fees, advisory and administration fees, charges and expenses of pricing and data
services, independent public accountants and custodians, insurance premiums
including fidelity bond premiums, outside legal expenses, costs of maintenance
of corporate existence, typesetting and printing of Prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund, printing and
production costs of shareholders' reports and corporate meetings, cost and
expenses of Fund stationery and forms, costs of special telephone and data lines
and devices, trade association dues and expenses, and any extraordinary expenses
and other customary Fund expenses.
Unless sooner terminated, the Fund Administration Agreement shall continue
in effect from year to year provided such continuance is specifically approved
at least annually by the Board. The Fund Administration Agreement is
terminable, without penalty, by the Board or by UAMFSI, on not less than ninety
(90) days' written notice. The Fund Administration Agreement shall
automatically terminate upon its assignment by UAMFSI without the prior written
consent of the Fund.
UAMFSI will from time to time employ or associate with such person or
persons as may be fit to assist them in the performance of the Fund
Administration Agreement. Such person or persons may be officers and employees
who are employed by both UAMFSI and the Fund. The compensation of such person
or persons for such employment shall be paid by UAMFSI and no obligation will be
incurred by or on behalf of the Fund in such respect.
Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which it provides
services.
CUSTODIAN
The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts
02110, serves as independent accountants for the Fund.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves as
the Funds distributor. Shares of the Fund are offered continuously. While the
Distributor will use its best efforts to sell shares of the Fund, it is not
obligated to sell any particular amount of shares.
12
<PAGE>
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may quote various performance figures to illustrate the
past performance of each class of the Portfolio. Performance quotations by
investment companies are subject to rules adopted by the SEC, 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 SEC.
Current yield and average annual compounded total return quotations used by the
Fund are based on the standardized methods of computing performance mandated by
the SEC. 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 return for the Portfolio is calculated according
to the following formula:
P (1 + T)/n/ = ERV
where:
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).
YIELD
Current yield reflects the income per share earned by the Portfolio's
investments.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing the result. Expenses accrued for the
period include any fees charged to all shareholders during the base period.
Yield for a Portfolio is calculated according to the following formula:
Yield = 2((a-b)/(d)+1)6
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
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COMPARISONS
To help investors better evaluate how an investment in a Portfolio of the
Fund might satisfy its investment objective, advertisements regarding the Fund
may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. Please see Appendix B for publications, indices and averages which may
be used.
In assessing such comparisons of performance, an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in 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 Portfolio will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name The Regis Fund II as a Delaware
business trust on May 18, 1994. On October 31, 1995, the name of the Fund was
changed to "UAM Funds Trust". The Fund's principal executive office is located
at One International Place, 44th Floor, 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 Agreement and Declaration of Trust permits the Fund to issue an unlimited
number of shares of beneficial interest, without par value. The Trustees have
the power to designate one or more series ("Portfolios") or classes of shares of
beneficial interest without further action by shareholders.
The Board of Trustees has classified an additional class of shares in
the Portfolio, known as Advisor Class Shares. As of the date of this Statement
of Additional Information, no Advisor Class Shares have been offered by the
Portfolio.
The shares of the Portfolio, when issued and paid for as provided for in
the Prospectuses will be fully paid and nonassessable, have no preference as to
conversion, exchange, dividends, retirement or other features and have no
preemptive rights. The shares of the Fund have noncumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of Trustees can elect 100% of the Trustees, 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 or her name of the
books of the Fund. Institutional Class, Service Class and Advisor Class shares
represent an interest in the same assets of a Portfolio and are identical in all
respects except that the Service Class and Advisor Class Shares bear certain
expenses related to shareholder servicing and the distribution of shares, and
have exclusive voting rights with respect to matters relating to such
expenditures.
In the event of liquidation of the Fund, the holders of the shares of each
Portfolio or any class thereof that has been established and designated shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Portfolio, or in the case of a class, belonging to that
Portfolio and allocable to that class, over the liabilities belonging to that
Portfolio or class. The assets so distributable to the holders of shares of any
particular Portfolio or class thereof shall be distributed to the holders in
proportion to the number of shares of that Portfolio or class thereof held by
them and recorded on the books of the Fund. The liquidation of any Portfolio or
class thereof may be authorized at any time by vote of a majority of the
Trustees then in office.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's net
investment income, if any, together with any net realized capital gains
quarterly in the amount and at the times that will avoid both income (including
capital gains) taxes incurred on it and the imposition of the federal excise tax
on undistributed income and capital gains. The amounts of any income dividends
or capital gains distributions cannot be predicted. See the discussion under
"Dividends, Capital Gains Distributions and Taxes" in the Prospectuses.
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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 Prospectuses.
As set forth in the Prospectuses, unless the shareholder elects otherwise
in writing, all dividend and capital gains distributions are automatically
reinvested in additional shares of the 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 of the Fund 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 realized by another Portfolio.
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.
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APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS
Aaa -- Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, modifier 2 indicates a mid-range rating and the modifier 3
indicates that the issue ranks at the lower end of the rating category.
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STANDARD & POOR'S RATINGS SERVICES CORPORATE BOND RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation and indicate an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC -- Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C -- The rating C is reserved for income bonds on which no interest is
being paid.
D -- Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus (+) or minus
(-) sign, which is used to show relative standing within the major rating
categories, except in the AAA category.
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.
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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 the 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.
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
Portfolio will agree to repurchase such instruments, at the Portfolio's 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 Portfolio is 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 risks which are not typically associated with investing in U.S.
companies. Since the securities of foreign companies are frequently
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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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APPENDIX B - COMPARISONS
With respect to the comparative measures of performance for equity securities
described herein, comparisons of performance assume reinvestment of dividends,
except as otherwise stated below.
(a) CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. --
analyzes price, current yield, risk, total return and average rate of
return (average annual compounded growth rate) over specified time periods
for the mutual fund industry.
(b) Composite Indices -- 60% Standard & Poor's 500 Stock Index, 30% Lehman
Brothers Long-Term Treasury Bond and 10% U.S. Treasury Bills; 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.
(c) 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.
(d) Donoghue's Money Fund Average -- is an average of all major money market
fund yields, published weekly for 7 and 30-day yields.
(e) 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.
(f) Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Investor's Daily, Lipper Analytical Services, Inc.,
Morningstar, Inc., New York Times, Personal Investor, Wall Street Journal
and Weisenberger Investment Companies Service -- publications that rate
fund performance over specified time periods.
(g) 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.
(h) Historical data supplied by the research departments of First Boston
Corporation, J.P. Morgan & Co, Inc., Salomon Brothers, Merrill Lynch & Co.,
Inc., Lehman Brothers, Inc. and Bloomberg L.P.
(i) Lehman Brothers Government/Corporate Index -- is a combination of the
Government and Corporate Bond Indices. The Government Index includes
public obligations of the U.S. Treasury, issues of the Government agencies,
and corporate debt backed by the U.S. Government. The Corporate Bond Index
includes fixed-rate nonconvertible corporate debt. Also included are
Yankee Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. All issues are investment grade
(BBB) or higher, with maturities of one to ten years and an outstanding par
value of at least $100 million for U.S. Government issues and $25 million
for others.. Any security downgraded during the month is held in the index
until month-end and then removed. All returns are market value weighted
inclusive of accrued income.
(j) 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.
(k) Lipper -- Mutual Fund Performance Analysis; and Lipper -- Fixed Income Fund
Performance Analysis -- measures total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestments of all distributions,
exclusive of any applicable sales charges.
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(l) Lipper Capital appreciation Funds Index -- a fund that aims at maximum
capital appreciation, frequently by means of 100% or more portfolio
turnover, leveraging, purchasing unregistered securities, purchasing
options, etc. the fund may take large cash positions.
(m) Lipper Small Cap Funds Index -- a fund that by prospectus or portfolio
practice invests primarily in companies with market capitalizations of less
than $1 billion at the time of purchase.
(n) Lipper 1-5 Year Short Investment Grade Debt Funds Average -- is an average
of 160 funds that invest at least 65% of assets in investment grade debt
issues (rated in top four grades with dollar-weighted average maturities of
5 years or less.
(o) Merrill Government/Corporate 1 to 5 Year Index -- is an unmanaged index
composed of U.S. Treasuries, agencies and corporates with maturities from 1
to 4.99 years. Corporates are investment grade only (rated in the top four
grades).
(p) Merrill Lynch 1-4.99 Year Corporate/Government Bond Index -- is an
unmanaged index composed of U.S. Treasuries, agencies and corporates with
maturities from 1 to 4.99 years. Corporates are investment grade only
(rated in the top four grades).
(q) 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.
(r) Mutual Fund Source Book, published by Morningstar, Inc. analyzes price,
yield, risk and total return for equity funds.
(s) 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.
(t) 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.
(u) Russell 2000 -- composed of the 2,000 smallest stocks in the Russell 3000,
a market value weighted index of the 3,000 largest U.S. publicly-traded
companies.
(v) Russell Mid-Cap Growth Index -- is composed of the 800 smallest stocks in
the Russell 1000 Index, with an average capitalization of $1.96 billion.
(w) 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.
(x) Salomon Brothers GNMA Index -- includes pools of mortgages originated by
private lenders and guaranteed by the mortgage pools of the Government
National Mortgage Association.
(y) 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.
(z) Salomon Brothers Three-Month T-Bill Average -- the average for all Treasury
bills for the previous three-month period.
(aa) Savings and Loan Historical Interest Rates -- as published by the U.S.
Savings and Loan League Fact Book.
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(bb) Standard & Poor's 400 Mid Cap Index -- consists of 400 domestic stocks
chosen for market size, liquidity, and industry group representation. It
is also a market-value weighted index and was the first benchmark of mid
cap stock price movement.
(cc) 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.
(dd) 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.
(ee) Value Line -- composed of over 1,600 stocks in the Value Line Investment
Survey.
(ff) 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.
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