<PAGE>
As filed with the Securities and Exchange Commission on November 16, 1998
Securities Act File No. 33-79858
Investment Company Act of 1940 File No. 811-8544
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 25 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 26 /X/
UAM FUNDS TRUST
(Exact Name of Registrant as specified in Charter)
c/o United Asset Management Corporation
One International Place
Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Registrant's Telephone Number (617) 330-8900
Michael E. DeFao, Secretary
UAM Fund Services, Inc.
211 Congress Street
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
---------------------------------------
COPY TO:
Audrey C. Talley, Esq.
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3469
IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE
(CHECK APPROPRIATE BOX):
[_] Immediately upon filing pursuant to Paragraph (b)
[_] on (date) pursuant to Paragraph (b)
[_] 60 days after filing pursuant to paragraph (a) (1)
[_] on (date) pursuant to paragraph (a) (1)
[X] 75 days after filing pursuant to Paragraph (a) (2)
[_] on (date) pursuant to Paragraph (a) (2) of Rule 485.
<PAGE>
PART A
UAM FUNDS TRUST
The following Prospectuses are included in this Post-Effective Amendment No. 25
filed on November 13, 1998:
Dwight Capital Preservation Portfolio Institutional Class Shares
Dwight Capital Preservation Portfolio Institutional Service Class Shares
The following Prospectuses are contained in Post-Effective Amendment No. 24
filed July 10, 1998:
. BHM&S Total Return Bond Portfolio Institutional Class Shares
. BHM&S Total Return Bond Portfolio Institutional Service Class Shares
. Chicago Asset Management Intermediate Bond Portfolio Institutional Class
Shares
. Chicago Asset Management Value/Contrarian Portfolio Institutional Class
Shares FPA Crescent Portfolio Institutional Class Share
. FPA Crescent Portfolio Institutional Service Class Shares
. Hanson Equity Portfolio Institutional Class Shares
. Jacobs International Octagon Portfolio Institutional Class Shares
. MJI International Equity Portfolio Institutional Class Shares
. MJI International Equity Portfolio Institutional Service Class Shares
. TJ Core Equity Portfolio Institutional Service Class Shares
The following Prospectuses are contained in Post-Effective Amendment No. 23
filed July 2, 1998:
. Clipper Focus Portfolio Institutional Class Shares
. Clipper Focus Portfolio Institutional Service Class Shares
The following Prospectus is contained in Post-Effective Amendment No. 22 filed
June 24, 1998:
. PR Mid Cap Growth Portfolio Institutional Class Shares
The following Prospectuses are contained in Post-Effective Amendment No. 21
filed June 19, 1998:
. Heitman Real Estate Portfolio Institutional Class Shares
. Heitman Real Estate Portfolio Advisor Class Shares
The following Prospectus is contained in Post-Effective Amendment No. 18 filed
January 23, 1998:
. Cambiar Opportunity Portfolio Institutional Class Shares
-2-
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UAM Funds
Funds for the Informed Investor
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
Institutional Class Prospectus , 199_
[LOGO OF UAM APPEARS HERE]
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Portfolio Summary................................................ 1
What are the Objectives of the Portfolio?....................... 1
What are the Principal Investment Strategies of the Portfolio?.. 1
What are the Principal Risks of the Portfolio................... 1
What are the Portfolio's Fees and Expenses?..................... 1
Investing With The UAM Funds..................................... 3
Buying Shares................................................... 3
Redeeming Shares................................................ 4
Exchanging Shares............................................... 4
Transaction Policies............................................ 4
Account Policies................................................. 8
Small Accounts.................................................. 8
Distributions................................................... 8
Federal Taxes................................................... 8
Fund Details..................................................... 10
Principal Investments and Risks of the Portfolio................ 10
Other Investment Practices and Strategies....................... 12
Year 2000....................................................... 13
Investment Management........................................... 13
Shareholder Servicing Arrangements.............................. 15
</TABLE>
<PAGE>
Portfolio Summary
WHAT ARE THE OBJECTIVES OF THE PORTFOLIO?
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The Dwight Capital Preservation Portfolio seeks a level of current income
higher than that of money market funds, while attempting to preserve
principal and maintain a stable net asset value per share. The portfolio
cannot guarantee it will meet its investment objectives. The portfolio may
change its investment objective without shareholder approval.
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE PORTFOLIO?
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The following is a brief description of the principal investment strategies
of the Dwight Capital Preservation Portfolio. For more information see
"PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO."
The portfolio invests in a variety of debt securities, money market
instruments, options and other instruments. The portfolio seeks to
stabilize its NAV by purchasing wrapper agreements (agreements to offset
changes in the value of a security) from financial institutions, such as
insurance companies and banks. The portfolio is not a money market fund.
The portfolio offers its shares only to individual investors who invest in
the portfolio through an individual retirement account ("IRA"), Education
IRA, SEP-IRA, Simple IRA, ROTH-IRA or KEOGH Plan.
WHAT ARE THE PRINCIPAL RISKS OF THE PORTFOLIO
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The following is a summary of the principal risks associated with investing
in the portfolio. For more information see "PRINCIPAL INVESTMENTS AND RISKS
OF THE PORTFOLIO."
Risks Common To All Mutual Funds
At any time, your investment in a mutual fund may be worth more or less
than the price you originally paid for it. You may lose money by investing
in any mutual fund because:
. The value of the securities it owns changes, sometimes rapidly and
unpredictably.
. The mutual fund is not successful in reaching its goal because of its
strategy or because it did not implement its strategy properly.
. Unforeseen occurrences in the securities markets negatively affect the
mutual fund.
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What are the Principal Risks of the Portfolio?
Although the portfolio tries to maintain a stable NAV, since it invests in
debt securities, the value of its holdings may fluctuate based on market
conditions, interest rates, credit quality of the underlying investments
and economic and political events. The value of debt securities tends to
fall when interest rates rise. The portfolio could also lose money if an
issuer of a security or a provider of a wrapper agreement defaults on its
obligation or if its credit quality worsens. The portfolio cannot guarantee
that wrapper agreements will be available, that it will purchase wrapper
agreements or that, if purchased, wrapper agreements will offset changes in
its NAV. Without wrapper agreements, the portfolio will not be able to
maintain a stable NAV. Buying wrapper agreements to stabilize prices is
likely to reduce the return of the portfolio.
WHAT ARE THE PORTFOLIO'S FEES AND EXPENSES?
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Fees and Expenses of the Portfolio
This table describes the fees and expenses that you may pay if you buy and
hold shares of the portfolio. This table is presented in the format
required by the Securities and Exchange Commission (SEC) and may not
reflect the actual expenses you would have paid as a shareholder in the
portfolio.
Shareholder Fees (Fees Paid Directly From Your Account)
Redemption Fee (as a percentage of amount redeemed) 2.00%
Annual Fund Operating Expenses (Expenses That Are Deducted From the Assets
of the Portfolio)
Management Fees 0.50%
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Other Expenses* 0.40%
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Total Annual Fund Operating Expenses 0.90.%
===========================================================================
* Other Expenses are based on estimated amounts for the first fiscal
year of the portfolio.
Actual Fees and Expenses
Due to certain expense limits, the ratios stated in the table may be higher
than the expenses you will actually pay as an investor in the portfolio.
The portfolio expects to pay 0.85% of its average daily net assets in total
operating expenses.
Example
This example can help you to compare the cost of investing in the portfolio
to the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a portfolio for the periods shown and then redeem all of your
shares at the end of those periods. It also assumes a 5% return on your
investment each year and that the portfolio's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year 3 Years
---------------------------------------------------------------------------
If you redeem your shares $51 $32
---------------------------------------------------------------------------
If you did not redeem your shares, you would pay $ 9 $29
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Investing with the UAM Funds
BUYING SHARES
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TO OPEN AN ACCOUNT TO BUY MORE SHARES
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By Mail Send a check or money Send a check and, if possible,
order and your account the "Invest by Mail" stub that
application to the UAM accompanied your statement to
Funds. Make checks the UAM Funds. Be sure your
payable to "UAM Funds" check identifies clearly your
(the UAM Funds will not name, account number and the
accept third-party portfolio into which you want
checks). to invest.
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By Wire Call the UAM Funds for an Call the UAM Funds to get a
account number and wire wire control number and wire
control number and then your money to the UAM Funds.
send your completed
account application to
the UAM Funds.
Wiring Instructions
United Missouri Bank
ABA # 101000695
UAM Funds
DDA Acct. # 9870964163
Ref: portfolio name/account number/
account name/wire control number
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By Automatic Not Available To set up a plan, mail a
Investment completed application to the
Plan (Via ACH) UAM Funds. To cancel or
change a plan, write to the
UAM Funds. Allow up to 15
days to create the plan and
3 days to cancel or change it.
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Minimum $2,500 for all accounts, $100 for all accounts
Investments except IRAs ($500) and
spousal IRAs ($250)
UAM Funds
PO Box 419081
Kansas City, MO 64141-6081
(Toll free) 1-877-UAM-LINK (826-5465)
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REDEEMING SHARES
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By Mail Send a letter signed by all registered parties on the
account to UAM Funds specifying the portfolio, the account
number and the dollar amount or number of shares you wish
to redeem. Certain shareholders may have to include
additional documents.
------------------------------------------------------------------------------
By Telephone You must first establish the telephone redemption
privilege (and, if desired, the wire redemption privilege)
by completing the appropriate sections of the account
application.
Call 1-877-UAM-Link to redeem your shares. Based on your
instructions, the UAM Funds will mail your proceeds to you
or wire them to your bank.
------------------------------------------------------------------------------
By If your account balance is at least $10,000, you may
Systematic transfer as little as $100 per month or per quarter from
Withdrawal Plan your UAM account to your financial institution.
(Via ACH)
To participate in this service, you must complete the
appropriate sections of the account application and mail
it to the UAM Funds.
EXCHANGING SHARES
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At no charge, you may exchange shares of one UAM Fund for shares of the same
class of any other UAM Fund by writing to or calling the UAM Funds. Before
exchanging your shares, read the prospectus of the UAM Fund for which you want
to exchange, which you may obtain from the UAM Funds. You may not exchange
shares represented by certificates over the telephone. You may only exchange
shares between accounts with identical registrations (i.e., the same names and
addresses).
TRANSACTION POLICIES
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Calculating Your Share Price
You may buy, sell or exchange shares of a UAM Fund at a price equal to its net
asset value (NAV) next computed after it receives your order. The portfolio
calculate its NAV as of the close of trading on the New York Stock Exchange
(NYSE) (generally 4:00 p.m. Eastern Time) on each day the NYSE is open.
Therefore, to receive the NAV on any given day, the UAM Funds must accept your
order by the close of trading on the NYSE that day. Otherwise, you will
receive the NAV that is calculated on the close of trading on the following
day. The UAM Funds are open for business on the same days as the NYSE, which
is closed on weekends and certain holidays.
4
<PAGE>
Buying or Selling Shares through a Financial Intermediary
You may buy, exchange or redeem shares of the UAM Funds through a financial
intermediary (such as a financial planner or adviser). Generally, to buy or
sell shares at the NAV of any given day your financial intermediary must
receive your order by the close of trading on the NYSE that day. Your
financial intermediary is responsible for transmitting all subscription and
redemption requests, investment information, documentation and money to the
UAM Funds on time.
Certain financial intermediaries have agreements with the UAM Funds that allow
them to enter confirmed purchase or redemption orders on behalf of clients and
customers. Under this arrangement, the financial intermediary must send your
payment to the UAM Funds by the time they price their shares on the following
day. If your financial intermediary fails to do so, it may be responsible for
any resulting fees or losses.
Calculating NAV
The UAM Funds calculate their NAV by adding the total value of their assets,
subtracting their liabilities and then dividing the result by the number of
shares outstanding. The UAM Funds value their investments with readily
available market quotations at market value. Investments that do not have
readily available market quotations are valued at fair value, according to
guidelines established by the UAM Funds. The UAM Funds may also value
securities at fair value when events occur that make established valuation
methods (such as stock exchange closing prices) unreliable. The UAM Funds
value debt securities that will mature within 60 days at amortized cost, which
approximates market value.
In-Kind Transactions
Under certain conditions and at the UAM Funds' discretion, you may pay for
shares of a portfolio with securities instead of cash.
Payment of Redemption Proceeds
The UAM Funds will pay for all shares redeemed within seven days after they
receive a redemption request in proper order. If you redeem shares that were
purchased by check, you will not receive your redemption proceeds until the
check has cleared, which may take up to 15 days. You may avoid these delays
by paying for shares with a certified check, bank check or money order.
Redemption Fee
The portfolio will deduct a 2.00% redemption fee from the redemption proceeds
of any shareholder redeeming shares of the portfolio, except those that:
. Die or become disabled.
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<PAGE>
. Are at least 59-1/2 1/2and have held their shares continuously for at least
12 months.
The portfolio charges the redemption fee primarily to offset certain
transaction costs and administrative expenses the portfolio incurs because of
the redemption. As the portfolio is intended for long-term investment, the
redemption fee is also designed to discourage shareholders from trying to take
advantage of short-term interest rate movements.
Signature Guarantee
You must have your signature guaranteed when (1) you want the proceeds from
your redemption sent to a person or address different from that registered on
the account, or (2) you request a transfer of your shares.
You may obtain a signature guarantee from most banks, savings institutions,
securities dealers, national securities exchanges, registered securities
associations, clearing agencies and other guarantor institutions. A notary
public cannot guarantee a signature.
Telephone Transactions
The UAM Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; they may be liable for any losses if
they fail to do so. The UAM Funds will be responsible for any loss, liability,
cost or expense for following instructions received by telephone that it
reasonably believes to be genuine.
Rights Reserved by the UAM Funds
Purchases
At any time and without notice, the UAM Funds may:
. Stop offering shares of a portfolio.
. Reject any purchase order.
. Bar an investor engaged in a pattern of excessive trading from buying
shares of any portfolio. (Excessive trading can hurt the performance of a
portfolio by disrupting its management and by increasing its expenses.)
Redemptions
The UAM Funds may suspend your right to redeem if:
. An emergency exists and a portfolio cannot dispose of its investments or
fairly determine their value.
. Trading on the NYSE is restricted.
. The SEC tells the UAM Funds to delay redemptions.
6
<PAGE>
At any time, the UAM Funds may change or eliminate any of the redemption
methods described above, except redemption by mail.
Exchanges
The UAM Funds may:
. Modify or cancel the exchange program at any time on 60 days' written
notice to shareholders.
. Reject any request for an exchange.
. Limit or cancel a shareholder's exchange privilege, especially when an
investor is engaged in a pattern of excessive trading.
7
<PAGE>
Account Policies
SMALL ACCOUNTS
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The UAM Funds may redeem your shares without your permission if the value of
your account falls below 50% of the required minimum initial investment, but
not because of a drop in the value of your shares caused by market
fluctuations. This provision does not apply to retirement accounts and certain
other accounts.
DISTRIBUTIONS
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Normally, the portfolio declares its net investment income daily and pays it
monthly. In addition, it distributes any net capital gains once a year. The
UAM Funds will automatically reinvest dividends and distributions in
additional shares of the portfolio, unless you elect on your account
application to receive them in cash.
To maintain a stable NAV, the portfolio may have to declare and pay dividends
in amounts that are not equal to the amount of net investment income it
actually earns. This may cause the portfolio to take some or all of the
following actions:
. If the portfolio distributes more money than it actually earned, it may
have to make a distribution that may be considered a return of capital.
. If the income the portfolio earns exceeds the amount of dividends
distributed, the portfolio may have to distribute that excess income to
shareholders and declare a reverse split of its shares.
The portfolio may also have to distribute its net capital gains, in which
would cause it to split its shares. Share splits or reverse share splits will
cause the number of shares owned by shareholders to increase or decrease while
allowing the NAV of the portfolio to remain stable.
FEDERAL TAXES
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The following is a summary of the federal income tax consequences of investing
in the UAM Funds. You may also have to pay state and local taxes on your
investment. You should always consult your tax advisor for specific guidance
regarding the tax effect of your investment in the UAM Funds.
Taxes on Distributions
The distributions of the portfolio will generally be taxable to shareholders
as ordinary income or capital gains (which may be taxable at different rates
depending on the length of time the portfolio held the relevant assets). You
will be subject to income tax on these distributions regardless whether they
are paid in cash or reinvested in additional shares. Once a year UAM Funds
will
8
<PAGE>
send you a statement showing the types and total amount of distributions
you received during the previous year.
You should note that if you purchase shares just before a distribution, the
purchase price would reflect the amount of the upcoming distribution. In this
case, you would be taxed on the entire amount of the distribution received,
even though, as an economic matter, the distribution simply constitutes a
return of your investment. This is known as "buying into a dividend" and
should be avoided.
Taxes on Exchanges and Redemptions
When you redeem or exchange shares in any portfolio, you may recognize a gain
or loss for income tax purposes. This gain or loss will be based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Any loss
realized on shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that were received
with respect to the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-
qualified plan) will not be currently taxable.
Backup Withholding
By law, the UAM Funds must withhold 31% of your distributions and proceeds if
you have not provided complete, correct taxpayer information.
9
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Fund Details
PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO
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The following is a brief description of the principal investment strategies
that the Dwight Capital Preservation Portfolio may employ in seeking its
objectives. This discussion is in addition to the discussion set forth in the
"PORTFOLIO SUMMARY." For more information concerning these investment
practices and their associated risks, please read the "PORTFOLIO SUMMARY" and
the statement of additional information (SAI). The portfolio may change these
strategies without shareholder approval.
The portfolio invests in a variety of debt securities, money market
instruments, derivatives, commingled funds of debt securities and other
instruments. The portfolio seeks to stabilize its NAV by purchasing wrapper
agreements with financial institutions, such as insurance companies and banks
(wrap providers). While not fixed at $1.00 per share like a money market fund,
the wrapper agreements are likely to cause the net asset value of the
portfolio to be considerably more stable than a typical high-quality fixed-
income fund.
The portfolio is not a money market fund and is not designed to maintain a
stable NAV of $1.00 per share. A money market fund will generally have a
shorter average maturity than the portfolio and its yield will tend to more
closely track the direction of current market rates than the yield of the
portfolio. Over the long-term, however, the adviser believes the portfolio
will offset those differences by producing higher returns than a money market
fund.
Debt Securities
The portfolio will invest primarily in debt securities that are rated at the
time of purchase in the top rating category by any one rating agency. The
portfolio may also invest in lower-rated debt securities, but not less than
investment-grade, or as permitted by its wrapper agreements. The adviser
will review any security that loses its rating or has its rating reduced after
the portfolio purchased it and will make a determination to keep or sell such
securities. The portfolio also invests in liquid short-term investments that
are rated, at the time of purchase, in one of the top two short-term rating
categories by any one rating agency.
Debt securities are securities issued by the U.S. government and its agencies,
corporate debt securities, mortgage-backed and asset-backed securities,
commercial paper and certificates of deposit. These securities may have
varying interest rate schedules and maturities (the dates when a debt
instrument is due and payable). Asset-backed and mortgage-backed securities
are securities that are backed by pools of loans or mortgages assembled for
sale to investors by various governmental agencies and private issuers.
Mortgage-backed securities may generally take two forms: pass-throughs and
collateralized mortgage obligations (CMOs). The average duration (the
10
<PAGE>
investment life of a security) of the portfolio will normally range from 1.5
to 4.0 years.
Risks of Debt Investing
The value of a debt security generally moves in the opposite direction from
interest rates (i.e., if interest rates go up the value of the bond will go
down, and vice versa). Interest rate changes may cause people to pay off
mortgage-backed and asset-backed securities earlier or later than expected,
which may shorten or lengthen the maturity or duration (a measure of the
investment life of a security) of the portfolio and may cause its share price
and yield to fall.
The credit rating or financial condition of an issuer may affect the value of
a debt security. Generally, the lower the quality rating of a security, the
greater the risks that the issuer will fail to pay interest and return
principal. To compensate investors for taking on increased risk, issuers with
lower credit ratings usually offer their investors higher interest rates than
issuers with better credit ratings. If an issuer defaults or becomes unable to
honor its financial obligations, the bond will lose some or all of its value.
Wrapper Agreements
A wrapper agreement obligates the wrap provider to maintain the book value
(the adjusted cost basis of a security) of some or all of the portfolio's
assets (covered assets). Under a typical wrapper agreement, if the portfolio
sells a covered asset for less than book value, the wrap provider will pay the
portfolio the difference. If the portfolio sells a security for more than its
book value, the portfolio will pay the wrap provider the difference. In
purchasing a wrapper agreement, the portfolio trades the potential for capital
appreciation and some yield for protection from a decline in the value of its
holdings caused by changes in interest rates.
The portfolio also anticipates that the value of the wrapper agreements will
move in the opposite direction from the value of the covered assets. When the
value of the covered assets is less than their book value, the portfolio will
treat the deficiency as an asset. Similarly, when the value of the covered
assets is more than their book value, the amount of such excess will be a
liability of the portfolio. Normally, the portfolio expects the sum of the
total value of its wrapper agreements plus the total value of all of its
covered assets to equal the book value of its covered assets.
The portfolio will enter into wrapper agreements with wrap providers that are
rated at the time of purchase in the top two rating categories by any one
rating agency.
Risks of Wrapper Agreements
The portfolio cannot guarantee that the combination of securities and wrapper
agreements will provide a constant NAV or a current rate of return that is
higher than a money market mutual fund.
11
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The portfolio may have to maintain a specified percentage of its total assets
in short-term investments (liquidity reserve) to cover redemptions and
portfolio expenses. The obligation to maintain a liquidity reserve may result
in a lower return for the portfolio than if it had invested in longer-term
debt securities.
The value of your shares might decline if:
. The wrap provider defaults or has its credit rating lowered.
. An issuer of a security defaults on payments of principal or interest or
its credit rating is downgraded, which may require the portfolio to sell
covered assets quickly and at prices that may not fully reflect their
current value. Wrap providers do not typically assume the credit risk
associated with the issuer of any covered assets. In addition, downgrades
below investment-grade and defaults by the issuer of covered assets usually
will cause the wrap provider to remove such assets from the coverage of a
wrapper agreement.
. The portfolio is unable to obtain suitable wrapper agreements. The
portfolio may elect not to cover some or all of its assets with wrapper
agreements if wrapper agreements are not available or the adviser believes
that the terms of available wrapper agreements are unfavorable. In
addition, the portfolio might not be able to replace existing wrapper
agreements upon maturity, default or termination with other suitable
wrapper agreement.
There is no active trading market for wrapper agreements and the portfolio
does not expect one to develop; therefore, the portfolio will consider wrapper
agreements illiquid. The portfolio may invest up to 15% of its net assets in
illiquid securities.
OTHER INVESTMENT PRACTICES AND STRATEGIES
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As described below the portfolios may invest in derivatives and may deviate
from their investment strategies from time to time. In addition, they may
employ investment practices that are not described in this prospectus,
including foreign securities, repurchase agreements, when-issued and forward
commitment transactions, lending of securities, borrowing and other
techniques. For more information concerning the risks associated with these
investment practices, you should read the SAI.
Derivatives
The portfolio may buy and sell derivatives, including futures and swaps.
Derivatives are often more volatile than other investments and may magnify a
portfolio's gains or losses. A portfolio may lose money if the adviser:
. Fails to predict correctly the direction in which the underlying asset or
economic factor will move.
. Judges market conditions incorrectly.
12
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. Employs a strategy that does not correlate well with the investments of the
portfolio.
Portfolio Turnover
The portfolio may buy and sell investments relatively often and estimates that
its annual portfolio turnover rate will not exceed 200%. Such a strategy
often involves higher expenses, including brokerage commissions, and may
increase the amount of capital gains, particularly short-term gains realized
by the portfolio. Shareholders must pay tax on such capital gains.
YEAR 2000
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Many computer programs in use today cannot distinguish the year 2000 from the
year 1900 because of the way they encode and calculate dates. Consequently,
these programs may not be able to perform necessary functions and could
disrupt the operations of the UAM Funds or financial markets in general. The
year 2000 issue affects all companies and organizations, including those that
provide services to the UAM Funds and those in which the UAM Funds invest.
The UAM Funds and their advisers, administrator, distributor and transfer
agent are taking steps they believe are reasonably necessary to address any
portfolio-related year 2000-related computer problems. They are actively
working on necessary changes to their own computer systems to prepare for the
year 2000 and expect that their systems will be adapted before that date.
They are also requesting information on each service provider's state of
readiness and contingency plan. However, at this time the degree to which the
year 2000 issue will affect the UAM Funds' investments or operations cannot be
predicted. Any negative consequences could adversely affect your investment in
the UAM Funds.
INVESTMENT MANAGEMENT
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Investment Adviser
Dwight Asset Management Company, a Delaware corporation located at 125 College
Street, Burlington, Vermont 05401, is the investment adviser to the portfolio.
Dwight Asset Management Company manages and supervises the investment of the
portfolio's assets on a discretionary basis. Dwight Asset Management Company,
an affiliate of United Asset Management Corporation, has provided investment
management services to corporations, pension and profit-sharing plans, 401(k)
and thrift plans since 1983. For its services, the portfolio pays Dwight Asset
Management Company fee of ____% of its average net assets.
In addition, the adviser has voluntarily agreed to limit the total annual fund
operating expenses of the portfolio to 0.85%. The adviser intends to continue
this expense limitation until further notice. To maintain this expense
limit,
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the adviser may waive a portion of its advisory fee and/or reimburse
certain expenses of the portfolios.
Portfolio Managers
Listed below are the investment professionals of the adviser that will have
primary responsibility for the day-to-day management of the portfolio and a
description of their business experience during the past five years.
<TABLE>
<CAPTION>
Manager Experience
- --------------------------------------------------------------------------------------------
<S> <C>
John K. Dwight Mr. Dwight founded Dwight Asset Management Company
President in 1983. Mr. Dwight has managed stable value products
for the Dwight Asset Management since 1978.
- --------------------------------------------------------------------------------------------
Laura Dagan Ms. Dagan joined Dwight Asset Management Company in
CFA, Managing Director 1987 and has worked in investment management since
1978.
- --------------------------------------------------------------------------------------------
Alan R. Matson Mr. Matson has been with Dwight Asset Management
CFA, Senior Vice President Company since 1995. Before then he worked as a
securities trader at Nomura Securities.
</TABLE>
Adviser's Historical Performance
The adviser manages accounts of fixed-income securities that have
substantially similar investment objectives as the portfolio. The adviser
manages these accounts using techniques and strategies substantially similar,
though not always identical, to those used to manage the portfolio.
Composites of the performance of all of these accounts are listed below. The
performance data for the managed accounts reflects deductions of all fees and
expenses. Because separately managed accounts may have different fees and
expenses than the portfolio, their investment returns may differ from those of
the portfolio. All fees and expenses of the separate accounts were less than
the 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.
The separately managed accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code. If they were, their
returns might have been lower. The performance of these separate accounts is
not intended to predict or suggest the performance of the portfolio and may be
calculated differently than the performance of the portfolio.
<TABLE>
<CAPTION>
Dwight Asset
Management Ryan 5 Year Merrill Lynch 3-
Company GIC. Master Month Treasury
Composite* Index+ Bill Index#
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Annualized Return For
Various Periods Ended
09/30/98 (annualized
1-year 6.94% 6.57% 5.36%
- ---------------------------------------------------------------------------------------------------------------
3-years 7.12% 6.66% 5.41%
- ---------------------------------------------------------------------------------------------------------------
5-years 7.45% 6.98% 5.14%
- ---------------------------------------------------------------------------------------------------------------
10 years 8.89% 8.01% 5.82%
- ---------------------------------------------------------------------------------------------------------------
Cumulative Since Inception
(__/__/__)
</TABLE>
14
<PAGE>
* The Dwight All Funds Composite reflects the total return, after all
investment management fees and expenses are deducted, of all stable value
retirement fund accounts included in its Separate Account Composite and its
Pooled Fund Composite. All returns are dollar weighted, and are net of
fees and expenses. Net fees and expenses have ranged from an average of
0.10% in 1994 to 0.14% as of 9/30/98.
+ The Ryan 5 year GIC Master Index is the primary benchmark used in the
evaluation of stable value funds with an intermediate duration. It is
priced monthly, with returns calculated from the average yield of the ten
most competitive stable value issuers as tracked by the Ryan Labs group.
The duration of the benchmark is approximately 2.5 years. The Index is
calculated without the deduction of any management fees or other expenses.
# The Merrill Lynch 3-Month U.S. Treasury Bill Index is used as a benchmark
for short term funds. It is calculated daily, looking at the returns
available to investors who continuously hold the current 3 month Treasury
bill as an investment. The Index's duration is less than 0.25 years, and
it is extremely responsive to changes in short term interest rates.
SHAREHOLDER SERVICING ARRANGEMENTS
- -------------------------------------------------------------------------------
Shareholder Servicing
Certain financial intermediaries (service agents) may charge their clients
account fees for buying or redeeming shares of the UAM Funds. These fees may
include transaction fees and/or service fees paid by the UAM Funds from their
assets attributable to the service agent. The UAM Funds do not pay these fees
on shares purchased directly from UAM Fund Distributors. The service agents
may provide shareholder services to their clients that are not available to a
shareholder dealing directly with the UAM Funds. Each service agent is
responsible for transmitting to its clients a schedule of any such fees and
information regarding any additional or different purchase or redemption
conditions. You should consult your service agent for information regarding
these fees and conditions.
The adviser may pay its affiliated companies for referring investors to the
portfolio. The adviser and its affiliates may, at their own expense, pay
qualified service providers for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to the portfolio.
The UAM Funds also offer Institutional Service Class shares, which pay
marketing or shareholder servicing fees, and Adviser Class shares, which
impose a sales load and fees for marketing and shareholder servicing, for
certain of its portfolios. The portfolio and other UAM Funds may not offer
all of these classes.
15
<PAGE>
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
For investors who want more information about the Dwight Capital Preservation
Portfolio, the following documents are available upon request.
Statement of Additional) Information
The SAI contains additional detailed information about the Dwight Capital
Preservation Portfolio and is incorporated by reference into (legally part of)
this prospectus.
Investors can receive free copies of these materials, request other
information about the portfolio and make shareholder inquiries by writing to
or calling:
UAM FUNDS
PO BOX 419081
KANSAS CITY, MO 64141-6081
(TOLL FREE) 1-877-UAM-LINK (826-5465)
You can review, for a fee, the reports of the portfolio and SAI by writing to
the SEC's Public Reference Section, Washington, D.C. 20549-6009, or by calling
the SEC at 1-800-SEC-0330. You can get copies of this information for free,
on the SEC's Internet site at http://www.sec.gov.
------------------
The portfolio's Investment Company Act of 1940 file number is 811-8544.
<PAGE>
UAM Funds
Funds for the Informed Investor
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
Institutional Service Class Prospectus ,199_
[LOGO OF UAM APPEARS HERE]
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
Table Of Contents
<TABLE>
<S> <C>
Portfolio Summary................................................ 1
What are the Objectives of the Portfolio?....................... 1
What are the Principal Investment Strategies of the Portfolio?.. 1
What are the Principal Risks of the Portfolio................... 1
What are the Portfolio's Fees and Expenses?..................... 2
Investing With The UAM Funds..................................... 3
Buying Shares................................................... 3
Redeeming Shares................................................ 4
Exchanging Shares............................................... 4
Transaction Policies............................................ 4
Account Policies................................................. 8
Small Accounts.................................................. 8
Distributions................................................... 8
Federal Taxes................................................... 8
Fund Details..................................................... 10
Principal Investments and Risks of the Portfolio................ 10
Other Investment Practices and Strategies....................... 12
Year 2000....................................................... 13
Investment Management........................................... 13
Shareholder Servicing Arrangements.............................. 15
</TABLE>
<PAGE>
Portfolio Summary
WHAT ARE THE OBJECTIVES OF THE PORTFOLIO?
- --------------------------------------------------------------------------------
The Dwight Capital Preservation Portfolio seeks a level of current income
higher than that of money market funds, while attempting to preserve principal
and maintain a stable net asset value per share. The portfolio cannot
guarantee it will meet its investment objectives. The portfolio may change
its investment objective without shareholder approval.
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE PORTFOLIO?
- --------------------------------------------------------------------------------
The following is a brief description of the principal investment strategies of
the Dwight Capital Preservation Portfolio. For more information see "PRINCIPAL
INVESTMENTS AND RISKS OF THE PORTFOLIO."
The portfolio invests in a variety of debt securities, money market
instruments, options and other instruments. The portfolio seeks to stabilize
its NAV by purchasing wrapper agreements (agreements to offset changes in the
value of a security) from financial institutions, such as insurance companies
and banks. The portfolio is not a money market fund.
The portfolio offers its shares only to individual investors who invest in the
portfolio through an individual retirement account ("IRA"), Education IRA,
SEP-IRA, Simple IRA, ROTH-IRA or KEOGH Plan.
WHAT ARE THE PRINCIPAL RISKS OF THE PORTFOLIO
- --------------------------------------------------------------------------------
The following is a summary of the principal risks associated with investing in
the portfolio. For more information see "PRINCIPAL INVESTMENTS AND RISKS OF
THE PORTFOLIO."
Risks Common to All Mutual Funds
At any time, your investment in a mutual fund may be worth more or less than
the price you originally paid for it. You may lose money by investing in any
mutual fund because:
. The value of the securities it owns changes, sometimes rapidly and
unpredictably.
. The mutual fund is not successful in reaching its goal because of its
strategy or because it did not implement its strategy properly.
. Unforeseen occurrences in the securities markets negatively affect the
mutual fund.
1
<PAGE>
What are the Principal Risks of the Portfolio?
Although the portfolio tries to maintain a stable NAV, since it invests in
debt securities, the value of its holdings may fluctuate based on market
conditions, interest rates, credit quality of the underlying investments and
economic and political events. The value of debt securities tends to fall
when interest rates rise. The portfolio could also lose money if an issuer of
a security or a provider of a wrapper agreement defaults on its obligation or
if its credit quality worsens. The portfolio cannot guarantee that wrapper
agreements will be available, that it will purchase wrapper agreements or
that, if purchased, wrapper agreements will offset changes in its NAV. Without
wrapper agreements, the portfolio will not be able to maintain a stable NAV.
Buying wrapper agreements to stabilize prices is likely to reduce the return
of the portfolio.
WHAT ARE THE PORTFOLIO'S FEES AND EXPENSES?
- --------------------------------------------------------------------------------
Fees and Expenses of the Portfolio
This table describes the fees and expenses that you may pay if you buy and
hold shares of the portfolio. This table is presented in the format required
by the Securities and Exchange Commission (SEC) and may not reflect the actual
expenses you would have paid as a shareholder in the portfolio.
<TABLE>
<CAPTION>
Shareholder Fees (Fees Paid Directly From Your Account)
Redemption Fee (as a percentage of amount redeemed) 2.00%
Annual Fund Operating Expenses (Expenses That Are Deducted From the Assets of the Portfolio)
<S> <C>
Management Fees 0.50%
--------------------------------------------------------------------------------------------------------
Service (12b-1) Fees 0.25%
--------------------------------------------------------------------------------------------------------
Other Expenses* 0.40%
--------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.15.%
========================================================================================================
* Other Expenses are based on estimated amounts for the first fiscal year of the portfolio.
</TABLE>
Actual Fees and Expenses
Due to certain expense limits, the ratios stated in the table may be higher
than the expenses you will actually pay as an investor in the portfolio. The
portfolio expects to pay 1.10% of its average daily net assets in total
operating expenses.
Example
This example can help you to compare the cost of investing in the portfolio to
the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a portfolio for the periods shown and then redeem all of your
shares at the end of those periods. It also assumes a 5% return on your
investment each year and that the portfolio's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year 3 Years
----------------------------------------------------------------------------
If you redeem your shares $32 $59
----------------------------------------------------------------------------
If you did not redeem your shares, you would pay $12 $37
2
<PAGE>
Investing with the UAM Funds
<TABLE>
<CAPTION>
BUYING SHARES
- ------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO BUY MORE SHARES
----------------------------------------------------------------------------------
<S> <C> <C>
By Mail Send a check or money Send a check and, if possible,
order and your account the "Invest by Mail" stub that
application to the UAM accompanied your statement to
Funds. Make checks the UAM Funds. Be sure your
payable to "UAM Funds" check identifies clearly your
(the UAM Funds will not name, account number and the
accept third-party portfolio into which you want to
checks). invest.
-------------------------------------------------------------------------------------
By Wire Call the UAM Funds for an Call the UAM Funds to get a wire
account number and wire control number and wire your
control number and then money to the UAM Funds.
send your completed
account application to
the UAM Funds.
Wiring Instructions
United Missouri Bank
ABA # 101000695
UAM Funds
DDA Acct. # 9870964163
Ref: portfolio name/account number/
account name/wire control number
-------------------------------------------------------------------------------------
By Automatic Not Available To set up a plan, mail a
Investment completed application to the UAM
Plan (Via ACH) Funds. To cancel or change a
plan, write to the UAM Funds.
Allow up to 15 days to create
the plan and 3 days to cancel or
change it.
-------------------------------------------------------------------------------------
Minimum $2,500 for all accounts, $100 for all accounts
Investments except IRAs ($500) and
spousal IRAs ($250)
UAM Funds
PO Box 419081
Kansas City, MO 64141-6081
(Toll free) 1-877-UAM-LINK (826-5465)
</TABLE>
3
<PAGE>
REDEEMING SHARES
- --------------------------------------------------------------------------------
By Mail Send a letter signed by all registered parties on the
account to UAM Funds specifying the portfolio, the account
number and the dollar amount or number of shares you wish
to redeem. Certain shareholders may have to include
additional documents.
-----------------------------------------------------------------------------
By Telephone You must first establish the telephone redemption
privilege (and, if desired, the wire redemption privilege)
by completing the appropriate sections of the account
application. Call 1-877-UAM-Link to redeem your shares.
Based on your instructions, the UAM Funds will mail your
proceeds to you or wire them to your bank.
-----------------------------------------------------------------------------
By If your account balance is at least $10,000, you may
Systematic transfer as little as $100 per month or per quarter from
Withdrawal Plan your UAM account to your financial institution.
(Via ACH) To participate in this service, you must complete the
appropriate sections of the account application and mail
it to the UAM Funds.
EXCHANGING SHARES
- --------------------------------------------------------------------------------
At no charge, you may exchange shares of one UAM Fund for shares of the same
class of any other UAM Fund by writing to or calling the UAM Funds. Before
exchanging your shares, read the prospectus of the UAM Fund for which you
want to exchange, which you may obtain from the UAM Funds. You may not
exchange shares represented by certificates over the telephone. You may only
exchange shares between accounts with identical registrations (i.e., the same
names and addresses).
TRANSACTION POLICIES
- --------------------------------------------------------------------------------
Calculating Your Share Price
You may buy, sell or exchange shares of a UAM Fund at a price equal to its
net asset value (NAV) next computed after it receives your order. The
portfolio calculate its NAV as of the close of trading on the New York Stock
Exchange (NYSE) (generally 4:00 p.m. Eastern Time) on each day the NYSE is
open. Therefore, to receive the NAV on any given day, the UAM Funds must
accept your order by the close of trading on the NYSE that day. Otherwise,
you will receive the NAV that is calculated on the close of trading on the
following day. The UAM Funds are open for business on the same days as the
NYSE, which is closed on weekends and certain holidays.
4
<PAGE>
Buying or Selling Shares through a Financial Intermediary
You may buy, exchange or redeem shares of the UAM Funds through a financial
intermediary (such as a financial planner or adviser). Generally, to buy or
sell shares at the NAV of any given day your financial intermediary must
receive your order by the close of trading on the NYSE that day. Your
financial intermediary is responsible for transmitting all subscription and
redemption requests, investment information, documentation and money to the
UAM Funds on time.
Certain financial intermediaries have agreements with the UAM Funds that allow
them to enter confirmed purchase or redemption orders on behalf of clients and
customers. Under this arrangement, the financial intermediary must send your
payment to the UAM Funds by the time they price their shares on the following
day. If your financial intermediary fails to do so, it may be responsible for
any resulting fees or losses.
Calculating NAV
The UAM Funds calculate their NAV by adding the total value of their assets,
subtracting their liabilities and then dividing the result by the number of
shares outstanding. The UAM Funds value their investments with readily
available market quotations at market value. Investments that do not have
readily available market quotations are valued at fair value, according to
guidelines established by the UAM Funds. The UAM Funds may also value
securities at fair value when events occur that make established valuation
methods (such as stock exchange closing prices) unreliable. The UAM Funds
value debt securities that will mature within 60 days at amortized cost, which
approximates market value.
In-Kind Transactions
Under certain conditions and at the UAM Funds' discretion, you may pay for
shares of a portfolio with securities instead of cash.
Payment of Redemption Proceeds
The UAM Funds will pay for all shares redeemed within seven days after they
receive a redemption request in proper order. If you redeem shares that were
purchased by check, you will not receive your redemption proceeds until the
check has cleared, which may take up to 15 days. You may avoid these delays
by paying for shares with a certified check, bank check or money order.
Redemption Fee
The portfolio will deduct a 2.00% redemption fee from the redemption proceeds
of any shareholder redeeming shares of the portfolio, except those that:
. Die or become disabled.
5
<PAGE>
. Are at least 59-1/2 1/2and have held their shares continuously for at least
12 months.
The portfolio charges the redemption fee primarily to offset certain
transaction costs and administrative expenses the portfolio incurs because of
the redemption. As the portfolio is intended for long-term investment, the
redemption fee is also designed to discourage shareholders from trying to take
advantage of short-term interest rate movements.
Signature Guarantee
You must have your signature guaranteed when (1) you want the proceeds from
your redemption sent to a person or address different from that registered on
the account, or (2) you request a transfer of your shares.
You may obtain a signature guarantee from most banks, savings institutions,
securities dealers, national securities exchanges, registered securities
associations, clearing agencies and other guarantor institutions. A notary
public cannot guarantee a signature.
Telephone Transactions
The UAM Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; they may be liable for any losses if
they fail to do so. The UAM Funds will be responsible for any loss, liability,
cost or expense for following instructions received by telephone that it
reasonably believes to be genuine.
Rights Reserved by the UAM Funds
Purchases
At any time and without notice, the UAM Funds may:
. Stop offering shares of a portfolio.
. Reject any purchase order.
. Bar an investor engaged in a pattern of excessive trading from buying
shares of any portfolio. (Excessive trading can hurt the performance of a
portfolio by disrupting its management and by increasing its expenses.)
Redemptions
The UAM Funds may suspend your right to redeem if:
. An emergency exists and a portfolio cannot dispose of its investments or
fairly determine their value.
. Trading on the NYSE is restricted.
. The SEC tells the UAM Funds to delay redemptions.
6
<PAGE>
At any time, the UAM Funds may change or eliminate any of the redemption
methods described above, except redemption by mail.
Exchanges
The UAM Funds may:
. Modify or cancel the exchange program at any time on 60 days' written
notice to shareholders.
. Reject any request for an exchange.
. Limit or cancel a shareholder's exchange privilege, especially when an
investor is engaged in a pattern of excessive trading.
7
<PAGE>
Account Policies
SMALL ACCOUNTS
- ------------------------------------------------------------------------------
The UAM Funds may redeem your shares without your permission if the value of
your account falls below 50% of the required minimum initial investment, but
not because of a drop in the value of your shares caused by market
fluctuations. This provision does not apply to retirement accounts and certain
other accounts.
DISTRIBUTIONS
- ------------------------------------------------------------------------------
Normally, the portfolio declares its net investment income daily and pays it
monthly. In addition, it distributes any net capital gains once a year. The
UAM Funds will automatically reinvest dividends and distributions in
additional shares of the portfolio, unless you elect on your account
application to receive them in cash.
To maintain a stable NAV, the portfolio may have to declare and pay dividends
in amounts that are not equal to the amount of net investment income it
actually earns. This may cause the portfolio to take some or all of the
following actions:
. If the portfolio distributes more money than it actually earned, it may
have to make a distribution that may be considered a return of capital.
. If the income the portfolio earns exceeds the amount of dividends
distributed, the portfolio may have to distribute that excess income to
shareholders and declare a reverse split of its shares.
The portfolio may also have to distribute its net capital gains, in which
would cause it to split its shares. Share splits or reverse share splits will
cause the number of shares owned by shareholders to increase or decrease while
allowing the NAV of the portfolio to remain stable.
FEDERAL TAXES
- -------------------------------------------------------------------------------
The following is a summary of the federal income tax consequences of investing
in the UAM Funds. You may also have to pay state and local taxes on your
investment. You should always consult your tax advisor for specific guidance
regarding the tax effect of your investment in the UAM Funds.
Taxes on Distributions
The distributions of the portfolio will generally be taxable to shareholders
as ordinary income or capital gains (which may be taxable at different rates
depending on the length of time the portfolio held the relevant assets). You
will be subject to income tax on these distributions regardless whether they
are paid in cash or reinvested in additional shares. Once a year UAM Funds
will
8
<PAGE>
send you a statement showing the types and total amount of distributions you
received during the previous year.
You should note that if you purchase shares just before a distribution, the
purchase price would reflect the amount of the upcoming distribution. In this
case, you would be taxed on the entire amount of the distribution received,
even though, as an economic matter, the distribution simply constitutes a
return of your investment. This is known as "buying into a dividend" and
should be avoided.
Taxes on Exchanges and Redemptions
When you redeem or exchange shares in any portfolio, you may recognize a gain
or loss for income tax purposes. This gain or loss will be based on the
difference between your tax basis in the shares and the amount you receive for
them. (To aid in computing your tax basis, you generally should retain your
account statements for the periods during which you held shares.) Any loss
realized on shares held for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividends that were received
with respect to the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-
qualified plan) will not be currently taxable.
Backup Withholding
By law, the UAM Funds must withhold 31% of your distributions and proceeds if
you have not provided complete, correct taxpayer information.
9
<PAGE>
Fund Details
PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO
- ------------------------------------------------------------------------------
The following is a brief description of the principal investment strategies
that the Dwight Capital Preservation Portfolio may employ in seeking its
objectives. This discussion is in addition to the discussion set forth in the
"PORTFOLIO SUMMARY." For more information concerning these investment
practices and their associated risks, please read the "PORTFOLIO SUMMARY" and
the statement of additional information (SAI). The portfolio may change these
strategies without shareholder approval.
The portfolio invests in a variety of debt securities, money market
instruments, derivatives, commingled funds of debt securities and other
instruments. The portfolio seeks to stabilize its NAV by purchasing wrapper
agreements with financial institutions, such as insurance companies and banks
(wrap providers). While not fixed at $1.00 per share like a money market fund,
the wrapper agreements are likely to cause the net asset value of the
portfolio to be considerably more stable than a typical high-quality fixed-
income fund.
The portfolio is not a money market fund and is not designed to maintain a
stable NAV of $1.00 per share. A money market fund will generally have a
shorter average maturity than the portfolio and its yield will tend to more
closely track the direction of current market rates than the yield of the
portfolio. Over the long-term, however, the adviser believes the portfolio
will offset those differences by producing higher returns than a money market
fund.
Debt Securities
The portfolio will invest primarily in debt securities that are rated at the
time of purchase in the top rating category by any one rating agency. The
portfolio may also invest in lower-rated debt securities, but not less than
investment-grade, or as permitted by its wrapper agreements. The adviser
will review any security that loses its rating or has its rating reduced after
the portfolio purchased it and will make a determination to keep or sell such
securities. The portfolio also invests in liquid short-term investments that
are rated, at the time of purchase, in one of the top two short-term rating
categories by any one rating agency.
Debt securities are securities issued by the U.S. government and its agencies,
corporate debt securities, mortgage-backed and asset-backed securities,
commercial paper and certificates of deposit. These securities may have
varying interest rate schedules and maturities (the dates when a debt
instrument is due and payable). Asset-backed and mortgage-backed securities
are securities that are backed by pools of loans or mortgages assembled for
sale to investors by various governmental agencies and private issuers.
Mortgage-backed securities may generally take two forms: pass-throughs and
collateralized mortgage obligations (CMOs). The average duration (the
10
<PAGE>
investment life of a security) of the portfolio will normally range from 1.5
to 4.0 years.
Risks of Debt Investing
The value of a debt security generally moves in the opposite direction from
interest rates (i.e., if interest rates go up the value of the bond will go
down, and vice versa). Interest rate changes may cause people to pay off
mortgage-backed and asset-backed securities earlier or later than expected,
which may shorten or lengthen the maturity or duration (a measure of the
investment life of a security) of the portfolio and may cause its share price
and yield to fall.
The credit rating or financial condition of an issuer may affect the value of
a debt security. Generally, the lower the quality rating of a security, the
greater the risks that the issuer will fail to pay interest and return
principal. To compensate investors for taking on increased risk, issuers with
lower credit ratings usually offer their investors higher interest rates than
issuers with better credit ratings. If an issuer defaults or becomes unable to
honor its financial obligations, the bond will lose some or all of its value.
Wrapper Agreements
A wrapper agreement obligates the wrap provider to maintain the book value
(the adjusted cost basis of a security) of some or all of the portfolio's
assets (covered assets). Under a typical wrapper agreement, if the portfolio
sells a covered asset for less than book value, the wrap provider will pay the
portfolio the difference. If the portfolio sells a security for more than its
book value, the portfolio will pay the wrap provider the difference. In
purchasing a wrapper agreement, the portfolio trades the potential for capital
appreciation and some yield for protection from a decline in the value of its
holdings caused by changes in interest rates.
The portfolio also anticipates that the value of the wrapper agreements will
move in the opposite direction from the value of the covered assets. When the
value of the covered assets is less than their book value, the portfolio will
treat the deficiency as an asset. Similarly, when the value of the covered
assets is more than their book value, the amount of such excess will be a
liability of the portfolio. Normally, the portfolio expects the sum of the
total value of its wrapper agreements plus the total value of all of its
covered assets to equal the book value of its covered assets.
The portfolio will enter into wrapper agreements with wrap providers that are
rated at the time of purchase in the top two rating categories by any one
rating agency.
Risks of Wrapper Agreements
The portfolio cannot guarantee that the combination of securities and wrapper
agreements will provide a constant NAV or a current rate of return that is
higher than a money market mutual fund.
11
<PAGE>
The portfolio may have to maintain a specified percentage of its total assets
in short-term investments (liquidity reserve) to cover redemptions and
portfolio expenses. The obligation to maintain a liquidity reserve may result
in a lower return for the portfolio than if it had invested in longer-term
debt securities.
The value of your shares might decline if:
. The wrap provider defaults or has its credit rating lowered.
. An issuer of a security defaults on payments of principal or interest or
its credit rating is downgraded, which may require the portfolio to sell
covered assets quickly and at prices that may not fully reflect their
current value. Wrap providers do not typically assume the credit risk
associated with the issuer of any covered assets. In addition, downgrades
below investment-grade and defaults by the issuer of covered assets usually
will cause the wrap provider to remove such assets from the coverage of a
wrapper agreement.
. The portfolio is unable to obtain suitable wrapper agreements. The
portfolio may elect not to cover some or all of its assets with wrapper
agreements if wrapper agreements are not available or the adviser believes
that the terms of available wrapper agreements are unfavorable. In
addition, the portfolio might not be able to replace existing wrapper
agreements upon maturity, default or termination with other suitable
wrapper agreement.
There is no active trading market for wrapper agreements and the portfolio
does not expect one to develop; therefore, the portfolio will consider wrapper
agreements illiquid. The portfolio may invest up to 15% of its net assets in
illiquid securities.
OTHER INVESTMENT PRACTICES AND STRATEGIES
- ------------------------------------------------------------------------------
As described below the portfolios may invest in derivatives and may deviate
from their investment strategies from time to time. In addition, they may
employ investment practices that are not described in this prospectus,
including foreign securities, repurchase agreements, when-issued and forward
commitment transactions, lending of securities, borrowing and other
techniques. For more information concerning the risks associated with these
investment practices, you should read the SAI.
Derivatives
The portfolio may buy and sell derivatives, including futures and swaps.
Derivatives are often more volatile than other investments and may magnify a
portfolio's gains or losses. A portfolio may lose money if the adviser:
. Fails to predict correctly the direction in which the underlying asset or
economic factor will move.
. Judges market conditions incorrectly.
12
<PAGE>
. Employs a strategy that does not correlate well with the investments of the
portfolio.
Portfolio Turnover
The portfolio may buy and sell investments relatively often and estimates that
its annual portfolio turnover rate will not exceed 200%. Such a strategy
often involves higher expenses, including brokerage commissions, and may
increase the amount of capital gains, particularly short-term gains realized
by the portfolio. Shareholders must pay tax on such capital gains.
YEAR 2000
- -------------------------------------------------------------------------------
Many computer programs in use today cannot distinguish the year 2000 from the
year 1900 because of the way they encode and calculate dates. Consequently,
these programs may not be able to perform necessary functions and could
disrupt the operations of the UAM Funds or financial markets in general. The
year 2000 issue affects all companies and organizations, including those that
provide services to the UAM Funds and those in which the UAM Funds invest.
The UAM Funds and their advisers, administrator, distributor and transfer
agent are taking steps they believe are reasonably necessary to address any
portfolio-related year 2000-related computer problems. They are actively
working on necessary changes to their own computer systems to prepare for the
year 2000 and expect that their systems will be adapted before that date.
They are also requesting information on each service provider's state of
readiness and contingency plan. However, at this time the degree to which the
year 2000 issue will affect the UAM Funds' investments or operations cannot be
predicted. Any negative consequences could adversely affect your investment in
the UAM Funds.
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
Investment Adviser
Dwight Asset Management Company, a Delaware corporation located at 125 College
Street, Burlington, Vermont 05401, is the investment adviser to the portfolio.
Dwight Asset Management Company manages and supervises the investment of the
portfolio's assets on a discretionary basis. Dwight Asset Management Company,
an affiliate of United Asset Management Corporation, has provided investment
management services to corporations, pension and profit-sharing plans, 401(k)
and thrift plans since 1983. For its services, the portfolio pays Dwight
Asset Management Company fee of ____% of its average net assets.
In addition, the adviser has voluntarily agreed to limit the total annual fund
operating expenses of the portfolio to 1.10%. The adviser intends to continue
this expense limitation until further notice. To maintain this expense limit,
13
<PAGE>
the adviser may waive a portion of its advisory fee and/or reimburse certain
expenses of the portfolios.
Portfolio Managers
Listed below are the investment professionals of the adviser that will have
primary responsibility for the day-to-day management of the portfolio and a
description of their business experience during the past five years.
<TABLE>
<CAPTION>
Manager Experience
--------------------------------------------------------------------------------------------------------
<S> <C>
John K. Dwight Mr. Dwight founded Dwight Asset Management Company in 1983.
President Mr. Dwight has managed stable value products for the Dwight
Asset Management since 1978.
--------------------------------------------------------------------------------------------------------
Laura Dagan Ms. Dagan joined Dwight Asset Management Company in 1987
CFA, Managing Director and has worked in investment management since 1978.
--------------------------------------------------------------------------------------------------------
Alan R. Matson Mr. Matson has been with Dwight Asset Management Company
CFA, Senior Vice President since 1995. Before then he worked as a securities trader
at Nomura Securities.
</TABLE>
Adviser's Historical Performance
The adviser manages accounts of fixed-income securities that have
substantially similar investment objectives as the portfolio. The adviser
manages these accounts using techniques and strategies substantially similar,
though not always identical, to those used to manage the portfolio.
Composites of the performance of all of these accounts are listed below. The
performance data for the managed accounts reflects deductions of all fees and
expenses. Because separately managed accounts may have different fees and
expenses than the portfolio, their investment returns may differ from those of
the portfolio. All fees and expenses of the separate accounts were less than
the 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.
The separately managed accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code. If they were, their
returns might have been lower. The performance of these separate accounts is
not intended to predict or suggest the performance of the portfolio and may be
calculated differently than the performance of the portfolio.
<TABLE>
<CAPTION>
Dwight Asset
Management Ryan 5 Year
Company GIC Master Merrill Lynch 3-Month
Composite* Index+ Treasury Bill Index#
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Annualized Return For Various
Periods Ended 09/30/98 (annualized
1-year 6.94% 6.57% 5.36%
--------------------------------------------------------------------------------------------------------------
3-years 7.12% 6.66% 5.41%
--------------------------------------------------------------------------------------------------------------
5-years 7.45% 6.98% 5.14%
--------------------------------------------------------------------------------------------------------------
10 years 8.89% 8.01% 5.82%
--------------------------------------------------------------------------------------------------------------
Cumulative Since Inception
(__/__/__)
</TABLE>
14
<PAGE>
* The Dwight All Funds Composite reflects the total return, after all
investment management fees and expenses are deducted, of all stable value
retirement fund accounts included in its Separate Account Composite and its
Pooled Fund Composite. All returns are dollar weighted, and are net of
fees and expenses. Net fees and expenses have ranged from an average of
0.10% in 1994 to 0.14% as of 9/30/98.
+ The Ryan 5 year GIC Master Index is the primary benchmark used in the
evaluation of stable value funds with an intermediate duration. It is
priced monthly, with returns calculated from the average yield of the ten
most competitive stable value issuers as tracked by the Ryan Labs group.
The duration of the benchmark is approximately 2.5 years. The Index is
calculated without the deduction of any management fees or other expenses.
# The Merrill Lynch 3-Month U.S. Treasury Bill Index is used as a benchmark
for short term funds. It is calculated daily, looking at the returns
available to investors who continuously hold the current 3 month Treasury
bill as an investment. The Index's duration is less than 0.25 years, and
it is extremely responsive to changes in short term interest rates.
SHAREHOLDER SERVICING ARRANGEMENTS
- -------------------------------------------------------------------------------
Distribution Plans
The UAM Funds have adopted distribution plans and shareholder services plans
under Rule 12b-1 of the Investment Company Act of 1940 that permit them to pay
broker-dealers, financial institutions and other third parties for marketing,
distribution and shareholder services. The UAM Funds' 12b-1 plans allow the
portfolio to pay up to 1.00% of its average daily net assets annually for
these services. However, the board of the UAM Funds has authorized the
portfolio to pay only 0.25% per year. Because Institutional Service Class
Shares pay these fees out of their assets on an ongoing basis, over time, your
shares may cost more than if you had paid another type of sales charge. Long-
term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by rules of the National Association of
Securities Dealers, Inc.
Shareholder Servicing
Certain financial intermediaries (service agents) may charge their clients
account fees for buying or redeeming shares of the UAM Funds, which are not
subject to the Fund's Distribution Plan or Shareholder Servicing Plan. These
fees may include transaction fees and/or service fees paid from the assets of
the UAM Funds attributable to the service agent. The UAM Funds do not pay
these fees on shares purchased directly from UAM Fund Distributors. The
service agents may provide shareholder services to their clients that are not
available to a shareholder dealing directly with the UAM Funds. Each service
agent is responsible for transmitting to its clients a schedule of any such
fees and information regarding any additional or different purchase or
redemption conditions. You should consult your service agent for information
regarding these fees and conditions.
Anyone entitled to receive compensation for selling or servicing shares of the
UAM Funds may receive different compensation with respect to one particular
class of shares over another.
15
<PAGE>
The adviser may pay its affiliated companies for referring investors to a
portfolio. The adviser and its affiliates may, at their own expense, pay
qualified service providers for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to a portfolio.
The UAM Funds also offer Institutional Class shares, which do not pay
marketing or shareholder servicing fees, and Advisor Class shares, which
impose a sales load and fees for marketing and shareholder servicing, for
certain of its portfolios. Not all of the UAM Funds offer all of these
classes.
16
<PAGE>
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
For investors who want more information about the Dwight Capital Preservation
Portfolio, the following documents are available upon request.
Statement of Additional) Information
The SAI contains additional detailed information about the Dwight Capital
Preservation Portfolio and is incorporated by reference into (legally part of)
this prospectus.
Investors can receive free copies of these materials, request other
information about the portfolio and make shareholder inquiries by writing to
or calling:
UAM FUNDS
PO BOX 419081
KANSAS CITY, MO 64141-6081
(TOLL FREE) 1-877-UAM-LINK (826-5465)
You can review, for a fee, the reports of the portfolio and SAI by writing to
the SEC's Public Reference Section, Washington, D.C. 20549-6009, or by calling
the SEC at 1-800-SEC-0330. You can get copies of this information for free,
on the SEC's Internet site at http://www.sec.gov.
------------------
The portfolio's Investment Company Act of 1940 file number is 811-8544.
<PAGE>
PART B
UAM FUNDS TRUST
The following Statement of Additional Information is included in this Post-
Effective Amendment No. 25 filed on November 13, 1998:
Dwight Capital Preservation Portfolio
The following Statements of Additional Information are contained in Post-
Effective Amendment No. 24 filed on July 10, 1998:
. BHM&S Total Return Bond Portfolio Institutional Class Shares and
Institutional Service Class Shares
. Chicago Asset Management Intermediate Bond Portfolio Institutional Class
Shares and Chicago Asset Management Value/Contrarian Portfolio
Institutional Class Shares
. FPA Crescent Portfolio Institutional Class Share and Institutional Service
Class Shares
. Hanson Equity Portfolio Institutional Class Shares
. Jacobs International Octagon Portfolio Institutional Class Shares
. MJI International Equity Portfolio Institutional Class Shares and
Institutional Service Class Shares
. TJ Core Equity Portfolio Institutional Service Class Shares
The following Statement of Additional Information is contained in Post-Effective
Amendment No. 23 filed July 2, 1998:
. Clipper Focus Portfolio Institutional Class Shares and Institutional
Service Class Shares
The following Statement of Additional Information is contained in Post-Effective
Amendment No. 22 filed June 24, 1998:
. PR Mid Cap Growth Portfolio Institutional Class Shares
The following Statement of Additional Information is contained in Post-Effective
Amendment No. 21 filed June 19, 1998:
. Heitman Real Estate Portfolio Institutional Class Shares and Advisor Class
Shares
The following Statement of Additional Information is contained in Post-Effective
Amendment No. 18 filed January 23, 1998:
. Cambiar Opportunity Portfolio Institutional Class Shares
-3-
<PAGE>
UAM FUNDS
UAM Fund Service Center
PO Box 419081
Kansas City, MO 64141-6081
(Toll free) 1-877-UAM-LINK (826-5465)
DWIGHT CAPITAL PRESERVATION PORTFOLIO
Institutional Class Shares
Institutional Service Class Shares
Statement of Additional Information
__________, 1999
This statement of additional information (SAI) is not a prospectus. However, you
should read it in conjunction with the prospectus of Dwight Capital Preservation
Portfolio Institutional Class Shares dated _______, 1999 and the prospectus of
Dwight Capital Preservation Portfolio Institutional Service Class Shares dated
_____, 1999. You may obtain a prospectus for Dwight Capital Preservation
Portfolio by contacting the UAM Funds at the address listed above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Definitions......................................................... 1
The Fund............................................................ 1
Description of the Portfolio and its Investments And Risks.......... 1
Borrowing..........................................................
Debt Securities.................................................... 1
Derivatives........................................................ 5
Illiquid and Restricted Securities................................. 9
Investment Companies............................................... 10
Repurchase Agreements.............................................. 10
Securities Lending................................................. 10
Short-Term Investments............................................. 10
When-Issued, Forward Commitment and Delayed Delivery Transactions.. 11
Wrapper Agreements................................................. 12
Investment Policies................................................. 14
Management of the Portfolio........................................ 15
Code of Ethics...................................................... 16
Investment Advisory and other Services.............................. 16
Investment Adviser................................................. 16
Distributor........................................................ 17
Administration and Transfer Agency Services........................ 18
Custodian.......................................................... 19
Independent Public Accountant...................................... 19
Service And Distribution Plans..................................... 19
Brokerage Allocation and Other Practices............................ 21
Selection of Brokers............................................... 21
Simultaneous Transactions.......................................... 21
Brokerage Commissions.............................................. 21
Capital Stock and Other Securities.................................. 22
Description Of Shares And Voting Rights............................ 22
Dividends and Capital Gains Distributions.......................... 22
Purchase Redemption and Pricing of Shares........................... 23
Purchase of Shares................................................. 23
Redemption of Shares............................................... 23
Transfer Of Shares................................................. 24
Valuation of Shares................................................ 25
Performance Calculations............................................ 25
Total Return....................................................... 25
Yield.............................................................. 26
Comparisons........................................................ 26
Taxes............................................................... 26
</TABLE>
<PAGE>
Definitions
The "Fund" is UAM Funds Trust.
The term "adviser" means Dwight Asset Management Company, the portfolio's
investment adviser.
UAM is United Asset Management Corporation.
UAMFSI is UAM Fund Services, Inc., the Fund's administrator.
UAMFDI is UAM Fund Distributors, Inc., the Fund's distributor.
UAMSSC is UAM Fund Shareholder Servicing Center, the Fund's sub-shareholder-
servicing agent.
CGFSC is Chase Global Funds Service Company, the Fund's sub-administrator.
UAM Funds Complex includes UAM Funds, Inc., UAM Funds Trust, UAM Funds Trust
II and all of their portfolios.
The term "the portfolio" is used to refer to Dwight Capital Preservation
Portfolio, while "portfolio" or "portfolios" refers to some or all portfolios
of the UAM Funds Complex.
The terms "board" and "governing board" refer to the Fund's Board of Directors
as a group, while "board member" refers to a single member of the board.
All other defined terms, which are not otherwise defined in this SAI, have the
same meaning in the SAI as they do in the prospectus of Dwight Capital
Preservation Portfolio.
The Fund
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, Boston, MA 02110; shareholders should direct all
correspondence to the address listed on the cover of this SAI.
The Fund is an open-end, management investment company under the Investment
Company Act of 1940. Dwight Capital Preservation Portfolio is a diversified
series of the Fund. This means that with respect to 75% of its total assets,
the portfolio may not invest more than 5% of its total assets in the
securities of any one issuer (except U.S. government securities). The
remaining 25% of its total assets are not subject to this restriction. To the
extent the portfolio invests a significant portion of its assets in the
securities of a particular issuer, it will be subject to an increased risk of
loss if the market value of such issuer's securities declines.
Description of the Portfolio and Its Investments and Risks
Debt Securities
- --------------------------------------------------------------------------------
Debt securities are used by corporations and governments to borrow money from
investors. Most debt securities promise a variable or fixed rate of return and
repayment of the amount borrowed at maturity. Some debt securities, such as
zero-coupon bonds, do not pay current interest and are purchased at a discount
from their face value. Debt securities may include, among other things, all
types of bills, notes, bonds, mortgage-backed securities or asset-backed
securities. The portfolio may invest in fixed-income securities issued by
corporate and government issuers and may have varying interest rate schedules.
Asset-backed and mortgage backed securities are securities that are backed by
pools of loans or mortgages assembled for sale to investors by various
governmental agencies and private issuers. Mortgage-backed securities may
generally take two forms: pass-throughs and collateralized mortgage
obligations (CMOs).
Since the portfolio invests in fixed-income securities, adverse changes in
interest rates could cause the value of its investments to fall. This
typically occurs when interest rates rise. The portfolio also could lose
money if a security's credit rating worsens or its issuer becomes unable to
honor its financial obligations. Interest rate changes may cause people to pay
off mortgage-backed and
1
<PAGE>
asset-backed securities earlier or later than expected, which may shorten or
lengthen the maturity or duration (a measure of the investment life of a
security) of the portfolio and may cause its share price and yield to fall.
Interest Rates
The value of a debt security generally moves in the opposite direction from
interest rates (i.e., if interest rates go up the value of the bond will go
down, and vice versa).
Credit Rating
The credit rating or financial condition of an issuer may affect the value of
a debt security. Generally, the lower the quality rating of a security, the
greater the risks that the issuer will fail to pay interest and return
principal. To compensate investors for taking on increased risk, issuers with
lower credit ratings usually offer their investors higher interest rates than
issuers with better credit ratings. If an issuer defaults, the bond will lose
some or all of its value.
Rating agencies are organizations that assign ratings to securities based
primarily on the rating agency's assessment of the issuer's financial
strength. The portfolio currently uses ratings compiled by Standard and
Poor's Ratings Services, Duff & Phelps Rating Co., Fitch IBCA, Inc. and,
Moody's Investor Services. Credit ratings are only an agency's opinion, not an
absolute standard of quality, and they do not reflect an evaluation of market
risk. APPENDIX A contains further information concerning the ratings of
certain rating agencies and their significance.
The adviser may use ratings produced by ratings agencies as guidelines to
determine the rating of a security at the time the portfolio buys it. A rating
agency may change its credit ratings at any time. The adviser monitors the
rating of the security and will take appropriate actions if a rating agency
reduces the security's rating. Unless otherwise provided in a Wrapper
Agreement, the portfolio is not obligated to dispose of securities whose
issuers subsequently are in default or which are downgraded below the above-
stated ratings.
A security rated within the four highest rating categories by a rating agency
is called investment-grade because its issuer is more likely to pay interest
and repay principal than an issuer of a lower rated bond. Adverse economic
conditions or changing circumstances, however, may weaken the capacity of the
issuer to pay interest and repay principal. If a security is not rated or is
rated under a different system, the adviser may determine that it is of
investment-grade.
U.S. Government Securities
For a discussion of these securities see "SHORT-TERM INVESTMENTS -
GOVERNMENT SECURITIES" below.
Mortgage-Backed Securities and Mortgage Pass-Through Securities
Mortgage-backed securities are interests in pools of mortgage loans that
various governmental, government-related and private organizations assemble as
securities for sale to investors. Mortgage-backed securities differ from other
forms of debt securities because they make monthly payments that consist of
both interest and principal payments. (Other debt securities normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates.) In effect, these payments are a "pass-
through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities.
Governmental entities, private insurers and the mortgage poolers may insure or
guarantee the timely payment of interest and principal of these pools through
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance and letters of credit issue the insurance and
guarantees. The adviser will consider such insurance and guarantees and the
creditworthiness of the issuers thereof in determining whether a mortgage-
related security meets its investment quality standards. It is possible that
the private insurers or guarantors will not meet their obligations under the
insurance policies or guarantee arrangements.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable.
Government National Mortgage Association (GNMA)
GNMA, a wholly owned U.S. government corporation within the Department of
Housing and Urban Development, is the principal governmental guarantor of
mortgage-related securities. GNMA, which is backed by the faith and credit of
the U.S. government, guarantees the timely payment of principal and interest
on securities issued by institutions approved by GNMA and backed by pools of
FHA-insured or VA-guaranteed mortgages. GNMA does not guarantee the market
value or yield of mortgage-backed securities or the value of portfolio shares.
To buy GNMA securities, the portfolio may have to pay a premium over the
maturity value of the underlying mortgages, which the portfolio may lose it if
prepayment occurs.
2
<PAGE>
Federal National Mortgage Association (FNMA)
FNMA is a government-sponsored corporation owned entirely by private
stockholders. FNMA, which is regulated by the Secretary of Housing and Urban
development, purchases conventional mortgages from a list of approved
seller/servicers, including state and federally-chartered savings and loan
associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to
timely payment of principal and interest by FNMA, but are not backed by the
full faith and credit of the U.S. government.
Federal Home Loan Mortgage Corporation (FHLMC)
FHLMC is a corporate instrumentality of the U.S. Government whose stock is
owned by the twelve Federal Home Loan Banks. Congress created FHLMC in 1970
to increase the availability of mortgage credit for residential housing. FHLMC
issues Participation Certificates (PCs) which represent interests in
conventional mortgages from its national portfolio. Like FNMA, FHLMC
guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the U.S.
Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional mortgage loans. In addition to
guaranteeing the mortgage-related security, such issuers may service and/or
have originated the underlying mortgage loans. Pools created by these issuers
generally offer a higher rate of interest than pools created by GNMA, FNMA &
FHLMC because they are not guaranteed by a government agency.
Risk of Investing in Mortgage-Backed Securities
Yield characteristics of mortgage-backed securities differ from those of
traditional fixed income securities. The major differences include interest
and principal payments that are more frequent (usually monthly), adjustable
interest rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
The portfolio may fail to recover fully its investment in mortgage-backed
securities notwithstanding any direct or indirect governmental, agency or
other guarantee because the counter-party failed to meet its commitments.
Changes in interest rates and a variety of economic, geographic, social and
other factors, such as the sale of the underlying property, refinancing or
foreclosure, can cause the loans underlying a mortgage-backed security to be
repaid sooner than expected. If the prepayment rates increase, the portfolio
may have to reinvest its principal at a rate of interest that is lower than
the rate on existing mortgage-backed securities. Conversely, when interest
rates are rising many mortgage-backed securities will see a decline in the
prepayment rate, extending their average life. Extending the average life of a
mortgage-backed security increases the risk of depreciation due to future
increases in market interest rates. For these reasons, mortgage-backed
securities may be less effective than other types of U.S. government
securities as a means of "locking in" interest rates.
Collateralized Mortgage Obligations (CMOs)
CMOs are hybrids between mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, CMOs usually pay interest and prepaid principal
monthly. While whole mortgage loans may collateralize CMOs, portfolios of
mortgage-backed securities guaranteed by GNMA, FHLMC, or FNMA, and their
income streams more typically collateralize them.
A REMIC is a CMO that qualifies for special tax treatment under the Internal
Revenue Code of 1986, as amended, and invests in certain mortgages primarily
secured by interests in real property and other permitted investments.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Each class of CMO or REMIC certificate, often referred to as a
"tranche," is issued at a specific interest rate and must be fully retired by
its final distribution date. Generally, all classes of CMOs or REMIC
certificates pay or accrue interest monthly. Investing in the lowest tranche
of CMOs and REMIC certificates involves risks similar to those associated with
investing in equity securities.
Other Asset-Backed Securities
A broad range of assets, including automobile loans, computer leases and
credit card receivables, are being securitized in pass-through structures
similar to the mortgage pass-through or CMO structures described above. In
general, the collateral supporting these securities is of shorter maturity
than mortgage loans and is less likely to experience substantial prepayments
with interest rate fluctuations.
3
<PAGE>
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the
benefit of any security interest in the related assets, which raises the
possibility that recoveries on repossessed collateral may not be available to
support payments on these securities. For example, credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which allow debtors
to reduce their balances by offsetting certain amounts owed on the credit
cards. Most issuers of asset-backed securities backed by automobile
receivables permit the servicers of such receivables to retain possession of
the underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the rated asset-backed securities. Because
of the large number of vehicles involved and technical requirements under
state laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables.
To lessen the effect of failures by obligors on underlying assets to make
payments, the entity administering the pool of assets may agree to ensure the
receipt of payments on the underlying pool occurs in a timely fashion
("liquidity protection"). In addition, asset-backed securities may obtain
insurance, such as guarantees, policies or letters of credit obtained by the
issuer or sponsor from third parties, for some or all of the assets in the
pool ("credit support"). Delinquency or loss more than that anticipated or
failure of the credit support could adversely affect the return on an
investment in such a security.
A portfolio may also invest in residual interests in asset-backed securities,
which is the excess cash flow remaining after making required payments on the
securities and paying related administrative expenses. The amount of residual
cash flow resulting from a particular issue of asset-backed securities depends
in part on the characteristics of the underlying assets, the coupon rates on
the securities, prevailing interest rates, the amount of administrative
expenses and the actual prepayment experience on the underlying assets.
Stripped Mortgage-Backed Securities
Stripped mortgage-backed securities are derivative multiple-class mortgage-
backed securities. Stripped mortgage-backed securities usually have two
classes that receive different proportions of interest and principal
distributions on a pool of mortgage assets. Typically, one class will receive
some of the interest and most of the principal, while the other class will
receive most of the interest and the remaining principal. In extreme cases,
one class will receive all of the interest ("interest only" or "IO" class)
while the other class will receive the entire principal (the "principal only"
or "PO" class). The cash flows and yields on IOs and POs are extremely
sensitive to the rate of principal payments (including prepayments) on the
underlying mortgage loans or mortgage-backed securities. A rapid rate of
principal payments may adversely affect the yield to maturity of IOs. Slower
than anticipated prepayments of principal may adversely affect the yield to
maturity of a PO. The yields and market risk of interest only and principal
only stripped mortgage-backed securities, respectively, may be more volatile
than those of other fixed income securities, including traditional mortgage-
backed securities.
Yankee Bonds
Yankee bonds are dollar-denominated bonds issued inside the United States by
foreign entities. Investment in these securities involve certain risks which
are not typically associated with investing in domestic securities. Foreign
securities, especially those of companies in emerging markets, can be riskier
and more volatile than domestic securities. Adverse political and economic
developments or changes in the value of foreign currency can make it harder
for a portfolio to sell its securities and could reduce the value of your
shares. Changes in tax and accounting standards and difficulties obtaining
information about foreign companies can negatively affect investment
decisions.
Zero Coupon Bonds
These securities make no periodic payments of interest, but instead are sold
at a discount from their face value. When held to maturity, their entire
income, which consists of accretion of discount, comes from the difference
between the issue price and their value at maturity. The amount of the
discount rate varies depending on factors including the time remaining until
maturity, prevailing interest rates, the security's liquidity and the issuer's
credit quality. The market value of zero coupon securities may exhibit greater
price volatility than ordinary debt securities because a stripped security
will have a longer duration than an ordinary debt security with the same
maturity. A portfolio's investments in pay-in-kind, delayed and zero coupon
bonds may require it to sell certain of its portfolio securities to generate
sufficient cash to satisfy certain income distribution requirements.
These securities may include U.S. Treasury securities that have had their
interest payments ("coupons") separated from the underlying principal
("corpus") by their holder, typically a custodian bank or investment brokerage
firm. Once the holder of the security has stripped or separated corpus and
coupons, it may sell each component separately. The principal or corpus is
then sold at a deep discount because the buyer receives only the right to
receive a future fixed payment on the security and does not receive any rights
to periodic interest (cash) payments. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold
bundled in such form. The underlying U.S. Treasury security is held in book-
entry form at the
4
<PAGE>
Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered
securities which are owned ostensibly by the bearer or holder thereof), in
trust on behalf of the owners thereof. Purchasers of stripped obligations
acquire, in effect, discount obligations that are economically identical to
the zero coupon securities that the Treasury sells itself.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record keeping system. Under a Federal Reserve program
known as "STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities," a portfolio can record its beneficial ownership of the coupon or
corpus directly in the book-entry record-keeping system.
DERIVATIVES
- --------------------------------------------------------------------------------
Derivatives are financial instruments whose value is based on an underlying
asset, such as a stock or a bond, or an underlying economic factor, such as an
interest rate or an index. The portfolio tries to minimize its loss by
investing in derivatives to protect them from broad fluctuations in market
prices, interest rates or foreign currency exchange rates. Investing in
derivatives for these purposes is known as "hedging." When hedging is
successful, the portfolio will have offset any depreciation in the value of
its portfolio securities by the appreciation in the value of the derivative
position. Although techniques other than the sale and purchase of derivatives
could be used to control the exposure of the portfolio to market fluctuations,
the use of derivatives may be a more effective means of hedging this exposure.
The portfolio may invest in the following types of derivatives:
Futures
A futures contract is an agreement between two parties whereby one party is
obligated to buy and the other is obligated to sell a financial instrument at
an agreed upon price and time. The parties to a futures contract do not have
to pay for or deliver the underlying financial instrument until the delivery
date. The parties to a futures contract can hold the contract until its
delivery date, although in many cases they close the contract early by taking
an opposite position in an identical contract. The financial instrument
underlying the contract may be a stock, stock index, bond, bond index,
interest rate, foreign exchange rate or other similar instrument. The
portfolio will incur commission expenses in both opening and closing futures
positions.
Futures contracts are traded in the United States on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for such trading
and regulated by the Commodity Futures Trading Commission, a federal agency.
These contract markets standardize the terms, including the maturity date and
underlying financial instrument, of all futures contracts. Contract markets
require both the purchaser and seller to deposit "initial margin" with a
futures broker, known as a futures commission merchant, when they enter into
the contract. Initial margin deposits are typically equal to a percentage of
the contract's value. After they open a futures contract, the parties to the
transaction must compare the purchase price of the contract to its daily
market value. If the value of the futures contract changes in such a way that
a party's position declines, that party must make additional "variation
margin" payments so that the margin payment is adequate. On the other hand,
the value of the contract may change in such a way that there is excess margin
on deposit, possibly entitling the party that has a gain to receive all or a
portion of this amount.
The portfolio may take a "short position" by selling futures contracts on
securities it owns or on securities with characteristics similar to those of
securities it owns. For example, when the portfolio expects interest rates to
rise or securities prices to fall, it can seek to offset a decline in the
value of its holdings by selling futures contracts so that the portfolio is
obligated to sell the Securities at a future lower price. When the portfolio's
short hedging position is successful, the appreciation in the value of the
futures position will offset substantially any depreciation in the value of
the holdings of the portfolio. On the other hand, a decline in the value of
the futures position would offset any unanticipated appreciation in the value
of the holdings of the portfolio.
On other occasions, the portfolio may take a "long" position by purchasing
futures contracts. For example, when the portfolio expects interest rates to
fall or securities' prices to rise, it can seek to secure a better rate or
price than might later be available by purchasing a futures contract. The
portfolio may also buy futures contracts as a substitute for transactions in
securities, to alter the investment characteristics of portfolio securities or
to gain or increase its exposure to a particular securities market.
Indexed Securities
The indexed securities in which the Portfolio may invest include debt
securities whose value at maturity is determined by reference to the relative
prices of various currencies or to the price of a stock index. The value of
such securities depends on the price of foreign currencies, securities indices
or other financial values or statistics. These securities may be positively or
negatively indexed; that is, their value may increase or decrease if the
underlying instrument appreciates.
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Options
An option is a contract between two parties for the purchase and sale of a
financial instrument for a specified price (known as the "strike price" or
"exercise price") at any time during the option period. Unlike a futures
contract, an option grants a right (not an obligation) to buy or sell a
financial instrument. Generally, a seller of an option can grant a buyer two
kinds of rights: a "call" (the right to buy the security) or a "put" (the
right to sell the security). Options have various types of underlying
instruments, including specific securities, indices of securities prices,
foreign currencies, interest rates and futures contracts. Options may be
traded on an exchange (exchange-traded-options) or may be customized
agreements between the parties (over-the-counter or OTC options). Like
futures, a financial intermediary, known as a clearing corporation,
financially backs exchange-traded options. However, OTC options have no such
intermediary and are subject to the risk that the counter-party will not
fulfill its obligations under the contract.
Purchasing Put and Call Options
When the portfolio purchases a put option, it buys the right to sell the
instrument underlying the option at a fixed strike price. In return for this
right, the portfolio pays the current market price for the option (known as
the "option premium"). The portfolio may purchase put options to offset or
hedge against a decline in the market value of its securities ("protective
puts") or to benefit from a decline in the price of securities that it does
not own. The portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying securities decreased below the exercise
price sufficiently to cover the premium and transaction costs. However, if the
price of the underlying instrument does not fall enough to offset the cost of
purchasing the option, a put buyer would lose the premium and related
transaction costs.
Call options are similar to put options, except that the portfolio obtains the
right to purchase, rather than sell, the underlying instrument at the option's
strike price. The portfolio would normally purchase call options in
anticipation of an increase in the market value of securities it owns or wants
to buy. The portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying instrument exceeded the exercise price
plus the premium paid and related transaction costs. Otherwise, the portfolio
would realize either no gain or a loss on the purchase of the call option.
The purchaser of an option may terminate its position by:
. Allowing it to expire and losing its entire premium;
. Exercising the option and either selling (in the case of a put option) or
buying (in the case of a call option) the underlying instrument at the
strike price; or
. Closing it out in the secondary market at its current price.
Selling (Writing) Put and Call Options
When the portfolio writes a call option it assumes an obligation to sell
specified securities to the holder of the option at a specified price if the
option is exercised at any time before the expiration date. Similarly, when
the portfolio writes a put option it assumes an obligation to purchase
specified securities from the option holder at a specified price if the option
is exercised at any time before the expiration date. The portfolio may
terminate its position in an exchange-traded put option before exercise by
buying an option identical to the one it has written. Similarly, it may
cancel an over-the-counter option by entering into an offsetting transaction
with the counter-party to the option.
The portfolio could try to hedge against an increase in the value of
securities it would like to acquire by writing a put option on those
securities. If security prices rise, the portfolio would expect the put
option to expire and the premium it received to offset the increase in the
security's value. If security prices remain the same over time, the
portfolio would hope to profit by closing out the put option at a lower price.
If security prices fall, the portfolio may lose an amount of money equal to
the difference between the value of the security and the premium it received.
Writing covered put options may deprive the portfolio of the opportunity to
profit from a decrease in the market price of the securities it would like to
acquire.
The characteristics of writing call options are similar to those of writing
put options, except that call writers expect to profit if prices remain the
same or fall. The portfolio could try to hedge against a decline in the value
of securities it already owns by writing a call option. If the price of that
security falls as expected, the portfolio would expect the option to expire
and the premium it received to offset the decline of the security's value.
However, the portfolio must be prepared to deliver the underlying instrument
in return for the strike price, which may deprive it of the opportunity to
profit from an increase in the market price of the securities it holds.
The portfolio is permitted only to write covered options. The portfolio can
cover a call option by owning, at the time of selling the option:
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. The underlying security (or securities convertible into the underlying
security without additional consideration), index, interest rate, foreign
currency or futures contract.
. A call option on the same security or index with the same or lesser
exercise price.
. A call option on the same security or index with a greater exercise price,
with the difference between the exercise prices maintained as a segregated
account containing cash or liquid securities.
. Cash or liquid securities equal to at least the market value of the
optioned securities, interest rate, foreign currency or futures contract.
. In the case of an index, the portfolio of securities that corresponds to
the index.
The portfolio can cover a put option by, at the time of selling the option:
. Entering into a short position in the underlying security.
. Purchasing a put option on the same security, index, interest rate, foreign
currency or futures contract with the same or greater exercise price.
. Purchasing a put option on the same security, index, interest rate, foreign
currency or futures contract with a lesser exercise price, with the
difference between the exercise prices maintained as a segregated account
containing cash or liquid securities.
. Maintaining the entire exercise price in liquid securities.
Options on Securities Indices
Options on securities indices are similar to options on securities, except
that the exercise of securities index options requires cash settlement
payments and does not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect price fluctuations
in a group of securities or segment of the securities market rather than price
fluctuations in a single security.
Options on Futures
An option on a futures contract provides the holder with the right to buy a
futures contract (in the case of a call option) or sell a futures contract (in
the case of a put option) at a fixed time and price. Upon exercise of the
option by the holder, the contract market clearing house establishes a
corresponding short position for the writer of the option (in the case of a
call option) or a corresponding long position (in the case of a put option).
If the option is exercised, the parties will be subject to the futures
contracts. In addition, the writer of an option on a futures contract is
subject to initial and variation margin requirements on the option position.
Options on futures contracts are traded on the same contract market as the
underlying futures contract.
The buyer or seller of an option on a futures contract may terminate the
option early by purchasing or selling an option of the same series (i.e., the
same exercise price and expiration date) as the option previously purchased or
sold. The difference between the premiums paid and received represents the
trader's profit or loss on the transaction.
The portfolio may purchase put and call options on futures contracts instead
of selling or buying futures contracts. The portfolio may buy a put option on
a futures contract for the same reasons it would sell a futures contract. It
also may purchase such put options in order to hedge a long position in the
underlying futures contract. The portfolio may buy call options on futures
contracts for the same purpose as the actual purchase of the futures
contracts, such as in anticipation of favorable market conditions.
The portfolio may write a call option on a futures contract to hedge against a
decline in the prices of the instrument underlying the futures contracts. If
the price of the futures contract at expiration were below the exercise price,
the portfolio would retain the option premium, which would offset, in part,
any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the purchase
of the futures contracts, except that, if market price declines, the portfolio
would pay more than the market price for the underlying instrument. The
premium received on the sale of the put option, less any transaction costs,
would reduce the net cost to the portfolio.
Combined Positions
The portfolio may purchase and write options in combination with each other,
or in combination with futures or forward contracts, to adjust the risk and
return characteristics of the overall position. For example, the portfolio
could construct a combined position whose risk and return characteristics are
similar to selling a futures contract by purchasing a put option and
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writing a call option on the same underlying instrument. Alternatively, the
portfolio could write a call option at one strike price and buy a call option
at a lower price to reduce the risk of the written call option in the event of
a substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Swap agreements
Swap agreements are contracts that allow one party to "swap" some pre-agreed
interest rate (either fixed rate or floating), index return, credit risk
exposure, or certain cash flows in exchange for some different obligation or
cash flow. For instance, one party may agree to exchange one variable floating
rate interest rate contract based off of LIBOR for the total return of a bond
index such as the Lehman Aggregate Bond Index.
Neither the principal nor the actual interest payments change hands. Instead,
the net difference between the two interest rates is determined - monthly,
semiannually, or annually - and is paid by the party whose payment obligation
exceeds that of the other.
Swap agreements can be a valuable tool for controlling risk (e.g., by aiding
duration management) or gaining sector exposure without exposure to individual
bond issues.
Swapping can allow investment managers to efficiently revise their investment
profile to take advantage of current or expected future market conditions or
to better optimize the structure of their investment portfolio.
The swapper is exposed to the risk that the counter-party will default on the
contract.
If unfavorable interest rates develop, the swapper must pay to unwind, or
assign, the swap. This termination of the swap places additional costs on the
swapper. Market risk of swaps is similar to that of holding a portfolio of
bonds.
Additional Risks of Derivatives
While transactions in derivatives may reduce certain risks, these transactions
themselves entail certain other risks. For example, unanticipated changes in
interest rates, securities prices or currency exchange rates may result in a
poorer overall performance of the portfolio than if it had not entered into
any derivatives transactions. Derivatives may magnify the portfolio's gains
or losses, causing it to make or lose substantially more than it invested.
When used for hedging purposes, increases in the value of the securities the
portfolio holds or intends to acquire should offset any losses incurred with a
derivative. Purchasing derivatives for purposes other than hedging could
expose the portfolio to greater risks.
Correlation of Prices
The portfolio's ability to hedge its securities through derivatives depends on
the degree to which price movements in the underlying index or instrument
correlate with price movements in the relevant securities. In the case of poor
correlation, the price of the securities the portfolio is hedging may not move
in the same amount, or even in the same direction as the hedging instrument.
The adviser will try to minimize this risk by investing only in those
contracts whose behavior it expects to resemble the portfolio securities it is
trying to hedge. However, if the portfolio's prediction of interest and
currency rates, market value, volatility or other economic factors is
incorrect, the portfolio may lose money, or may not make as much money as it
could have.
Derivative prices can diverge from the prices of their underlying instruments,
even if the characteristics of the underlying instruments are very similar to
the derivative. Listed below are some of the factors that may cause such a
divergence.
. Current and anticipated short-term interest rates, changes in volatility of
the underlying instrument, and the time remaining until expiration of the
contract.
. A difference between the derivatives and securities markets, including
different levels of demand, how the instruments are traded, the imposition
of daily price fluctuation limits or trading of an instrument stops.
. Differences between the derivatives, such as different margin requirements,
different liquidity of such markets and the participation of speculators
in such markets.
Derivatives based upon a narrower index of securities, such as those of a
particular industry group, may present greater risk than derivatives based on
a broad market index. Since narrower indices are made up of a smaller number
of securities, they are more susceptible to rapid and extreme price
fluctuations because of changes in the value of those securities.
While currency futures and options values are expected to correlate with
exchange rates, they may not reflect other factors that affect the value of
the investments of the portfolio. A currency hedge, for example, should
protect a Yen-denominated security from a decline in the Yen, but will not
protect the portfolio against a price decline resulting from deterioration in
the issuer's
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creditworthiness. Because the value of the portfolio's foreign-denominated
investments changes in response to many factors other than exchange rates, it
may not be possible to match the amount of currency options and futures to the
value of the portfolio's investments precisely over time.
Lack of Liquidity
Before a futures contract or option is exercised or expires, the portfolio can
terminate it only by entering into a closing purchase or sale transaction.
This requires a secondary market for such instruments on the exchange where
the portfolio originally entered into the transaction. If there is no
secondary market for the contract, or the market is illiquid, the portfolio
may have to purchase or sell the instrument underlying the contract, make or
receive a cash settlement or meet ongoing variation margin requirements. The
inability to close out derivative positions could have an adverse impact on
the ability of the portfolio to hedge its investments and may prevent the
portfolio from realizing profits or limiting its losses.
Derivatives may become illiquid (i.e., difficult to sell at a desired time and
price) under a variety of market conditions. For example:
. During periods of market volatility, a commodity exchange may suspend or
limit trading in a particular derivative instrument, an entire category of
derivatives or all derivatives.
. The portfolio may have difficulty liquidating its existing positions or
recovering excess variation margin payments because of exchange or clearing
house equipment failures, government intervention, insolvency of a
brokerage firm or clearing house or other disruptions of normal trading
activity.
. Investors may lose interest in a particular derivative or category of
derivatives.
Management Risk
If the adviser incorrectly predicts stock market and interest rate trends, the
portfolio may lose money by investing in derivatives. For example, if the
portfolio were to write a call option based on its adviser's expectation that
the price of the underlying security would fall, but the price were to rise
instead, the portfolio could be required to sell the security upon exercise at
a price below the current market price. Similarly, if the portfolio were to
write a put option based on the adviser's expectation that the price of the
underlying security would rise, but the price were to fall instead, the
portfolio could be required to purchase the security upon exercise at a price
higher than the current market price.
Margin
Because of the low margin deposits required upon the opening of a derivative
position, such transactions involve an extremely high degree of leverage.
Consequently, a relatively small price movement in a derivative may result in
an immediate and substantial loss (as well as gain) to the portfolio and it
may lose more than it originally invested in the derivative.
If the price of a futures contract changes adversely, the portfolio may have
to sell securities at a time when it is disadvantageous to do so to meet its
minimum daily margin requirement. The portfolio may lose its margin deposits
if a broker with whom it has an open futures contract or related option
becomes insolvent or declares bankruptcy.
ILLIQUID AND RESTRICTED SECURITIES
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Mutual funds do not typically hold a significant amount of illiquid securities
because of the potential for delays on resale and uncertainty in valuation.
Limitations on resale may have an adverse effect on the marketability of
portfolio securities, and a mutual fund might be unable to dispose of illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register restricted securities in order to dispose of them, resulting
in additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale of such
investments to the general public or to certain institutions may not be
indicative of their liquidity.
The portfolio may purchase restricted securities that are not registered for
sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the governing board, the Adviser determines the liquidity
of such investments by considering all relevant factors. Provided that a
dealer or
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institutional trading market in such securities exists, these restricted
securities are not treated as illiquid securities for purposes of the
portfolio's investment limitations. The portfolio may invest up to 15% of its
net assets in illiquid securities. The priced realized from the sales of these
securities could be more or less than those originally paid by the portfolio
or less than what may be considered the fair value of such securities.
INVESTMENT COMPANIES
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The portfolio reserve the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-ended 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
investment company. The portfolio will indirectly bear its proportionate share
of any management fees paid by an investment company in which it invests in
addition to the advisory fee paid by the portfolio.
The Fund has received permission from the SEC to allow 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 provided that the
investment is consistent with the portfolio's investment policies and
restrictions. Based upon the portfolio's assets invested in the DSI Money
Market Portfolio, the investing portfolio's adviser will waive its investment
advisory and any other fees earned as a result of the portfolio's investment
in the DSI Money Market Portfolio. The investing portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other
shareholders.
REPURCHASE AGREEMENTS
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In a repurchase agreement, the portfolio buys a security for a relatively
short period (usually not more than 7 days) and simultaneously agrees to sell
it back at a specified date and price. The portfolio normally uses repurchase
agreements to earn income on assets that are not invested. The portfolio will
require the counter-party to the agreement to deliver securities serving as
collateral for each repurchase agreement to its custodian either physically or
in book-entry form. The counter-party must add to the collateral whenever the
price of the repurchase agreement rises (i.e., the borrower "marks to the
market" on a daily basis).
If the seller of the security declares bankruptcy or otherwise becomes
financially unable to buy back the security, the portfolio's right to sell the
security may be restricted. In addition, the value of the security might
decline before the portfolio can sell it and the portfolio might incur
expenses in enforcing its rights.
SECURITIES LENDING
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To earn additional income, the portfolio may lend up to one-third of their
total assets (including the value of the collateral for the loans) at fair
market value to broker- dealers or other financial institutions. The portfolio
may reinvest any cash collateral in short-term securities and money market
funds. The portfolio will only lend its securities if:
. The borrower provides collateral at least equal to the market value of the
securities loaned.
. The collateral pledged and maintained by the borrower must consist of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or
securities issued or guaranteed by the United States Government.
. The borrower adds to the collateral whenever the price of the securities
loaned rises (i.e., the borrower "marks to the market" on a daily basis).
. The portfolio can terminate the loan at any time; and
. The portfolio receives reasonable interest on the loan (which may include
the Portfolio investing any cash collateral in interest bearing short-term
investments).
These risks are similar to the ones involved with repurchase agreements. When
the portfolio lends securities, there is a risk that it will lose money
because the borrower fails to return the securities involved in the
transaction. In addition, the borrower may become financially unable to honor
its contractual obligations, which may delay or prevent the portfolio from
liquidating the collateral.
SHORT-TERM INVESTMENTS
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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 investments described below:
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Bank Obligations
The portfolio will only invest in a security issued by a commercial bank if
the bank:
. Has total assets of at least $1 billion, or the equivalent in other
currencies;
. Is a U.S. bank and a member of the Federal Deposit Insurance Corporation;
and
. Is a foreign branch of a U.S. bank and the adviser believes the security is
of an investment quality comparable with other debt securities that the
portfolio may purchase.
Time Deposits
Time deposits are non-negotiable deposits, such as savings accounts or
certificates of deposit, held by a financial institution for a fixed term with
the understanding that the depositor can withdraw its money only by giving
notice to the institution. However, there may be early withdrawal penalties
depending upon market conditions and the remaining maturity of the obligation.
The portfolio may only purchase time deposits maturing from two business days
through seven calendar days.
Certificates of deposit
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or savings and loan association for a definite
period of time and earning a specified return.
Banker's Acceptance
A banker's acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with an international commercial transaction
(to finance the import, export, transfer or storage of goods).
Commercial Paper
Commercial paper is short-term obligation with maturity ranging from 2 to 270
days issued by banks, corporations and other borrowers. Such investments are
unsecured and usually discounted. The portfolio may invest in commercial
paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's, or, if not
rated, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P. See APPENDIX A for a description of
commercial paper ratings.
Investment-Grade Short-Term Corporate Obligations
See the discussion of debt securities above.
U.S. Government Securities
The portfolio may buy debt securities that are issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. government. Some
U.S. government securities, such as Treasury bills, notes and bonds are
supported by the full faith and credit of the U.S. government. Others,
however, are supported only by the right of the instrumentality to borrow from
the U.S. government.
While U.S. government securities are guaranteed as to principal and interest,
their market value is not guaranteed. U.S. government securities are subject
to the same interest rate and credit risks as other fixed income securities.
However, since U.S. government securities are of the highest quality, the
credit risk is minimal. The U.S. government does not guarantee the net asset
value of the assets of the portfolio.
WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED DELIVERY TRANSACTIONS
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A when-issued security is one whose terms are available and for which a market
exists, but which have not been issued. In a forward delivery transaction, the
portfolio contracts to purchase securities for a fixed price at a future date
beyond customary settlement time. "Delayed delivery" refers to securities
transactions on the secondary market where settlement occurs in the future. In
each of these transactions, the parties fix the payment obligation and the
interest rate that they will receive on the securities at the time the parties
enter the commitment; however, they do not pay money or delivery securities
until a later date. Typically, no income accrues on securities the portfolio
has committed to purchase before the securities are delivered, although the
portfolio may earn income on securities it has in a segregated account. The
portfolio will only enter into these types of transactions with the intention
of actually acquiring the securities, but may sell them before the settlement
date.
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The portfolio uses when-issued, delayed-delivery and forward delivery
transactions to secure what it considers being an advantageous price and yield
at the time of purchase. When the portfolio engages in when-issued, delayed-
delivery and forward delivery transactions, it relies on the other party to
consummate the sale. If the other party fails to complete the sale, the
portfolio may miss the opportunity to obtain the security at a favorable price
or yield.
When purchasing a security on a when-issued, delayed delivery, or forward
delivery basis, the portfolio assumes the rights and risks of ownership of the
security, including the risk of price and yield changes. At the time of
settlement, the market value of the security may be more or less than the
purchase price. The yield available in the market when the delivery takes
place also may be higher than those obtained in the transaction itself.
Because the portfolio does not pay for the security until the delivery date,
these risks are in addition to the risks associated with its other
investments.
The portfolio will add liquid assets to the account daily so that the value of
the assets in the account is equal to the amount of such commitments. Such
segregated securities either will mature or, if necessary, be sold on or
before the settlement date.
WRAPPER AGREEMENTS
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Wrapper agreements are used in order to stabilize the NAV of the portfolio.
Each wrapper agreement obligates the wrapper provider to maintain the "book
value" of a portion of the portfolio's assets (covered assets) up to a
specified maximum dollar amount, upon the occurrence of certain specified
events. Generally, the book value of the covered assets is their (1) purchase
price plus interest on the covered assets accreted at a rate specified in the
wrapper agreement (crediting rate) less an adjustment to reflect any defaulted
securities. The crediting rate used in computing book value is calculated by a
formula specified in the wrapper agreement and is adjusted periodically. In
the case of wrapper agreements purchased by the portfolio, the crediting rate
is the actual interest earned on the covered assets, or an index-based
approximation thereof, plus or minus an adjustment for an amount receivable
from or payable to the wrapper provider based on fluctuations in the market
value of the covered assets. As a result, while the crediting rate will
generally reflect movements in the market rates of interest, it may at any
time be more or less than these rates or the actual interest income earned on
the covered assets. The crediting rate may also be impacted by defaulted
securities and by increases and decreases of the amount of covered assets as a
result of contributions and withdrawals tied to the purchase and redemption of
shares. In no event will the crediting rate fall below zero percent under the
wrapper agreements entered into by the portfolio.
wrapper providers are banks, insurance companies and other financial
institutions. The number of wrapper providers has been increasing in recent
years. As of April 1998, there were approximately fifteen wrapper providers
rated in one of the top two long-term rating categories by Moody's, S&P or
another NRSRO. The cost of wrapper agreements is typically 0.10% to 0.25% per
dollar of covered assets per annum.
Generally, under the terms of a wrapper agreement, if the market value (plus
accrued interest on the underlying securities) of the covered assets is less
than their book value at the time the covered assets are liquidated in order
to provide proceeds for withdrawals of portfolio interests resulting from
redemptions of shares by IRA Owners, the wrapper provider becomes obligated to
pay to the portfolio the difference. Conversely, the portfolio becomes
obligated to make a payment to the wrapper provider if it is necessary for the
portfolio to liquidate covered assets at a price above their book value in
order to make withdrawal payments. (Withdrawals generally will arise when the
portfolio must pay shareholders who redeem shares.) Because it is anticipated
that each wrapper agreement will cover all covered assets up to a specified
dollar amount, if more than one wrapper provider becomes obligated to pay to
the portfolio the difference between book value and market value (plus accrued
interest on the underlying securities), each wrapper provider will be
obligated to pay an amount as designated by their contract according to the
withdrawal hierarchy specified by the Adviser in the wrapper agreement. Thus,
the portfolio will not have the option of choosing which wrapper agreement to
draw upon in any such payment situation.
The terms of the wrapper agreements vary concerning when these payments must
actually be made between the portfolio and the wrapper provider. In some
cases, payments may be due upon disposition of covered assets; other wrapper
agreements provide for settlement of payments only upon termination of the
wrapper agreement or total liquidation of the covered assets.
The portfolio expects that the use of wrapper agreements by the portfolio will
under most circumstances permit the portfolio to maintain a constant NAV and
to pay dividends that will generally reflect over time both the interest
income of, and market gains and losses on, the covered assets held by the
portfolio less the expenses of the portfolio. However, there can be no
guarantee that the portfolio will maintain a constant NAV or that any
shareholder will realize the same investment return as might be realized by
investing directly in the portfolio assets other than the wrapper agreements.
For example, a default by the issuer of a portfolio Security or a wrapper
provider on its obligations might result in a decrease in the value of the
portfolio assets and, consequently, the shares. The wrapper agreements
generally do not protect the portfolio from loss if an issuer of portfolio
Securities defaults on payments of interest or principal. Additionally, a
portfolio shareholder may realize more or less than the actual investment
return on the portfolio Securities. Furthermore, there can be no assurance
that the portfolio will be able at all times to obtain
12
<PAGE>
wrapper agreements. Although it is the current intention of the portfolio to
obtain such agreements covering all of its assets (with the exceptions noted),
the portfolio may elect not to cover some or all of its assets with wrapper
agreements should wrapper agreements become unavailable or should other
conditions such as cost, in the Adviser's sole discretion, render their
purchase inadvisable.
If, in the event of a default of a wrapper provider, the portfolio were unable
to obtain a replacement wrapper agreement, participants redeeming shares might
experience losses if the market value of the portfolio's assets no longer
covered by the wrapper agreement is below book value. The combination of the
default of a wrapper provider and an inability to obtain a replacement
agreement could render the portfolio and the portfolio unable to achieve their
investment objective of maintaining a stable NAV. If the governing board
determines that a wrapper provider is unable to make payments when due, that
Board may assign a fair value to the wrapper agreement that is less than the
difference between the book value and the market value (plus accrued interest
on the underlying securities) of the applicable covered assets and the
portfolio might be unable to maintain NAV stability.
Some wrapper agreements require that the portfolio maintain a specified
percentage of its total assets in short-term investments (liquidity reserve).
These short-term investments must be used for the payment of withdrawals from
the portfolio and portfolio expenses. To the extent the liquidity reserve
falls below the specified percentage of total assets, the portfolio is
obligated to direct all net cash flow to the replenishment of the liquidity
reserve. The obligation to maintain a liquidity reserve may result in a lower
return for the portfolio than if these funds were invested in longer-term debt
securities. The liquidity reserve required by all wrapper agreements is not
expected to exceed 2-10% of the portfolio's total assets.
Wrapper agreements may also require that the covered assets have a specified
duration or maturity, consist of specified types of securities or be of a
specified investment quality. The portfolio will purchase wrapper agreements
whose criteria in this regard are consistent with the portfolio's investment
objective and policies.
Wrapper agreements may also require the disposition of securities whose
ratings are downgraded below a certain level. This may limit the portfolio's
ability to hold such downgraded securities.
Wrapper agreements are structured with a number of different features. Wrapper
agreements purchased by the portfolio are of three basic types: (1) non-
participating, (2) participating and (3) "hybrid." In addition, the wrapper
agreements will either be of fixed-maturity or open-end maturity
("evergreen"). The portfolio enters into particular types of wrapper
agreements depending upon their respective cost to the portfolio and the
wrapper provider's creditworthiness, as well as upon other factors. Under most
circumstances, it is anticipated that the portfolio will enter into
participating wrapper agreements of open-end maturity and hybrid wrapper
agreements.
Types of Wrapper Agreements
Non-Participating Wrapper Agreement
Under a non-participating wrapper agreement, the wrapper provider becomes
obligated to make a payment to the portfolio whenever the portfolio sells
covered assets at a price below book value to meet withdrawals of a type
covered by the wrapper agreement (a "Benefit Event"). Conversely, the
portfolio becomes obligated to make a payment to the wrapper provider whenever
the portfolio sells covered assets at a price above their book value in
response to a Benefit Event. In neither case is the crediting rate adjusted at
the time of the Benefit Event. Accordingly, under this type of wrapper
agreement, while the portfolio is protected against decreases in the market
value of the covered assets below book value, it does not realize increases in
the market value of the covered assets above book value; those increases are
realized by the wrapper providers.
Participating Wrapper Agreement
Under a participating wrapper agreement, the obligation of the wrapper
provider or the portfolio to make payments to each other typically does not
arise until all of the covered assets have been liquidated. Instead of
payments being made on the occurrence of each Benefit Event, these obligations
are a factor in the periodic adjustment of the crediting rate.
Hybrid Wrapper Agreement
Under a hybrid wrapper agreement, the obligation of the wrapper provider or
the portfolio to make payments does not arise until withdrawals exceed a
specified percentage of the covered assets, after which time payment covering
the difference between market value and book value will occur. For example, a
50/50 hybrid wrap on $100mm of securities would provide for a participating
wrapper be in place for the first $50 million of withdrawals which might lead
to adjustments in the crediting rate, with a non-participating wrapper in
place for the next $50 million of withdrawals, with those withdrawals not
creating any adjustment to the crediting rate.
13
<PAGE>
Fixed-Maturity Wrapper Agreement
A fixed-maturity wrapper agreement terminates at a specified date, at which
time settlement of any difference between book value and market value of the
covered assets occurs. A fixed-maturity wrapper agreement tends to ensure that
the covered assets provide a relatively fixed rate of return over a specified
period of time through bond immunization, which targets the duration of the
covered assets to the remaining life of the wrapper agreement.
Evergreen Wrapper Agreement
An evergreen wrapper agreement has no fixed maturity date on which payment
must be made, and the rate of return on the covered assets accordingly tends
to vary. Unlike the rate of return under a fixed-maturity wrapper agreement,
the rate of return on assets covered by an evergreen wrapper agreement tends
to more closely track prevailing market interest rates and thus tends to rise
when interest rates rise and fall when interest rates fall. An Evergreen
wrapper agreement may be converted into a fixed-maturity wrapper agreement
that will mature in the number of years equal to the duration of the covered
assets.
Additional Risks of Wrapper Agreements
In the event of the default of a wrapper provider, the portfolio could
potentially lose the book value protections provided by the wrapper agreements
with that wrapper provider. However, the impact of such a default on the
portfolio as a whole may be minimal or non-existent if the market value of the
covered assets thereunder is greater than their book value at the time of the
default, because the wrapper provider would have no obligation to make
payments to the portfolio under those circumstances. In addition, the
portfolio may be able to obtain another wrapper agreement from another wrapper
provider to provide book value protections with respect to those covered
assets. The cost of the replacement wrapper agreement might be higher than the
initial wrapper agreement due to market conditions or if the market value
(plus accrued interest on the underlying securities) of those covered assets
is less than their book value at the time of entering into the replacement
agreement. Such cost would also be in addition to any premiums previously paid
to the defaulting wrapper provider. If the portfolio were unable to obtain a
replacement wrapper agreement, participants redeeming shares might experience
losses if the market value of the portfolio's assets no longer covered by the
wrapper agreement is below book value. The combination of the default of a
wrapper provider and an inability to obtain a replacement agreement could
render the portfolio and the portfolio unable to achieve its investment
objective of seeking to maintain a stable NAV.
With respect to payments made under the wrapper agreements between the
portfolio and the wrapper provider, some wrapper agreements, as noted in the
portfolio's prospectus, provide that payments may be due upon disposition of
the covered assets, while others provide for payment only upon the total
liquidation of the Covered assets or upon termination of the wrapper
agreement. In none of these cases, however, would the terms of the wrapper
agreements specify which portfolio securities are to be disposed of or
liquidated. Moreover, because it is anticipated that each wrapper agreement
will cover all covered assets up to a specified dollar amount, if more than
one wrapper provider becomes obligated to pay to the portfolio the difference
between book value and market value (plus accrued interest on the underlying
securities), each wrapper provider will pay a pro-rata amount in proportion to
the maximum dollar amount of coverage provided. Thus, the portfolio will not
have the option of choosing which wrapper agreement to draw upon in any such
payment situation. Under the terms of most wrapper agreements, the wrapper
provider will have the right to terminate the wrapper agreement in the event
that material changes are made to the portfolio's investment objectives or
limitations or to the nature of the portfolio's operations. In such event, the
portfolio may be obligated to pay the wrapper provider termination fees. The
portfolio will have the right to terminate a wrapper agreement for any reason.
Such right, however, may also be subject to the payment of termination fees.
In the event of termination of a wrapper agreement or conversion of an
Evergreen Wrapper Agreement to a fixed maturity, some wrapper agreements may
require that the duration of some portion of the portfolio's securities be
reduced to correspond to the fixed maturity or termination date and that such
securities maintain a higher credit rating than is normally required, either
of which requirements might adversely affect the return of the portfolio.
Investment Policies
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall (with the exception
of a limitation relating to borrowing) 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 investment
14
<PAGE>
limitations of the portfolio. The following investment limitations are
fundamental, which means the portfolio cannot change them without shareholder
approval. The portfolio will not:
. Make any investment that is inconsistent with its classification as a
diversified investment management company under the Investment Company Act
of 1940, as amended.
. Concentrate its investments in securities of issuers primarily engaged in
any particular industry (other securities issued or guaranteed by the
United States government or its agencies or instrumentalities or when the
portfolio adopts a temporary defensive position).
. Issue senior securities, except as permitted by the Investment Company Act
of 1940, as amended.
. Invest in physical commodities or contracts on physical commodities.
. Purchase or sell real estate or real estate limited partnerships, although
it may purchase and sell securities of companies which deal in real estate
and may purchase and sell securities which are secured by interests in real
estate.
. Make loans except (i) by that the acquisition of investment securities or
other investment instruments in accordance with the portfolio's prospectus
and statement of additional information shall not be deemed to be the
making of a loan; and (ii) that the portfolio may lend its portfolio
securities in accordance with applicable law and the guidelines set forth
in the portfolio's prospectus and statement of additional information, as
they may be amended from time to time.
. Underwrite the securities of other issuers.
. Borrow money, except to the extent permitted by applicable law and the
guidelines set forth in the portfolio's prospectus and statement of
additional information, as they may be amended from time to time.
MANAGEMENT OF THE PORTFOLIO
- --------------------------------------------------------------------------------
The business of the Fund is managed by its governing board, which, in turn,
elects officers who are responsible for the day-to-day operations of the Fund
and who execute policies formulated by the board. The Fund pays each board
member who is not also an officer or affiliated person (independent board
member) a $150 quarterly retainer fee per active portfolio per quarter and a
$2,000 meeting fee. In addition, each independent board member is reimbursed
for travel and other expenses incurred while attending board meetings. The
$2,000 meeting fee and expense reimbursements are aggregated for all of the
board members and allocated proportionately among the portfolio of the UAM
Funds complex. The Fund does not pay the remaining board members for their
services. UAM or its affiliates or Chase Global Funds Services Company pay the
Fund's officers.
The following table lists the board members and officers of the Fund and
provides information regarding their present positions, date of birth,
address, principal occupations during the past five years, aggregate
compensation received from the Fund and total compensation received from the
UAM Funds complex.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Total
Aggregate Compensation
Position Compensation from From UAM
UAM Registrant as of Funds Complex as
Name, Address, DOB Funds, Inc. Principal Occupations During the Past 5 years October 31, 1998 of October 31, 1998
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr. Director President of Squam Investment Management Company, 0
College Road -- RFD 3 Inc. and Great Island Investment Company, Inc.;
Meredith, NH 03253 President of Bennett Management Company from 1988 to
1/26/29 1993.
----------------------------------------------------------------------------------------------------------------------------------
Nancy J. Dunn Director Vice President for Finance and Administration and 0
10 Garden Street Treasurer of Radcliffe College since 1991.
Cambridge, MA 02138
8/14/51
----------------------------------------------------------------------------------------------------------------------------------
Philip D. English Director President and Chief Executive Officer of Broventure 0
16 West Madison Street Company, Inc.; Chairman of the Board of Chektec
Baltimore, MD 21201 Corporation and Cyber Scientific, Inc.
8/5/48
----------------------------------------------------------------------------------------------------------------------------------
William A. Humenuk Director Partner in the Philadelphia office of the law firm Dechert 0
4000 Bell Atlantic Tower Price & Rhoads; Director, Hofler Corp.
1717 Arch Street
Philadelphia, PA 19103
4/21/42
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Total
Aggregate Compensation
Position Compensation from From UAM
UAM Registrant as of Funds Complex as
Name, Address, DOB Funds, Inc. Principal Occupations During the Past 5 years October 31, 1998 of October 31, 1998
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Norton H. Reamer* Director, Chairman, Chief Executive Officer and a Director of 0 0
One International Place President United Asset Management Corporation; Director, Partner
Boston, MA 02110 and or Trustee of each of the Investment Companies of the
3/21/35 Chairman Eaton Vance Group of Mutual Funds.
----------------------------------------------------------------------------------------------------------------------------------
Peter M. Whitman, Jr.* Director President and Chief Investment Officer of Dewey Square 0 0
One Financial Center Investors Corporation since 1988; Director and Chief
Boston, MA 02111 Executive Officer of H.T. Investors, Inc., formerly a
7/1/43 subsidiary of Dewey Square.
----------------------------------------------------------------------------------------------------------------------------------
William H. Park Vice Executive Vice President and Chief Financial Officer of 0 0
One International Place President United Asset Management Corporation.
Boston, MA 02110
9/19/47
----------------------------------------------------------------------------------------------------------------------------------
Gary L. French Treasurer President of UAMFSI and UAMFDI, formerly Vice 0 0
211 Congress Street President of Operations, Development and Control of
Boston, MA 02110 Fidelity Investments in 1995; Treasurer of the Fidelity
7/4/51 Group of Mutual Funds from 1991 to 1995.
----------------------------------------------------------------------------------------------------------------------------------
Michael E. DeFao Secretary Vice President and General Counsel of UAMFSI and 0 0
211 Congress Street UAMFDI; Associate Attorney of Ropes & Gray (a law firm)
Boston, MA 02110 from 1993 to 1995.
2/28/68
----------------------------------------------------------------------------------------------------------------------------------
Robert R. Flaherty Assistant Vice President of UAMFSI; formerly Manager of Fund 0 0
211 Congress Street Treasurer Administration and Compliance of CGFSC from 1995 to
Boston, MA 02110 1996; Deloitte & Touche LLP from 1985 to 1995, Senior
9/18/63 Manager.
----------------------------------------------------------------------------------------------------------------------------------
Michelle Azrialy Assistant Assistant Treasurer of Chase Global Funds Services 0 0
73 Tremont Street Secretary Company since 1996. Senior Public Accountant with
Boston, MA 02108 Price Waterhouse LLP from 1991 to 1994.
4/12/69
</TABLE>
______________
*These people are "interested persons" of the Fund as that term is defined in
the 1940 Act.
Code of Ethics
The Fund has adopted a Code of Ethics that restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
Investment Advisory and Other Services
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Control of Adviser
The Adviser is located at 125 College Street, Burlington, Vermont 05401. The
Adviser (or its predecessor), an affiliate of United Asset Management
Corporation, has provided investment management services to corporations,
pension and profit-sharing plans, 401(k), 403(b) and thrift plans since 1978.
UAM is a holding company incorporated in Delaware in December 1980 for the
purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August 1983, UAM has
acquired or organized approximately 45 such affiliated firms (the "UAM
Affiliated Firms"). UAM believes that permitting UAM Affiliated Firms to
retain control over their investment advisory decisions is necessary to allow
them to continue to provide investment management services that are intended
to meet the particular needs of their respective clients. Accordingly, after
acquisition by UAM, UAM Affiliated Firms continue to operate under their own
firm name, with their own leadership and individual investment philosophy and
approach. Each UAM Affiliated Firm manages its own business independently on a
day-to-day basis. Investment strategies
16
<PAGE>
employed and securities selected by UAM Affiliated Firms are separately chosen
by each of them. Several UAM Affiliated Firms also act as investment advisers
to separate series or portfolio of the UAM Funds complex.
Investment Advisory Agreement
Service Performed by Adviser
Pursuant to the Investment Advisory Agreement (Advisory Agreement) between the
Fund and the Adviser, the Adviser has agreed to:
. Manage the investment and reinvestment of the assets of the portfolio.
. Continuously review, supervise and administer the investment program of the
portfolio.
. Determine in its discretion the securities the portfolio will buy or sell
and the portion of its assets the portfolio will hold uninvested.
Limitation of Liability
In the absence of (1) willful misfeasance, bad faith, or gross negligence of
the part of the Adviser in the performance of its obligations and duties under
the Advisory Agreement, (2) reckless disregard by the Adviser of its
obligations and duties under the Advisory Agreement, or (3) 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
Advisory Agreement.
Continuing an Advisory Agreement
Unless sooner terminated, an Advisory Agreement shall continue for periods of
one year so long as such continuance is specifically approved at least
annually (a) by a majority of those members of the governing board of the Fund
who are not parties to the Advisory Agreement or interested persons of any
such party and (b) by a majority of the governing board of the Fund or a
majority of the shareholders of the portfolio. An Advisory Agreement may be
terminated at any time by the Fund, without the payment of any penalty, by
vote of a majority of the portfolio' shareholders on 60 days' written notice
to the Adviser. The Adviser may terminate the Advisory Agreements at any time,
without the payment of any penalty, upon 90 days' written notice to the Fund.
An Advisory Agreement will automatically and immediately terminate if it is
assigned.
Investment Advisory Fee
For its services, the Adviser receives an advisory fee calculated annual rate
of 0.40% of the average daily net assets of the portfolio for the month. The
Adviser's fee is paid monthly.
Expense Limitation
The Adviser may voluntarily agree to limit the expenses of the portfolio. The
Adviser may reduce its compensation to the extent that the expenses of the
portfolio exceed such lower expense limitation as the Adviser may, by notice
to the portfolio, declare to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions, interest, taxes, deferred
organizational and extraordinary expenses and, if the fund has a distribution
plan, payments required under such plan. The prospectus describes the terms of
any expense limitation that are in effect from time to time.
Representative Institutional Clients
As of the date of this SAI, the Adviser's representative institutional clients
included Morgan Stanley, MFS, SEI Corporation Chase Manhattan Bank, Asea Brown
Boveri, Hoffmann-LaRoche and the State of Vermont.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance-based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
DISTRIBUTOR
- --------------------------------------------------------------------------------
UAMFDI serves as the Fund's distributor. The Fund offers its shares
continuously. While UAMFDI will use its best efforts to sell shares of the
Fund, it is not obligated to sell any particular amount of shares. UAMFDI
receives no compensation for its services. UAMFDI, an affiliate of UAM, is
located at 211 Congress Street, Boston, Massachusetts 02110.
17
<PAGE>
ADMINISTRATION AND TRANSFER AGENCY SERVICES
- --------------------------------------------------------------------------------
Administrator and Sub-Administrator
Administrator
Pursuant to a Fund Administration Agreement with the Fund, UAMFSI manages,
administers and conducts the general business activities of the Fund. As a
part of its responsibilities, UAMFSI provides and oversees the provision by
various third parties of administrative, fund accounting, dividend disbursing
and transfer agent services for the Fund. UAMFSI, an affiliate of UAM, has its
principal office at 211 Congress Street, Boston, Massachusetts 02110.
UAMFSI will bear all expenses in connection with the performance of its
services under the Fund Administration Agreement. Other expenses to be
incurred in the operation of the Fund will be borne by the Fund or other
parties, including
. Taxes, interest, brokerage fees and commissions.
. Salaries and fees of officers and members of the Board who are not
officers, directors, shareholders or employees of an affiliate of UAM,
including UAMFSI, UAMFDI or the Adviser.
. SEC fees and state Blue-Sky fees.
. EDGAR filing fees.
. Processing services and related fees.
. Advisory and administration fees.
. Charges and expenses of pricing and data services, independent public
accountants and custodians.
. Insurance premiums including fidelity bond premiums.
. Outside legal expenses.
. Costs of maintenance of corporate existence.
. Typesetting and printing of prospectuses for regulatory purposes and for
distribution to current shareholders of the Fund.
. Printing and production costs of shareholders' reports and corporate
meetings.
. Cost and expenses of Fund stationery and forms.
. Costs of special telephone and data lines and devices.
. Trade association dues and expenses.
. Any extraordinary expenses and other customary Fund expenses.
Unless sooner terminated, the Fund Administration Agreement shall continue in
effect from year to year provided the board specifically approves such
continuance at least annually. The Board or UAMFSI may terminate the Fund
Administration Agreement, without penalty, on not less than ninety (90) days'
written notice. The Fund Administration Agreement 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. UAMFSI will pay such person or persons
for such employment. The Fund will not incur any obligations with respect to
such persons.
Sub-Administrator
UAMFSI has subcontracted some of the its administrative and fund accounting
services to 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, Massachusetts 02108.
Sub-Transfer Agent and Sub-Shareholder Servicing Agent
UAMFSI has subcontracted its transfer agent and dividend-disbursing agent
services to DST Systems, Inc. under an Agency Agreement between UAMFSI and DST
Systems Inc. DST Systems, Inc., is located at P.O. Box 419534, Kansas City,
Missouri 64141-6534.
18
<PAGE>
UAM Shareholder Service Center, Inc. ("UAMSSC"), an affiliate of UAM, serves
as sub-shareholder servicing agent for the Fund under an agreement between
UAMSSC and UAMFSI. The principal place of business of UAMSSC is 825 Duportail
Road, Wayne, Pennsylvania 19087.
Administration and Transfer Agency Services Fees
The portfolio pays a four-part fee to UAMFSI as follows:
. A portfolio specific fee to UAMFSI calculated at the annual rate of 0.06%
aggregate net assets of the portfolio.
. An annual base fee that UAMFSI pays to Chase Global Funds Services Company
for its sub-administration and other services calculated at the annual rate
of $52,500 for the first operational class; $7,500 for each additional
operational class; and 0.04% of their pro rata share of the combined assets
of the UAM Funds.
. An annual base fee that UAMFSI pays to DST Systems, Inc. for its services
as transfer agent and dividend-disbursing agent equal to $10,500 for the
first operational class and $10,500 for each additional class.
. An annual base fee that UAMFSI pays to UAMSSC for its services as sub-
shareholder-servicing agent equal to $7,500 for the first operational class
and $2,500 for each additional class.
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 PUBLIC ACCOUNTANT
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.
SERVICE AND DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
The Fund has adopted a Distribution Plan and a Shareholder Servicing Plan (the
"Plans") for their Institutional Service Class Shares pursuant to Rule 12b-1
under the Investment Company Act of 1940.
Shareholder Servicing Plan
The Shareholder Servicing Plan (Service Plan) permits the Fund to compensate
broker-dealers or other financial institutions (Service Agents) that have
agreed with UAMFDI to provide administrative support services to Institutional
Service Class shareholders that are their customers. Under the Service Plan,
Institutional Service Class Shares may pay service fees at the maximum annual
rate of 0.25% of the average daily net asset value of such shares held by the
Service Agent for the benefit of its customers. The Fund pays these fees out
of the assets allocable to Institutional Service Class Shares to UAMFDI, to
the Service Agent directly or through UAMFDI. Each item for which a payment
may be made under the Service Plan constitutes personal service and/or
shareholder account maintenance and may constitute an expense of distributing
Fund Service Class Shares as the SEC construes such term under Rule 12b-1.
Services for which Institutional Service Class Shares may compensate Service
Agents include:
. Acting as the sole shareholder of record and nominee for beneficial owners.
. Maintaining account records for such beneficial owners of the Fund's
shares.
. Opening and closing accounts.
. Answering questions and handling correspondence from shareholders about
their accounts.
. Processing shareholder orders to purchase, redeem and exchange shares.
. Handling the transmission of funds representing the purchase price or
redemption proceeds.
. Issuing confirmations for transactions in the Fund's shares by
shareholders.
. Distributing current copies of prospectuses, statements of additional
information and shareholder reports.
. Assisting customers in completing application forms, selecting dividend and
other account options and opening any necessary custody accounts.
19
<PAGE>
. Providing account maintenance and accounting support for all transactions.
. 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.
Rule 12b-1 Distribution Plan
The Distribution Plan permits a portfolio to pay UAMFDI or others for certain
distribution, promotional and related expenses involved in marketing its
Institutional Service Class Shares. Under the Distribution Plan, Institutional
Service Class Shares may pay distribution fees at the maximum annual rate of
0.75% of the average daily net asset value of such shares held by the Service
Agent for the benefit of its customers. These expenses include, among other
things:
. Advertising the availability of services and products.
. Designing materials to send to customers and developing methods of making
such materials accessible to customers.
. Providing information about the product needs of customers.
. Providing facilities to solicit Fund sales and to answer questions from
prospective and existing investors about the Fund.
. Receiving and answering correspondence from prospective investors,
including requests for sales literature, prospectuses and statements of
additional information.
. Displaying and making available sales literature and prospectuses.
. Acting as liaison between shareholders and the Fund, including obtaining
information from the Fund and providing performance and other information
about the Fund.
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.
Fees Paid under the Service and Distribution Plans
The Plans permit Institutional Service Class Shares to pay distribution and
service fees at the maximum annual rate of 0.75% of the class' average daily
net assets for the year. The Fund's governing board may reduce this amount at
any time and has limited the amount the Institutional Service Class may pay
under the Plans to 0.50% of the class' average daily net assets for the year.
Currently, however, the class is paying 0.25% of its average daily net assets.
The Fund will not reimburse the Distributor or others for distribution
expenses incurred in excess of the amount permitted by the Plans.
Subject to seeking best price and execution, the Fund may buy or sell
portfolio securities through firms that receive payments under the Plans.
UAMFDI, at its own expense, may pay dealers for aid in distribution or for aid
in providing administrative services to shareholders.
Approving, Amending and Terminating the Fund's Distribution Arrangements
Shareholders of each portfolio have approved the Plans. The Plans also were
approved by the governing board of the Fund, including a majority of the
members of the board who are not interested persons of the Fund and who have
no direct or indirect financial interest in the operation of the Plans (Plan
Members), by votes cast in person at meetings called for the purpose of voting
on these Plans.
Continuing the Plans
The Plans continue in effect from year to year so long as they are approved
annually by a majority of the Fund's board members and its Plan Members. To
continue the Plans, the board must determine whether such continuation is in
the best interest of the Institutional Service Class shareholders and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Fund's board has determined that the Fund's distribution
arrangements are likely to benefit the Fund and its shareholders by enhancing
the Fund's ability to efficiently service the accounts of its Institutional
Service Class shareholders.
Amending the Plans
A majority of the Fund's governing board and a majority of its the Plan
Members must approve any material amendment to the Plans. Likewise, any
amendment materially increasing the maximum percentage payable under the Plans
must be approved by a majority of the outstanding voting securities of the
Class, as well as by a majority of the Plan Members.
20
<PAGE>
Terminating the Plans
A majority of the Plan Members or a majority of the outstanding voting
securities of the Class may terminate the Plans at any time without penalty.
In addition, the Plans will terminate automatically upon their assignment.
Miscellaneous
So long as the Plans are in effect, the disinterested board members will
select and nominate the Plan Members of the Fund.
The Fund and UAMFDI intend to comply with the Conduct Rules of the National
Association of Securities Dealers relating to investment company sales
charges. with these rules.
Pursuant to the Plans, the board 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.
Additional Non-12b-1 Shareholder Servicing Arrangements
In addition to payments by the Fund under the Plans, UAM and any of its
affiliates, may, at its own expense, compensate a Service Agent or other
person for marketing, shareholder servicing, record-keeping and/or other
services performed with respect to the Fund, a portfolio or any class of
shares of a portfolio. The person making such payments may do so out of its
revenues, its profits or any other source available to it. Such services
arrangements, when in effect, are made generally available to all qualified
service providers. The Adviser may also compensate its affiliated companies
for referring investors to the portfolios.
Brokerage Allocation and Other Practices
SELECTION OF BROKERS
- --------------------------------------------------------------------------------
The Advisory Agreement authorizes the Adviser to select the brokers or dealers
that will execute the purchases and sales of investment securities for the
portfolio. The Advisory Agreement also directs the Adviser to use its best
efforts to obtain the best execution with respect to all transactions for the
Adviser. The Adviser may select brokers based on research, statistical and
pricing services they provide to the portfolio. Information and research
provided by a broker will be in addition to, and not instead of, the services
the Adviser is required to perform under the Advisory Agreement. In so doing,
the portfolio may pay higher commission rates than the lowest rate available
when the Adviser believes it is reasonable to do so in light of the value of
the research, statistical, and pricing services provided by the broker
effecting the transaction. The Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
SIMULTANEOUS TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser makes investment decisions for the portfolio independently of
decisions made for its other clients. When a security is suitable for the
investment objective of more than one client, it may be prudent for the
Adviser to engage in a simultaneous transaction, that is, buy or sell the same
security for more than one client. The Adviser strives to allocate such
transactions among its clients, including the portfolio, in a fair and
reasonable manner. Although there is no specified formula for allocating such
transactions, the Fund's governing board periodically reviews the various
allocation methods used by the Adviser, and the results of such allocations.
BROKERAGE COMMISSIONS
- --------------------------------------------------------------------------------
Debt Securities
Debt securities are usually bought and sold directly from the issuer or an
underwriter or market maker for the securities. Generally, each Fund will not
pay brokerage commissions for such purchases. When a debt security is bought
from an underwriter, the purchase price will usually include an underwriting
commission or concession. The purchase price for securities bought from
dealers serving as market makers will similarly include the dealer's mark up
or reflect a dealer's mark down. When the portfolio executes transactions in
the over-the-counter market, it will deal with primary market makers unless
prices that are more favorable are otherwise obtainable.
21
<PAGE>
Capital Stock and Other Securities
DESCRIPTION OF SHARES AND VOTING RIGHTS
- --------------------------------------------------------------------------------
The Fund's Declaration of Trust, as amended, permit its governing board to
issue an unlimited number of shares without par value. The governing board has
the power to create and designate one or more series (portfolio) or classes of
shares of common stock and to classify or reclassify any unissued shares at
any time and without shareholder approval. When issued and paid for, the
shares of each series and class of the Fund are fully paid and nonassessable,
and have no pre-emptive rights or preference as to conversion, exchange,
dividends, retirement or other features.
The shares of each series and class have non-cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the election
of members of the governing board can elect 100% of the members if they choose
to do so. On each matter submitted to a vote of the shareholders, a
shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his name on the books
of the Fund. Shares of all classes will vote together as a single class except
when otherwise required by law or as determined by the members of the Fund's
governing board.
If the Fund is liquidated, the shareholders of the portfolio or any class
thereof are entitled to receive the net assets belonging to the portfolio, or
in the case of a class, belonging to the portfolio and allocable to that
class. The Fund will distribute is net assets to its shareholders in
proportion to the number of shares of the portfolio or class thereof held by
them and recorded on the books of the Fund. The liquidation of the portfolio
or any class thereof may be authorized at any time by vote of a majority of
the members of the governing board.
The governing board has authorized two classes of shares, Institutional and
Institutional Service. Both Institutional Class and Institutional Service
Class Shares represent interests in the same assets of the portfolio and,
except as discussed below, are identical in all respects. Unlike
Institutional Class Shares, Institutional Service Class Shares bear certain
expenses related to shareholder servicing and the distribution of such shares
and have exclusive voting rights with respect to matters relating to such
distribution expenditures. The two classes also have different exchange
privileges. The net income attributable to Institutional Service Class
Shares and the dividends payable on Institutional Service Class Shares will be
reduced by the amount of the shareholder servicing and distribution fees;
accordingly, the net asset value of the Institutional Service Class Shares
will be reduced by such amount to the extent the portfolio has undistributed
net income.
The Fund will not hold annual meetings except when required to by the 1940 Act
or other applicable law. The Fund has undertaken that the governing board will
call a meeting of shareholders if such a meeting is requested in writing by
the holders of not less than 10% of the outstanding shares of the Fund. The
Fund will assist shareholder communications in such matters to the extent
required by the undertaking.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund tries to distribute substantially all of the net investment income of
the portfolio and net realized capital gains so as to avoid income taxes on
its dividends and distributions and the imposition of the federal excise tax
on undistributed income and capital gains. However, the Fund cannot predict
the time or amount of any such dividends or distributions.
Distributions by the portfolio reduce its NAV. A distribution that reduces the
NAV of the portfolio below its cost basis is taxable as described in the
prospectus of the portfolio, although from an investment standpoint, it is a
return of capital. If you buy shares of the portfolio on or before the "record
date" -- the date that establishes which shareholders will receive an upcoming
distribution -- for a distribution, you will receive some of the money you
invested as a taxable distribution.
Unless the shareholder elects otherwise in writing, all dividend and capital
gains distributions are automatically received 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.
The portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for federal tax purposes. The portfolio will
distribute its net capital gains to its investors, but will not offset (for
federal income tax purposes) such gains against any net capital losses of
another portfolio.
22
<PAGE>
Purchase Redemption and Pricing of Shares
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
Service Agents may enter confirmed purchase orders on behalf of their
customers. If shares of the portfolio are purchased in this manner, the
Service Agent must receive your investment order before the close of trading
on the New York Stock Exchange and transmit it to UAMSSC before the close of
its business day to receive that day's share price. UAMSSC must receive proper
payment for the order by the time the portfolio is priced on the following
business day. Service Agents are responsible to their customers and the Fund
for timely transmission of all subscription and redemption requests,
investment information, documentation and money.
Purchases of shares of the portfolio 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.
The Fund reserves the right in its sole discretion 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.
In-Kind Purchases
If accepted by the Fund, shareholders may purchase shares of the portfolio in
exchange for securities that are eligible for acquisition by the portfolio.
Securities to be exchanged that 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 the portfolio in exchange for
securities will be issued at net asset value determined as of the same time.
All dividends, interest, subscription, or other rights pertaining to such
securities shall become the property of the portfolio and must be delivered to
the Fund by the investor upon receipt from the issuer. Securities acquired
through an in-kind purchase will be acquired for investment and not for
immediate resale.
The Fund will not accept securities in exchange for shares of the 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).
. The investor represents and agrees that all securities offered to be
exchanged are liquid securities and not subject to any restrictions upon
their sale by the portfolio under the Securities Act of 1933, or otherwise.
. The value of any such securities (except U.S. Government securities) being
exchanged together with other securities of the same issuer owned by the
portfolio will not exceed 5% of the net assets of the portfolio immediately
after the transaction.
Investors who are subject to Federal taxation upon exchange may realize a gain
or loss for Federal income tax purposes depending upon the cost of securities
or local currency exchanged. Investors interested in such exchanges should
contact the Adviser.
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
When you redeem, your shares may be worth more or less than the price you paid
for them depending on the market value of the investments held by the
portfolio.
By Mail
Requests to redeem shares must include:
. Share certificates, if issued.
. A letter of instruction or an assignment specifying the number of shares or
dollar amount 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").
23
<PAGE>
. Any other necessary legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit
sharing plans and other organizations.
By Telephone
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.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include
requiring the investor to provide certain personal identification at the time
an account is opened, 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
instructions of such transaction requests. The Fund or Sub-Transfer Agent may
be liable for any losses due to unauthorized or fraudulent telephone
instructions if the Fund or the Sub-Transfer Agent does not employ the
procedures described above. Neither the Fund nor the Sub-Transfer Agent will
be responsible for any loss, liability, cost or expense for following
instructions received by telephone that it reasonably believes to be genuine.
Signature Guarantees
To protect your account, the Fund and its sub-transfer agent from fraud,
signature guarantees are required for certain redemptions. The purpose of
signature guarantees is to verify the identity of the person who has
authorized a redemption from your account
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 that 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.
Other Redemption Information
Normally, the Fund will pay for all shares redeemed under proper procedures
within one business day of and no more than seven days after the receipt of
the request, or earlier if required under applicable law. The Fund may suspend
the right of redemption or postpone the date at times when both the NYSE and
Custodian Bank are closed, or under any emergency circumstances determined by
the SEC.
The Fund may suspend redemption privileges or postpone the date of payment
. During any period that both the NYSE and custodian bank are closed, or
trading on the NYSE is restricted as determined by the Commission.
. During any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for the
portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets.
. For such other periods as the Commission may permit.
TRANSFER OF SHARES
- --------------------------------------------------------------------------------
Shareholders may transfer shares of the portfolio to another person by making
a written request to the Fund. Your request should clearly identify the
account and number of shares you wish to transfer. All registered owners
should sign the request and all stock certificates, if any, which are subject
to the transfer. The signature on the letter of request, the stock certificate
or any stock power must be guaranteed in the same manner as described under
"Signature Guarantees." As in the case of redemptions, the written request
must be received in good order before any transfer can be made.
24
<PAGE>
VALUATION OF SHARES
- --------------------------------------------------------------------------------
The Fund does not price its shares on those days when the New York Stock
Exchange is closed, which are currently: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day;
New Year's Day and Dr. Martin Luther King, Jr. Day.
Debt Securities
Debt securities are valued according to the broadest and most representative
market, which will ordinarily be the over-the-counter market. Debt securities
may be valued based on prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities. Securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost when the UAM Funds' boards determines that amortized cost reflects fair
value.
Wrapper Agreements
The value of Wrapper Agreements determined in good faith at fair value using
methods determined by the UAM Funds' boards. The fair value of a wrapper
agreement generally will be equal to the difference between the book value and
the market value of the applicable covered assets after consideration is given
to the credit rating of the wrap provider and its ability to pay amounts due
under the wrapper agreement. If the board determines that a wrap provider is
unable to make such payments, the board may assign a value to the wrapper
agreement that is less than the difference between the book value and the
market value of the covered assets, which might adversely affect the
portfolio's ability to maintain a stable NAV.
Other Assets
The value of other assets and securities for which no quotations are readily
available (including illiquid and restricted securities) is determined in good
faith at fair value using methods determined by the UAM Funds' boards.
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. 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.
Performance is calculated separately for each class. Dividends paid by the
portfolio with respect to each class 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 fees, distribution charges and any incremental transfer agency costs
relating to Service Class Shares will be borne exclusively by that class.
TOTAL RETURN
- --------------------------------------------------------------------------------
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
cumulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of
return that, if achieved annually, would have produced the same cumulative
total return if performance had been constant over the entire period.
The average annual total return of the 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 one, five and ten-year period and the deduction of
all applicable Fund expenses on an annual basis. Since Institutional Service
Class Shares bear additional service and distribution expenses, their average
annual total return will generally be lower than that of the Institutional
Class Shares.
These figures are calculated according to the following formula:
P (1 + T)/n/ = ERV
Where:
25
<PAGE>
P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the 1,
5 or 10 year periods (or fractional portion thereof).
YIELD
- --------------------------------------------------------------------------------
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
income actually paid to shareholders.
The current yield is determined by dividing the net investment income per
share earned during a 30-day base period by the maximum offering price per
share on the last day of the period and annualizing the result. Expenses
accrued for the period include any fees charged to all shareholders during the
base period. Since Institutional Service Class Shares bear additional service
and distribution expenses, their yield will generally be lower than that of
the Institutional Class Shares.
Yield is obtained using the following formula:
Yield = 2(((a-b)/(c/d)+1)/6/-1)
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
COMPARISONS
- --------------------------------------------------------------------------------
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
described in the portfolio' s SAI. This information may also be included in
sales literature and advertising.
To help investors better evaluate how an investment in the portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. Please see APPENDIX B for publications, indices and averages that
may be used.
In assessing such comparisons of performance, an investor should keep in mind
that the composition of the investments in the reported indices and averages
is not identical to the composition of investments in 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.
Taxes
In order for the portfolio to continue to qualify for federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended, at least 90% of its gross income for a taxable year must be
derived from qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or foreign
currencies, or other income derived with respect to its business of investing
in such securities or currencies.
26
<PAGE>
The portfolio will distribute to shareholders annually any net capital gains
that have been recognized for federal income tax purposes. Shareholders will
be advised on the nature of the payments.
If for any taxable year a portfolio does not qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, all of
the portfolio's taxable income would be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In this event,
a portfolio's distributions to shareholders would be taxable as ordinary
income to the extent of the current and accumulated earnings and profits of
the particular portfolio, and would be eligible for the dividends received
deduction in the case of corporate shareholders.
Dividends and interest received by each portfolio may give rise to withholding
and other taxes imposed by foreign countries. These taxes reduce each
portfolio's dividends but are included in the taxable income reported on your
tax statement if each portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
27
<PAGE>
PART C
UAM FUNDS TRUST
OTHER INFORMATION
ITEM 23. EXHIBITS
Exhibits previously filed by the Fund are incorporated by reference to such
filings. The following table describes the location of all exhibits. In the
table, the following references are used: PEA 24 = Post Effective Amendment No.
24 filed on July 10, 1998; PEA 23 = Post Effective Amendment No. 23 filed on
July 2, 1998; PEA 22 = Post Effective Amendment No. 22 filed on June 24, 1998;
PEA 21 = Post Effective Amendment No. 21 filed on June 19, 1998; PEA 20 = Post-
Effective Amendment No. 20 filed on March 26, 1998, PEA 19 = Post-Effective
Amendment No. 19 filed on February 3, 1998; PEA 18 = Post-Effective Amendment
No. 18 filed on January 23, 1998, PEA17 = Post-Effective Amendment No. 17 filed
on December 15, 1997, PEA16 = Post-Effective Amendment No. 16 filed on July 10,
1997, PEA14 = Post-Effective Amendment No. 14 filed on September 17, 1996, PEA13
= Post-Effective Amendment No. 13 filed on August 28, 1996, PEA12 = Post-
Effective Amendment No. 12 filed on July 17, 1996, PEA8 = Post-Effective
Amendment No. 8 filed on March 13, 1996, PEA4 = Post-Effective Amendment No. 4
filed on February 9, 1995, PEA3 = Post-Effective Amendment No. 3 filed on
December 14, 1994, PEA2 = Post-Effective Amendment No. 2 filed on November 25,
1994, PEA1 = Post-Effective Amendment No. 1 filed on November 15, 1994, and RS =
Original Registration Statement on Form N-1A filed on June 3, 1994..
<TABLE>
<CAPTION>
Incorporated by
Exhibit Reference to (Location):
- ------- -----------------------
<S> <C>
A.1. Declaration of Trust PEA 24
2. Certificate of Trust PEA 24
3. Certificate of Amendment PEA 24
to Certificate of Trust
B. By-Laws PEA 24
C. Form of Specimen Share Certificate PEA 24
D. Investment Advisory Agreements RS, PEA1, PEA2, PEA3, PEA4, PEA12, PEA14,
PEA17, PEA18, PEA 21; PEA 22, PEA 23
E.1. Distribution Agreement (UAM Funds
Distributors, Inc.) PEA 24
2. Distribution Agreement (ACG Capital
Corporation) PEA17, PEA19
F. Trustees' and Officers' Contracts and
Programs Not applicable
G.1. Global Custody Agreement PEA16
H.1. Fund Administration Agreement PEA13
2. Mutual Funds Service Agreement PEA16
I. Opinions and Consents of Counsel Not applicable
J. Consent of Independent Auditors Not applicable
K. Other Financial Statements Not applicable
L. Purchase Agreement PEA 24
M.1. Distribution Plan PEA 24
2. Selling Dealer Agreement PEA 24
</TABLE>
-4-
<PAGE>
3. Shareholder Services Plan PEA 24
4. Service Agreement PEA 24
N. Financial Data Schedule Not applicable
O. Amended and Restated Rule 18f-3 Multiple PEA 24
Class Plan
P. Powers of Attorney PEA 24
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Not applicable.
ITEM 25. INDEMNIFICATION
Reference is made to Article VI of Registrant's Declaration of Trust, which is
incorporated herein by reference. Registrant hereby also makes the undertaking
consistent with Rule 484 under the Securities Act of 1933, as amended. Insofar
as indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Provisions for indemnification of UAM Fund Services, Inc. are contained in
Section 6 of its Fund Administration Agreement with the Registrant.
Provisions for indemnification of the Registrant's investment advisers are
contained in Section 7 of their respective Investment Advisory Agreements with
the Registrant.
Provisions for indemnification of Registrant's principal underwriter, UAM Fund
Distributors, Inc., are contained in its Distribution Agreement with the
Registrant.
Provisions for indemnification of Registrant's custodian, The Chase Manhattan
Bank, are contained in Section 12 of its Fund Global Custody Agreement with the
Registrant.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the caption "Investment Adviser" in the Prospectuses
constituting Part A of this Registration Statement and "Investment Adviser" in
Part B of this Registration Statement. Except for information with respect to
Pell Rudman Trust Company, N.A., the information required by this Item 26 with
respect to each director, officer, or partner of each other investment adviser
of the Registrant is incorporated by reference to the Forms ADV filed by the
investment advisers listed below with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940, as amended, under the file
numbers indicated:
<TABLE>
<CAPTION>
Investment Adviser File No.
- ------------------ --------
<S> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. 801-31237
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C>
Cambiar Investors, Inc. 801-09538
Chicago Asset Management Company 801-20197
Dwight Asset Management Company 801-45304
First Pacific Advisors, Inc. 801-39512
Hanson Investment Management Company 801-14817
Heitman/PRA Securities Advisors, Inc. 801-48252
Jacobs Asset Management, L.P. 801-49790
Murray Johnstone International Ltd. 801-34926
Pacific Financial Research, Inc. 801-54352
Tom Johnson Investment Management, Inc. 801-42549
</TABLE>
<TABLE>
<CAPTION>
Name and Principal Business Address Positions and Offices with Pell Rudman Positions and Offices
- ----------------------------------- -------------------------------------- ---------------------
Trust Company, N.A. with Pell Rudman & Co., Inc.
------------------- ----------------------------
<S> <C> <C>
Jeffrey S. Thomas Director Chief Financial Officer
100 Federal Street of Pell, Rudman & Co., Inc.
Boston, Massachusetts
Edward I. Rudman Director Chairman and President
100 Federal Street of Pell, Rudman & Co., Inc.
Boston, Massachusetts
James S. McDonald Director Executive Vice President of Pell,
100 Federal Street Rudman & Co., Inc.
Boston, Massachusetts
Susan W. Hunnewell Director Senior Vice President of Pell,
100 Federal Street Rudman & Co., Inc.
Boston, Massachusetts
</TABLE>
Barrow, Hanley, Mewhinney & Strauss, Inc., Cambiar Investors, Inc., Chicago
Asset Management Company, Dwight Asset Management Company, First Pacific
Advisors, Inc., Hanson Investment Management Company, Heitman/PRA Securities
Advisors, Inc., Jacobs Asset Management, L.P., Murray Johnstone International
Ltd., Pacific Financial Research, Inc., Pell Rudman Trust Company, N.A., and Tom
Johnson Investment Management, Inc., are affiliates of United Asset Management
Corporation ("UAM"), a Delaware corporation owning firms engaged primarily in
institutional investment management.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Except for Heitman Real Estate Portfolio Advisor Class Shares, UAM Fund
Distributors, Inc. ("UAMFDI") acts as sole distributor of the Registrant's
shares. ACG Capital Corporation ("ACG") acts as
-6-
<PAGE>
sole distributor of the Heitman Real Estate Portfolio Advisor Class Shares.
(b) The information required with respect to each Director and officer of
UAMFDI is incorporated by reference to Schedule A of Form BD filed pursuant
to the Securities and Exchange Act of 1934 (SEC File No. 8-41126).
The information required with respect to each Director and officer of
ACG is incorporated by reference to Schedule A of Form BD filed pursuant to
the Securities and Exchange Act of 1934 (SEC File No. 8-47813).
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act of 1940, as amended, and the rules promulgated thereunder
will be maintained in the physical possession of the Registrant, the
Registrant's Advisers, the Registrant's Sub-Transfer and Sub-Administrative
Agent (Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108) and the Registrant's Custodian Bank (The Chase Manhattan
Bank 4 Chase MetroTech Center, Brooklyn, New York, 11245).
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
Not Applicable.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston and Commonwealth of Massachusetts on the
16th day of November, 1998.
UAM FUNDS TRUST
/s/ Michael E. DeFao
-----------------------
Michael E. DeFao
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the 16th day of November, 1998:
*
_________________________________
Norton H. Reamer, Chairman and
President
*
_________________________________
John T. Bennett, Jr., Trustee
*
_________________________________
Nancy J. Dunn, Trustee
*
_________________________________
Philip D. English, Trustee
*
_________________________________
William A. Humenuk, Trustee
*
_________________________________
Peter M. Whitman, Jr., Trustee
/s/ Gary L. French
- ----------------------
Gary L. French, Treasurer
/s/ Michael E. DeFao
- ---------------------
* Michael E. DeFao
(Attorney-in-Fact)
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