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PART B
UAM FUNDS
HEITMAN REAL ESTATE PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION -- MARCH 2, 1998
As Supplemented June 30, 1998
This Statement is not a Prospectus but should be read in conjunction
with the Prospectus of the UAM Funds Trust (the "UAM Funds" or the "Fund") for
the Heitman Real Estate Portfolio Institutional Class Shares dated March 2, 1998
and the Advisor Class Prospectus dated March 2, 1998, as supplemented from
time-to-time. To obtain a Prospectus, please call the UAM Funds Service Center
at 1-800-638-7983.
TABLE OF CONTENTS
INVESTMENT OBJECTIVE AND POLICIES............................................2
PURCHASE AND REDEMPTION OF SHARES............................................3
VALUATION OF SHARES..........................................................4
SHAREHOLDER SERVICES.........................................................4
INVESTMENT LIMITATIONS ......................................................5
MANAGEMENT OF THE FUND.......................................................7
INVESTMENT ADVISER...........................................................9
SERVICE AND DISTRIBUTION PLANS..............................................11
PORTFOLIO TRANSACTIONS......................................................12
ADMINISTRATIVE SERVICES.....................................................13
CUSTODIAN...................................................................14
INDEPENDENT ACCOUNTANTS.....................................................14
DISTRIBUTOR.................................................................14
PERFORMANCE CALCULATIONS....................................................15
GENERAL INFORMATION.........................................................16
FINANCIAL STATEMENTS........................................................17
APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS .......................A-1
APPENDIX B - COMPARISONS...................................................B-1
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INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment policies of the
Heitman Real Estate Portfolio (the "Portfolio") as set forth in the Prospectuses
for the Institutional Class Shares and Advisor Class Shares of the Portfolio.
LENDING OF SECURITIES
The Portfolio may lend its investment securities to qualified brokers,
dealers, domestic and foreign banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended, (the "1940
Act") or the Rules and Regulations or interpretations of the Securities and
Exchange Commission (the "SEC" or the "Commission") thereunder, which currently
require that (a) the borrower pledge and maintain with the Portfolio collateral
consisting of cash, an irrevocable letter of credit issued by a domestic U.S.
bank or securities issued or guaranteed by the United States Government having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time, and (d) the
Portfolio receives reasonable interest on the loan (which may include the
Portfolio investing any cash collateral in interest bearing short-term
investments). The Portfolio will not loan securities to the extent that greater
than one-third of its assets (including the value of the collateral for the
loans) at fair market value would be committed to loans. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. These risks are similar to the ones involved with repurchase
agreements as discussed in the Prospectus.
SHORT-TERM INVESTMENTS
In order to earn a return on uninvested assets, meet anticipated
redemptions, or for temporary defensive purposes, the Portfolio may invest a
portion of its assets in the short-term investments described below:
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a
commercial bank or savings and loan association. Time deposits are
non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits
maturing in more than seven days will not be purchased by the
Portfolio, and time deposits maturing from two business days through
seven calendar days will not exceed 10% of the total assets of the
Portfolio.
Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan associations collateralized by funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A banker's
acceptance is a time draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).
Each Portfolio will not invest in any security issued by a commercial
bank unless (i) the bank has total assets of at least $1 billion, or the
equivalent in other currencies, (ii) in the case of U.S. banks, it is a member
of the Federal Deposit Insurance Corporation, and (iii) in the case of foreign
branches of U.S. banks, the security is, in the opinion of the Adviser, of an
investment quality comparable with other debt securities which may be purchased
by the Portfolio;
(2) Commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by
Moody's or, if not rated, determined by the Adviser to be of comparable
quality;
(3) Short-term corporate obligations rated BBB or better by S&P or Baa by
Moody's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct
obligations of the U.S. Government and differ mainly in interest rates,
maturities and dates of issue;
(5) U.S. Government agency securities issued or guaranteed by U.S.
Government sponsored instrumentalities
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and Federal agencies. These include securities issued by the Federal
Home Loan Banks, Federal Land Bank, Farmers Home Administration,
Federal Farm Credit Banks, Federal Intermediate Credit Bank, Federal
National Mortgage Association, Federal Financing Bank, the Tennessee
Valley Authority, and others; and
(6) Repurchase agreements collateralized by securities listed above.
PORTFOLIO TURNOVER
The portfolio turnover rates described in the Prospectuses are
calculated by dividing the lesser of purchases or sales of portfolio securities
for the year by the monthly average of the value of the portfolio securities.
The calculation excludes all securities, including options, whose maturities at
the time of acquisition were one year or less. Portfolio turnover may vary
greatly from year to year within a particular year, and may also be affected by
cash requirements for redemptions of shares. See "Financial Highlights" in the
Prospectuses for the historical portfolio turnover rates with respect to the
Portfolio.
PURCHASE AND REDEMPTION OF SHARES
Institutional Class Shares of the Portfolio may be purchased without a
sales commission at, and Advisor Class Shares of the Portfolio may be purchased
with a sales charge in addition to, the net asset value per share next
determined after an order is received in proper form by the Fund and payment is
received by the Fund's custodian. The minimum initial investment required for
the Institutional Class Shares is $250,000, except institutions purchasing
shares of the Portfolio on behalf of accounts maintained by the institution may
aggregate such accounts to satisfy the minimum initial investment requirement,
and the minimum initial investment required for the Advisor Class Shares is
$5,000. Effective August 1, 1998, the minimum initial investment for
Institutional Class Shares will be reduced to $2,500. Certain exceptions may be
permitted from time to time by the officers of the Fund. Subsequent investments
will be accepted in any amount. An order received in proper form prior to the
close of regular trading on the New York Stock Exchange ("Exchange") (generally
4:00 p.m. Eastern Time) will be executed at the price computed on the date of
receipt; and an order received not in proper form or after the close of the
Exchange will be executed at the price computed on the next day the Exchange is
open after proper receipt. The Exchange will be closed on the following days:
New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Portfolio reserves the right in its sole discretion (1) to suspend the
offering of its shares, (2) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (3) to reduce
or waive the minimum for initial and subsequent investment for certain fiduciary
accounts such as employee benefit plans or under circumstances where certain
economies can be achieved in sales of a Portfolio's shares.
General information on how to buy shares of the Fund, as well as sales
charges, if any involved, is set forth under "Purchase of Shares" in the
Prospectus. The following supplements that information.
For purposes of determining whether a purchase of the Advisor Class shares
of beneficial interest in the Fund (the "Advisor Class") qualifies for reduced
sales charges and for purposes of determining whether an investor can join with
another investor in a single purchase for inclusion toward completion of a
Letter of Intent with respect to Advisor Class shares, the term "related person"
includes: (i) an individual, or an individual combining with his or her spouse
and their children and purchasing for his, her or their own account; (ii) a
"company" as defined in Section 2(a)(8) of the 1940 Act; (iii) a trustee or
other fiduciary purchasing for a single trust estate or single fiduciary account
(including a pension, profit sharing or other employee benefit trust created
pursuant to a plan qualified under Section 401 of the Internal Revenue Code);
(iv) a tax-exempt organization under Section 501(c)(3) of (13) of the Internal
Revenue Code; and (v) an employee benefit plan of a single employer or of
affiliated employers.
The Portfolio may suspend redemption privileges or postpone the date of
payment (i) during any period that either the Exchange and custodian bank are
closed or trading on the Exchange is restricted as determined by the Commission,
(ii) during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for a Portfolio
to dispose of securities owned by it or to fairly determine the value of its
assets, and (iii) for such other periods as the Commission may permit. The Fund
has made an election with the
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Commission to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
the net assets of the Fund at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Commission. Redemptions in excess
of the above limits may be paid, in whole or in part, in investment securities
or in cash as the Board of Trustees may deem advisable; however, payment will be
made wholly in cash unless the Trustees believe that economic or market
conditions exist which would make such a practice detrimental to the best
interests of the Portfolio. If redemptions are paid in investment securities,
such securities will be valued as set forth in each Prospectus under "Valuation
of Shares," and a redeeming shareholder would normally incur brokerage expenses
if he converted those securities to cash.
No charge is made by the Portfolio for redemptions. Any redemption may be
more or less than the shareholder's initial cost depending on the market value
of the securities held by the Portfolio.
Signature Guarantees - To protect your account, the Fund and Chase Global
Funds Services Company ("CGFSC") from fraud, signature guarantees are required
for certain redemptions. The purpose of signature guarantees is to verify the
identify of the person who has authorized a redemption from your account.
Signatures guarantees are required for (1) all redemptions when the proceeds are
to be paid to someone other than the registered owner(s) and/or registered
address, or (2) share transfer requests.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A complete definition of eligible guarantor institutions
is available from the Fund's transfer agent. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
VALUATION OF SHARES
Equity securities listed on a securities exchange for which market
quotations are readily available are valued at the last quoted sale price on the
day the valuation is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Unlisted equity securities
and listed securities not traded on the valuation date for which market
quotations are readily available are valued not exceeding the asked prices nor
less than the bid prices. Quotations of foreign securities in a foreign currency
are converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against U.S. dollars quoted by any major bank
or by a broker.
Bonds and other fixed income securities are valued according to the
broadest and most representative market which will ordinarily be the
over-the-counter market. Bonds and other fixed income securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities. Securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost when the Board of Trustees determines that it reflects fair value.
The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good faith
at fair value using methods approved by the Fund's Trustees.
SHAREHOLDER SERVICES
The following supplements the information set forth under "Shareholder
Services" in the Portfolio's Prospectuses.
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EXCHANGE PRIVILEGE
Institutional Class Shares of the Portfolio may be exchanged for any other
Institutional Class Shares of a Portfolio included in the UAM Funds which is
comprised of the Fund and UAM Funds, Inc. (See the list of Portfolios of the UAM
Funds - Institutional Class Shares in the Heitman Real Estate Portfolio -
Institutional Class Shares Prospectus.) Likewise, Advisor Class Shares of the
Portfolio may be exchanged for Advisor Class Shares of any other UAM Funds
Portfolio to the extent any are created in the future. Exchange requests should
be made by calling the Fund (1-800-638-7983) or by writing to UAM Funds, UAM
Funds Service Center, c/o Chase Global Funds Services Company, P.O. Box 2798,
Boston, MA 02208-2798. The exchange privilege is only available with respect to
Portfolios that are qualified for sale in the shareholder's state of residence.
Any such exchange will be based on the respective net asset values of the
shares involved. There is no sales commission or charge of any kind for
Institutional Class Shares of the Portfolio. However, there is a sales charge
for Advisor Class Shares of the Portfolio. Before making an exchange into a
Portfolio, a shareholder should read its Prospectus and consider the investment
objective of the Portfolio to be purchased. You may obtain a Prospectus for the
Portfolio(s) you are interested in by calling the UAM Funds Service Center at
1-800-638-7983.
Exchange requests may be made either by mail or telephone. Telephone
exchanges will be accepted only if the certificates for the shares to be
exchanged have not been issued to the shareholder and if the registration of the
two accounts will be identical. Requests for exchanges received prior to the
close of regular trading on the Exchange (generally 4:00 p.m. Eastern Time),
will be processed as of the close of business on the same day. Requests received
after the close of regular trading on the Exchange will be processed on the next
business day. Neither the Fund nor CGFSC will be responsible for the
authenticity of the exchange instructions received by telephone. Exchanges may
also be subject to limitations as to amounts or frequency and to other
restrictions established by the Board of Trustees to assure that such exchanges
do not disadvantage the Fund and its shareholders.
For Federal income tax purposes an exchange between funds is a taxable
event, and, accordingly, a capital gain or loss may be realized. In a revenue
ruling relating to circumstances similar to the Fund's, an exchange between
series of a Fund was also deemed to be a taxable event. It is likely, therefore,
that a capital gain or loss would be realized on an exchange between Portfolios;
you may want to consult your tax adviser for further information in this regard.
The exchange privilege may be modified or terminated at any time.
TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolio to another person or
entity by making a written request to the Fund. The request should clearly
identify the account and number of shares to be transferred, and include the
signature of all registered owners and all stock certificates, if any, which are
subject to the transfer. The signature on the letter of request, the stock
certificate or any stock power must be guaranteed in the same manner as
described under "Purchase and Redemption of Shares." As in the case of
redemptions, the written request must be received in good order before any
transfer can be made.
INVESTMENT LIMITATIONS
The Portfolio is subject to the following restrictions which are
fundamental policies (except as noted below) and may not be changed without the
approval of the lesser of: (1) at least 67% of the voting securities of the
Portfolio present at a meeting if the holders of more than 50% of the
outstanding voting securities of the Portfolio are present or represented by
proxy, or (2) more than 50% of the outstanding voting securities of the
Portfolio. Whenever an investment limitation sets forth a percentage limitation
on investment or utilization of assets, such limitation shall be determined
immediately after and as a result of a Portfolio's acquisition of such security
or other asset. Accordingly, any later increase or decrease resulting from a
change in values, net assets or other circumstances will not be considered when
determining whether the investment complies with a Portfolio's investment
limitations. The Portfolio will not:
1. As to 75% of the total assets of the Portfolio, purchase securities for the
Portfolio of any issuer, if immediately thereafter (i) more than 5% of the
Portfolio's total assets (taken at market value) would be invested in the
securities of such issuer, or (ii) more than 10% of the outstanding voting
securities of any
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class of such issuer would be held by the Portfolio, provided that this
limitation does not apply to U.S. Government securities.
2. Make investments in real estate (including real estate limited partnership
interests, but excluding readily marketable interest in real estate
investment trusts ("REITs") or readily marketable securities of companies
which invest in real estate) or commodities or commodity contracts,
although the Portfolio may purchase securities of issuers which deal in
real estate and may purchase securities which are secured by interests in
real estate, and the Portfolio may invest in futures contracts and related
options.
3. Act as a securities underwriter.
4. Make loans, except that the Portfolio may (i) purchase bonds, debentures
and other publicly-distributed securities of a like nature, (ii) make loans
in the form of call loans or loans maturing in not more than one year which
are secured by marketable collateral and are in amounts and on terms
similar to those currently in effect in the case of loans made by national
banks, (iii) enter into repurchase agreements with respect to portfolio
securities, and (iv) lend the portfolio securities of the Portfolio.
5. Borrow money, except that (i) the Portfolio may borrow money for temporary
administrative purposes provided that the aggregate of all such borrowings
does not exceed 33[OBJECT OMITTED]% of the value of the Portfolio's total
assets and is not for more than 60 days, and (ii) the Portfolio may enter
into interest-rate futures contracts. The Portfolio may not borrow for the
purpose of leveraging its investment portfolio. The Portfolio may not
purchase additional securities while outstanding borrowings exceed 5% of
the value of its assets.
6. Lend the portfolio securities of the Portfolio in an amount in excess of
33% of the total assets of the Portfolio, taken at market value. Any loans
of portfolio securities will be made according to guidelines established by
the Securities and Exchange Commission and the Trustees, including the
borrower's maintaining collateral equal at all times to the value of the
securities loaned.
7. Purchase "illiquid" securities for the Portfolio, including repurchase
agreements maturing in more than seven days, options traded "over-the-
counter," securities lacking readily available market quotations and
securities which cannot be sold without registration or the filing of a
notification under federal or state securities laws, if, as a result, more
than 15% of the Portfolio's net assets would then be invested in such
securities.*
8. Purchase securities on margin, except short-term credits as are necessary
for the purchase and sale of securities. For purposes of this restriction,
the deposit or payment of initial or variation margin in connection with
futures contracts or related options will not be deemed to be a purchase of
securities on margin by the Portfolio.*
9. Purchase securities of any other investment company, except in connection
with a merger, consolidation, acquisition or reorganization, and except
that the Portfolio may purchase securities of money market mutual funds to
the extent permitted by applicable law. This restriction shall not prohibit
the Portfolio from investing in securities issued by REITs.*
10. Purchase securities for the Portfolio of companies which together with
predecessors have a record of less than three years' continuous operation,
and equity securities of issuers which are not readily marketable, if, as a
result, more than 5% of the Portfolio's net assets would then be invested
in such securities, except that this restriction shall not apply to the
purchase of securities of REITs.*
11. Invest in puts, calls, straddles, spreads and any combination thereof,
except that (i) the Portfolio may write covered put and call options on
securities and write and purchase put and call options on stock indexes,
and (ii) the Portfolio may write covered put and call options on U.S.
Government securities.*
12. Purchase securities from or sell securities to any of its officers or
Trustees, except with respect to its own shares and as is permissible under
applicable statutes, rules and regulations.*
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13. Purchase securities of companies for the purpose of exercising control.*
14. Make short sales whereby the dollar amount of short sales at any one time
shall exceed 25% of the net assets of the Portfolio, or the value of
securities of any one issuer in which the Portfolio is short exceeds the
lesser of 2% of the value of the Portfolio's net assets or 2% of the value
of securities of any class of any issuer, except that the Portfolio may
make short sales against the box.*
-------------------
*Therefore, it may be changed by the Fund's Board of Trustees upon a
reasonable notice to investors.
While the Fund has the power to pledge its assets to secure borrowings, the
Fund has no intention of pledging the assets of the Portfolio taken at market
value in any amount in excess of 33 1/3% of the Portfolio's total assets taken
at market value. The deposit of assets in escrow in connection with the writing
of covered put or call options and the purchase of securities on a when-issued
or delayed-delivery basis, and collateral arrangements with respect to the
purchase and sale of stock options and stock index options and initial and
variation margin for futures contracts, are not deemed to be pledges of assets
of the Portfolio. Also, although the Fund has the power to make call loans, it
has no intention to do so.
Government securities in which the Portfolio may invest include (a)
direct obligations of the U.S. Treasury, including bills, bonds and notes, and
(b) obligations issued or guaranteed as to principal and interest by U.S.
Government agencies or instrumentalities and supported by any of (i) the full
faith and credit of the U.S. Treasury (e.g., Government National Mortgage
Association participation certificates); (ii) the right of the issuer to borrow
a limited amount from the U.S. Treasury (e.g., securities of Federal Farm Credit
Banks); (iii) the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality (e.g., securities of the
Federal National Mortgage Association); or (iv) the credit of the agency or
instrumentality (e.g., securities of the Student Loan Marketing Association).
Although the Portfolio has the ability to invest in futures contracts
and options, the Portfolio has no current intention of doing so without first
notifying its shareholders and supplying further information in the
Prospectuses.
Although not an investment policy, it is anticipated that under normal
circumstances approximately 60% to 90% of the Portfolio's assets will be
invested in REITs which, according to the National Association of Real Estate
Investment Trusts, have grown over five-fold since 1991.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Officers of the Fund manage its day-to-day operations and are
responsible to the Fund's Board of Trustees. The Trustees set broad policies for
the Fund and elect its Officers. The following is a list of the Trustees and
Officers of the Fund, their addresses and dates of birth, and a brief statement
of their present positions and principal occupations during the past five years.
John T. Bennett, Jr. (1/26/29), Trustee of the Fund
College Road--RFD 3, Meredith, NH 03253; President of Squam Investment
Management Company, Inc. and Great Island Investment Company, Inc.; President of
Bennett Management Company from 1988 to 1993.
Nancy J. Dunn (8/14/51), Trustee of the Fund
10 Garden Street, Cambridge, MA 02138; Vice President for Finance and
Administration and Treasurer of Radcliffe College since 1991.
Philip D. English (8/5/48), Trustee of the Fund
16 West Madison Street, Baltimore, MD 21201; President and Chief Executive
Officer of Broventure Company, Inc.; Chairman of the Board of Chektec
Corporation and Cyber Scientific, Inc.
William A. Humenuk (4/21/42), Trustee of the Fund
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4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, PA 19103; Partner in
the Philadelphia office of the law firm Dechert Price & Rhoads; Director, Hofler
Corp.
Norton H. Reamer* (3/21/35), Trustee of the Fund
One International Place, Boston, MA 02110; President and Chairman of the Fund;
Chairman, Chief Executive Officer and a Director of United Asset Management
Corporation; Director, Partner or Trustee of each of the Investment Companies of
the Eaton Vance Group of Mutual Funds.
Charles H. Salisbury, Jr.* (8/24/40), Trustee of the Fund
One International Place, Boston, MA 02110; Executive Vice President of United
Asset Management Corporation; formerly an executive officer and Director of T.
Rowe Price and President and Chief Investment Officer of T. Rowe Price Trust
Company.
Peter M. Whitman, Jr.* (7/1/43), Trustee of the Fund
One Financial Center, Boston, MA 02111; President and Chief Investment Officer
of Dewey Square Investors Corporation since 1988; Director and Chief Executive
Officer of H. T. Investors, Inc., formerly a subsidiary of Dewey Square.
William H. Park (9/19/47), Vice President of the Fund
One International Place, Boston, MA 02110; Executive Vice President and Chief
Financial Officer of United Asset Management Corporation.
Gary L. French (7/4/51), Treasurer of the Fund
211 Congress Street, Boston, MA 02110; President of UAM Fund Services, Inc. and
UAM Fund Distributors, Inc.; formerly Vice President of Operations, Development
and Control of Fidelity Investment in 1995; Treasurer of the Fidelity Group of
Mutual Funds from 1991 to 1995.
Michael E. DeFao (2/28/68), Secretary of the Fund
211 Congress Street, Boston, MA 02110; Vice President and General Counsel of UAM
Fund Services, Inc. and UAM Fund Distributors, Inc.; Associate Attorney of Ropes
& Gray (a law firm) from 1993 to 1995.
Robert R. Flaherty (9/18/63), Assistant Treasurer of the Fund
211 Congress Street, Boston, MA 02110; Vice President of UAM Fund Services,
Inc.; formerly Manager of Fund Administration and Compliance of Chase Global
Fund Services Company from 1995 to 1996; Senior Manager of Deloitte & Touche LLP
from 1985 to 1995.
Michelle Azrialy (4/12/69), Assistant Secretary; 73 Tremont Street, Boston, MA
02108; Assistant Treasurer of Chase Global Funds Services Company since 1996.
Senior Public Accountant with Price Waterhouse LLP from 1991 to 1994.
Gordon M. Shone (7/30/56), Assistant Treasurer of the Fund
73 Tremont Street, Boston, MA 02108; Vice President of Fund Administration and
Compliance of Chase Global Funds Services Company; formerly Senior Audit Manager
of Coopers & Lybrand LLP (1983-1996).
- ----------------
* Messrs. Reamer, Salisbury and Whitman are deemed to be "interested persons" of
the Fund as that term is defined in the 1940 Act.
As of May 29, 1998, the Trustees and Officers of the Fund owned less than
1% of the Fund's outstanding shares.
REMUNERATION OF TRUSTEES AND OFFICERS
The Fund pays each Trustee, who is not also an officer or affiliated
person, a $150 quarterly retainer fee per active Portfolio which currently
amounts to $1,350 per quarter. In addition, each unaffiliated Trustee receives a
$2,000 meeting fee which is aggregated for all the Trustees and allocated
proportionately among the Portfolios of the Fund and UAM Funds, Inc., and
reimbursement for travel and other expenses incurred while attending Board
meetings. Trustees
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who are also officers or affiliated persons receive no remuneration for their
service as Trustees. The Fund's officers and employees are paid by either the
Adviser, United Asset Management Corporation ("UAM"), the Administrator or CGFSC
and receive no compensation from the Fund.
The following table shows aggregate compensation paid to each of the
Fund's unaffiliated Trustees by the Fund and total compensation paid by the Fund
and UAM Funds, Inc. (collectively the "Fund Complex"), in the fiscal year ended
April 30, 1998.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Accrued Annual from Registrant and
Name of Person, Position From as Part of Benefits Upon Fund Complex
------------------------ Registrant Fund Expenses Retirement Paid to Trustees
---------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
John T. Bennett, Jr.......... $6,149 0 0 $33,500
Trustee
Philip D. English............ $6,149 0 0 $33,500
Trustee
William A. Humenuk........... $6,149 0 0 $33,500
Trustee
Nancy J. Dunn................ $4,668 0 0 $25,200
Trustee
</TABLE>
PRINCIPAL HOLDER OF SECURITIES
As of May 29, 1998, the following persons or organizations held of record
or beneficially 5% or more of the shares of the Portfolio, as noted:
Heitman Real Estate Portfolio Institutional Class Shares: United Nations
Joint Staff Pension Fund, c/o Henry L. Ouma, Investment Management Service,
United Nations, Room S-0702, New York, NY, 38.2%; Charles Schwab & Company,
Reinvest Account, 101 Montgomery Street, San Francisco, CA, 30%*; Charles Schwab
& Company, Cash Account, 101 Montgomery Street, San Francisco, CA, 23%*; HAWCO,
c/o Hawaiian Trust Company, Client Mutual Funds 769, P.O. Box 1930, Honolulu,
HI, 9%; Donaldson Lufkin & Jenrette, Cash Account, 1 Pershing Plaza, Jersey
City, NJ, 9.5*; Drexel University, Office of the Comptroller, 32nd & Chestnut
Street, Philadelphia, PA, 5%.
Heitman Real Estate Portfolio Advisor Class Shares: Charles Schwab &
Company, Special Custody Account, 101 Montgomery Street, San Francisco, CA, 38
%*.
The persons(s) or organization(s) listed above as owning 25% or more of the
outstanding shares of the Portfolio may be presumed to "control" (as that term
is defined in the 1940 Act) such Portfolio. As a result, those persons or
organizations could have the ability to vote a majority of the shares of the
Portfolio on any matter requiring the approval of shareholders of such
Portfolio.
- -----
* Denotes shares held by a trustee or fiduciary for which beneficial
ownership is disclaimed or presumed disclaimed.
INVESTMENT ADVISER
CONTROL OF ADVISER
Heitman/PRA Securities Advisors, Inc. (the "Adviser") is a wholly-owned
subsidiary of Heitman Financial
9
<PAGE>
Ltd. which is a wholly-owned subsidiary of UAM, a holding company incorporated
in Delaware in December 1980 for the purpose of acquiring and owning firms
engaged primarily in institutional investment management. Since its first
acquisition in August 1983, UAM has acquired or organized approximately 45 such
wholly-owned affiliated firms (the "UAM Affiliated Firms"). UAM believes that
permitting UAM Affiliated Firms to retain control over their investment advisory
decisions is necessary to allow them to continue to provide investment
management services that are intended to meet the particular needs of their
respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed and
securities selected by UAM Affiliated Firms are separately chosen by each of
them.
SERVICES PROVIDED BY ADVISER
Pursuant to an Investment Advisory Agreement ("Agreement") between the Fund
and the Adviser, the Adviser has agreed to manage the investment and
reinvestment of the Portfolio's assets, to continuously review, supervise and
administer the Portfolio's investment program, and to determine in its
discretion the securities to be purchased or sold and the portion of the
Portfolio's assets to be held uninvested.
In the absence of (i) willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties under
the Agreement, (ii) reckless disregard by the Adviser of its obligations and
duties under the Agreement, or (iii) a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services, the Adviser shall
not be subject to any liability whatsoever to the Fund, or to any shareholder of
the Fund, for any error of judgment, mistake of law or any other act or omission
in the course of, or connected with, rendering services under the Agreement.
Unless sooner terminated, the Agreement shall continue for a period of one
year so long as such continuance is specifically approved at least annually (a)
by the vote of a majority of those members of the Board of Trustees of the Fund
who are not parties to the Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Board of Trustees of the Fund or (c) by vote of a majority of the
outstanding voting securities of the Portfolio. The Agreement may be terminated
at any time by the Portfolio, without the payment of any penalty, by vote of a
majority of the entire Board of Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio on 60 days' written notice to
the Adviser. The Agreement may be terminated by the Adviser at any time, without
the payment of any penalty, upon 90 days' written notice to the Fund. The
Agreement will automatically and immediately terminate in the event of its
assignment.
PHILOSOPHY AND STYLE
The Adviser believes that, over the long term, publicly traded real estate
securities' performance is determined by the underlying real estate assets, real
estate market cycles and management's ability to operate and invest in these
assets during each market cycle. The Adviser's primary objective is to generate
long-term, superior, risk-adjusted returns by identifying and investing in
publicly traded real estate companies which demonstrate the highest probability
of growing cash flow per share without undue risk to achieve such growth. As a
value-oriented manager, The Adviser is committed to a strategy of investing in
companies which offer growth at a reasonable price.
ADVISORY FEES
As compensation for services rendered by the Adviser under the Investment
Advisory Agreement, the Portfolio pays the Adviser an annual fee in monthly
installments calculated by applying the following annual percentage rates to the
Portfolio's average daily net assets for the month:
0.75% of the Portfolio's first $100 million; plus 0.65% of the net assets
in excess of $100 million.
During the fiscal years ended December 31, 1997, 1996 and December 31,
1995, the fees paid to the Adviser were $1,489,121, $992,968, and $724,658,
respectively.
10
<PAGE>
SERVICE AND DISTRIBUTION PLANS
As stated in the Portfolio's Advisor Class Shares Prospectus, the
Distributor may enter into agreements with broker-dealers and other financial
institutions ("Service Agents"), pursuant to which they will provide
administrative support services to Advisor Class shareholders who are their
customers ("Customers") in consideration of the Fund's payment of 0.25% (on an
annualized basis) of the average daily net asset value of the Advisor Class
Shares held by the Service Agent for the benefit of its Customers. Such services
include:
(a) acting as the sole shareholder of record and nominee for beneficial
owners;
(b) maintaining account records for such beneficial owners of the Fund's
shares;
(c) opening and closing accounts;
(d) answering questions and handling correspondence from shareholders
about their accounts;
(e) processing shareholder orders to purchase, redeem and exchange
shares;
(f) handling the transmission of funds representing the purchase price or
redemption proceeds;
(g) issuing confirmations for transactions in the Fund's shares by
shareholders;
(h) distributing current copies of prospectuses, statements of additional
information and shareholder reports;
(i) assisting customers in completing application forms, selecting
dividend and other account options and opening any necessary custody
accounts;
(j) providing account maintenance and accounting support for all
transactions; and
(k) performing such additional shareholder services as may be agreed upon
by the Fund and the Service Agent, provided that any such additional
shareholder services must constitute a permissible non-banking
activity in accordance with the then current regulations of, and
interpretations thereof by, the Board of Governors of the Federal
Reserve System, if applicable.
Each agreement with a Service Agent is governed by a Shareholder Service
Plan (the "Service Plan") that has been adopted by the Fund's Board of Trustees.
Pursuant to the Service Plan, the Board of Trustees reviews, at least quarterly,
a written report of the amounts expended under each agreement with Service
Agents and the purposes for which the expenditures were made. In addition,
arrangements with Service Agents must be approved annually by a majority of the
Fund's Trustees, including a majority of the Trustees who are not "interested
persons" of the Fund as defined in the 1940 Act and have no direct or indirect
financial interest in such arrangements.
The Board of Trustees has approved the arrangements with Service Agents
based on information provided by the Fund's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Fund and its
shareholders by affording the Fund greater flexibility in connection with the
servicing of the accounts of the beneficial owners of its shares in an efficient
manner. Any material amendment to the Fund's arrangements with Service Agents
must be approved by a majority of the Fund's Board of Trustees (including a
majority of the disinterested Trustees). The Shareholder Services Plan may be
terminated at any time by vote of a majority of the Trustees of the Fund who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related to the
Plan or, at the discretion of the Board of Trustees of the Fund, by vote of a
majority of the outstanding voting securities of the Fund. So long as the
arrangements with Service Agents are in effect, the selection and nomination of
the members of the Fund's Board of Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Fund will be committed to the discretion of such
non-interested Trustees.
For the fiscal years ended December 31, 1997, 1996 and 1995, the Fund
paid $190,631, $89,289 and
11
<PAGE>
$2,985, respectively, in compensation to ACG Capital Corporation with respect to
Advisor Class Shares pursuant to a Distribution Agreement dated May 15, 1995.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Distribution Plan for the Advisor Class Shares of the Fund (the "Distribution
Plan"). The Distribution Plan permits the Fund to pay for certain distribution,
promotional and related expenses involved in the marketing of only the Advisor
Class Shares.
The Distribution Plan permits the Advisor Class Shares, pursuant to the
Distribution Agreement, to pay a monthly fee to the Distributor for its services
and expenses in distributing and promoting sales of the Advisor Class Shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, and paying distribution
and maintenance fees to securities brokers and dealers who enter into agreements
with the Distributor. In addition, the Advisor Class Shares may make payments
directly to other unaffiliated parties who either aid in the distribution of
their shares or provide services to the Class.
The maximum annual aggregate fee payable by the Fund under the Service
and Distribution Plans (the "Plans"), may not exceed in the aggregate 0.50% of
the Adviser Class Shares' average daily net assets for the year without first
obtaining shareholder approval. The Fund's Board of Trustees may reduce this
amount at any time. The current fee which will be payable under the Service Plan
has been set at 0.25%, and the current fee which will be payable under the
Distribution Plan has been set at 0.25%.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid by the Advisor
Class Shares will be borne by such persons without any reimbursement from such
Classes. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
under the Plans. From time to time, the Distributor may pay additional amounts
from its own resources to dealers for aid in distribution or for aid in
providing administrative services to shareholders.
The Plans, the Distribution Agreement and the form of dealer's and
services agreements have all been approved by the Board of Trustees of the Fund,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the Plans or any related agreements, by vote cast in
person at a meeting duly called for the purpose of voting on the Plans and such
Agreements. Continuation of the Plans, the Distribution Agreement and the
related agreements must be approved annually by the Board of Trustees in the
same manner, as specified above.
Each year the Trustees must determine whether continuation of the Plans
is in the best interest of the shareholders of Advisor Class Shares and that
there is a reasonable likelihood of the Plans providing a benefit to the Class.
The Plans, the Distribution Agreement and the related agreements with any
broker-dealer or others relating to the Class may be terminated at any time
without penalty by a majority of those Trustees who are not "interested persons"
or by a majority vote of the outstanding voting securities of the Class. Any
amendment materially increasing the maximum percentage payable under the Plans
must likewise be approved by a majority vote of the relevant Class' outstanding
voting securities, as well as by a majority vote of those Trustees who are not
"interested persons." Also, any other material amendment to the Plans must be
approved by a majority vote of the Trustees including a majority of the Trustees
of the Fund having no interest in the Plans. In addition, in order for the Plans
to remain effective, the selection and nomination of Trustees who are not
"interested persons" of the Fund must be effected by the Trustees who themselves
are not "interested persons" and who have no direct or indirect financial
interest in the Plans. Persons authorized to make payments under the Plans must
provide written reports at least quarterly to the Board of Trustees for their
review. The National Association of Securities Dealers, Inc. has adopted
amendments to its Conduct Rules relating to investment company sales charges.
The Fund and the Distributor intend to operate in compliance with these rules.
During the fiscal years ended December 31, 1996 and December 31, 1995,
the Fund paid an aggregate of $89,289 and $2,985, respectively, to Service
Agents under contracts entered into pursuant to the Shareholder Servicing Plan.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Adviser to select the
brokers or dealers that will execute
12
<PAGE>
the purchases and sales of investment securities for the Portfolio and directs
the Adviser to use its best efforts to obtain the best execution with respect to
all transactions for the Portfolio. In doing so, a Portfolio may pay higher
commission rates than the lowest rate available when the Adviser believes it is
reasonable to do so in light of the value of the research, statistical, and
pricing services provided by the broker effecting the transaction.
It is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of shares which may be made through broker-dealer
firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend the Fund's Portfolios or who act as agents in the
purchase of shares of the Portfolios for their clients.
During the fiscal years ended December 31, 1997, 1996 and 1995, the
Fund paid $480,427, $400,540, and $334,132, respectively, in brokerage
commissions.
During the fiscal year ended December 31, 1997, transactions of the
Portfolio aggregating $173,894,638 were allocated to brokers providing research,
statistical and other related services and $234,403 in brokerage commissions
were paid on these transactions.
Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the Adviser. If purchases or sales of
securities consistent with the investment policies of a Portfolio and one or
more of these other clients served by the Adviser is considered at or about the
same time, transactions in such securities will be allocated among the Portfolio
and clients in a manner deemed fair and reasonable by the Adviser. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser, and the results of such allocations, are
subject to periodic review by the Fund's Board of Trustees.
ADMINISTRATIVE SERVICES
The Board of Trustees of the Fund approved a Fund Administration
Agreement, effective April 15, 1996, ("Fund Administration Agreement"), between
UAM Fund Services, Inc., a wholly-owned subsidiary of UAM, and the Fund.
Pursuant to the terms of the Fund Administration Agreement, UAMFSI manages,
administers and conducts the general business activities of the Fund other than
those which have been contracted to other third parties by the Fund.
Additionally, UAMFSI has agreed to provide transfer agency services to the
Portfolios pursuant to the terms of the Agreement.
UAMFSI has subcontracted some of these services to Chase Global Funds
Services Company ("CGFSC"), an affiliate of The Chase Manhattan Bank, pursuant
to a Mutual Funds Service Agreement between UAMFSI and CGFSC (collectively, with
the Fund Administration Agreement between UAMFSI and the Fund, the
"Agreements").
Pursuant to the terms of the Agreements, the Portfolio pays UAMFSI a
two part monthly fee: a Portfolio specific fee which is retained by UAMFSI and a
sub-administration fee which UAMFSI in turn pays to CGFSC. The following
portfolio specific fees are calculated from the aggregate net assets of each
Portfolio:
Annual Rate
Heitman Real Estate Portfolio................... 0.06%
CGFSC's monthly fee for its services is calculated on an annualized
basis as follows:
0.19 of 1% of the first $200 million of combined UAM Funds net
assets;
0.11 of 1% of the next $800 million of combined UAM Funds net assets;
0.07 of 1% of combined UAM Funds net assets in excess of $1 billion
but less than $3 billion;
0.05 of 1% of combined UAM Funds net assets in excess of $3 billion.
Fees are allocated among the Portfolios on the basis of their relative
assets and are subject to a graduated minimum fee schedule per Portfolio, which
starts at $2,000 per month and increases to $70,000 annually after two years. If
a separate class of shares is added to a Portfolio, its minimum annual fee
increases by $20,000.
Prior to April 15, 1996, CGFSC or its predecessor, Mutual Funds Service
Company, provided certain
13
<PAGE>
administrative services to the Fund under an Administration Agreement between
the Fund and U.S. Trust Company of New York.
UAMFSI bears all expenses in connection with the performance of its
services under the Agreement. Other expenses to be incurred in the operation of
the Fund are borne by the Fund or other parties, including taxes, interest,
brokerage fees and commissions, if any, salaries and fees of officers and
members of the Board who are not officers, directors, shareholders or employees
of UAMFSI, or the Fund's investment adviser or distributor, SEC fees and state
Blue Sky fees, EDGAR filing fees, processing services and related fees, advisory
and administration fees, charges and expenses of pricing and data services,
independent public accountants and custodians, insurance premiums including
fidelity bond premiums, outside legal expenses, costs of maintenance of
corporate existence, typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the Fund, printing and
production costs of shareholders' reports and corporate meetings, cost and
expenses of Fund stationery and forms; costs of special telephone and data lines
and devices; trade association dues and expenses; and any extraordinary expenses
and other customary Fund expenses.
Unless sooner terminated as provided herein, the Fund Administration
Agreement shall continue in effect from year to year provided such continuance
is specifically approved at least annually by the Board. The Fund Administration
Agreement is terminable, without penalty, by the Board or by UAMFSI, on not less
than ninety (90) days' written notice. The Fund Administration Agreement shall
automatically terminate upon its assignment by UAMFSI without the prior written
consent of the Fund.
UAMFSI will from time to time employ or associate with such person or
persons as may be fit to assist them in the performance of the Fund
Administration Agreement. Such person or persons may be officers and employees
who are employed by both UAMFSI and the Fund. The compensation of such person or
persons for such employment shall be paid by UAMFSI and no obligation will be
incurred by or on behalf of the Fund in such respect.
Effective February 28, 1997, the Fund entered into an Account Services
Agreement (the "Services Agreement") with UAM Retirement Plan Services, Inc.
(the "Service Provider"), a wholly-owned subsidiary of UAM. Under the Services
Agreement, the Service Provider agrees to perform certain services for
participants in a self-directed, defined contribution plan, and for whom the
Service Provider provides participant recordkeeping. Pursuant to the Services
Agreement, the Service Provider is entitled to receive, after the end of each
month, a fee at the annual rate of 0.15% of the average aggregate daily net
asset value of shares of the Portfolios in the accounts for which they provide
services.
CUSTODIAN
The Chase Manhattan Bank, 3 Chase Metrotech Center, Brooklyn, New York
11245, provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.
DISTRIBUTOR
UAM Fund Distributors, Inc., a wholly-owned subsidiary of UAM, serves
as the distributor of the Institutional Class Shares of the Fund. Shares of the
Fund are offered continuously. While the Distributor will use its best efforts
to sell shares of the Fund, it is not obligated to sell any particular amount of
shares. UAM Fund Distributors, Inc. received no compensation for its services
directly or indirectly from the Portfolio during the fiscal year ended December
31, 1997.
ACG Capital Corporation ("ACG"), 1661 Tice Valley Boulevard, #200,
Walnut Creek, CA 94595, provides distribution services to the Fund with respect
to Advisor Class shares pursuant to a Distribution Agreement (the "ACG
Distribution Agreement").
14
<PAGE>
Under the ACG Distribution Agreement, ACG is granted the right to sell
Advisor Class shares as agent for the Fund. ACG agrees to use all reasonable
efforts to secure purchasers for the Advisor Class shares and to pay expenses of
printing and distributing prospectuses, statements of additional information and
reports prepared for use in connection with the sale of Advisor Class shares and
any other literature and advertising used in connection with the offering.
PERFORMANCE CALCULATIONS
PERFORMANCE
The Portfolio may from time to time quote various performance figures
to illustrate past performance.
Performance quotations by investment companies are subject to rules
adopted by the Commission, which require the use of standardized performance
quotations or, alternatively, that every non-standardized performance quotation
furnished by each class of the Fund be accompanied by certain standardized
performance information computed as required by the Commission. Current yield
and average annual compounded total return quotations used by the Portfolio are
based on the standardized methods of computing performance mandated by the
Commission. An explanation of those methods used to compute or express
performance follows.
YIELD
Current yield reflects the income per share earned by a Portfolio's
investment. The current yield of a Portfolio 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 Advisor Class Shares of a Portfolio
bear additional service and distribution expenses, the yield of the Advisor
Class Shares of a Portfolio will generally be lower than that of the
Institutional Class Shares of the same Portfolio.
A yield figure is obtained using the following formula:
Yield = 2 [(a - b + 1)/6/ - 1]
-----
cd
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.
TOTAL RETURN
The average annual total return of a Portfolio is determined by finding
the average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending redeemable
value. The calculation assumes that all dividends and distributions are
reinvested when paid. The quotation assumes the amount was completely redeemed
at the end of each 1, 5 and 10 year period and the deduction of all applicable
Fund expenses on an annual basis. Since Advisor Class Shares of a Portfolio bear
additional service and distribution expenses, the average annual total return of
the Advisor Class Shares of a Portfolio will generally be lower than that of the
Institutional Class Shares of the same Portfolio.
These figures are calculated according to the following formula:
P(1 + T)/n/ = REV
where:
15
<PAGE>
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
REV = 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).
The average annual total returns of the Institutional Class Shares for
the one-year and five-year periods ended December 31, 1997 and since inception
(January 4, 1989) through December 31, 1997 were 21.12%, 18.02% and 11.37%,
respectively, and the average annual total returns of the Advisor Class Shares
for the one-year period ended December 31, 1997 and since inception (May 15,
1995) through December 31, 1997 were 14.47% and 24.70%, respectively.
COMPARISONS
To help investors better evaluate how an investment in the Portfolio
might satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance as reported by various financial
publications. Advertisements may also compare performance (as calculated above)
to performance as reported by other investments, indices and averages. Please
see Appendix B for publications, indices and averages which may be used.
In assessing such comparisons of performance, an investor should keep
in mind that the composition of the investments in the reported indices and
averages is not identical to the composition of investments in a Portfolio, that
the averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
Portfolio to calculate its performance. In addition, there can be no assurance
that the Portfolio will continue this performance as compared to such other
averages.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized under the name The Regis Fund II as a Delaware
business trust on May 18, 1994. On October 31, 1995, the name of the Fund was
changed to "UAM Funds Trust." The Fund's principal office is located at One
International Place, Boston, MA 02110; however, all investor correspondence
should be directed to the Fund at UAM Funds Service Center, c/o Chase Global
Funds Services Company, P.O. Box 2798, Boston, MA 02208-2798. The Fund's
Agreement and Declaration of Trust permits the Fund to issue an unlimited number
of shares of beneficial interest, without par value. The Trustees have the power
to designate one or more series ("Portfolios") or classes of shares of
beneficial interest without further action by shareholders. The Trustees have
authorized an additional class of shares known as Institutional Service Class
Shares. As of the date of this Statement of Additional Information, no
Institutional Service Class Shares have been offered by this Portfolio.
The shares of the Portfolio of the Fund, when issued and paid for as
provided for in the Prospectuses, will be fully paid and nonassessable, have no
preference as to conversion, exchange, dividends, retirement or other features
and have no preemptive rights. The shares of the Fund have noncumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of Trustees can elect 100% of the Trustees if they choose to do so.
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held), then standing in his or her name on the
books of the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes on it and the imposition of the Federal excise tax on undistributed
income and capital gains. See discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectuses. The amounts of any income
dividends or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of the Portfolio by an investor may have
16
<PAGE>
the effect of reducing the per share net asset value of the Portfolio by the per
share amount of the dividend or distribution. Furthermore, such dividends or
distributions, although in effect a return of capital, are subject to income
taxes as set forth in the Prospectuses.
As set forth in the Prospectuses, unless the shareholder elects
otherwise in writing, all dividend and capital gains distributions are
automatically received in additional shares of the Portfolio of the Fund 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. Any net
capital gains recognized by the Portfolio will be distributed to its investors
without need to offset (for Federal income tax purposes) such gains against any
net capital losses realized by another Portfolio.
FEDERAL 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 (the "Code"), at least 90% of the Portfolio's 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 related income derived with respect to
its business investing in such securities or currencies.
The Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for Federal income tax purposes. Shareholders
will be advised on the nature of the payments.
CODE OF ETHICS
The Fund has adopted a Code of Ethics which restricts to a certain
extent personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
FINANCIAL STATEMENTS
The Financial Statements of the Portfolio which include the Financial
Highlights for the fiscal year ended December 31, 1997 which appear in the 1997
Annual Report and the report thereon of Price Waterhouse LLP as of and for the
fiscal year ended December 31, 1997 which were previously filed electronically
with the SEC are incorporated herein by reference. The Financial Statements and
Financial Highlights for the periods prior to 1996 were audited by other
independent accountants. The Financial Statements and financial Highlights for
the periods prior to 1996 were audited by other independent accountants.
17
<PAGE>
APPENDIX A -- DESCRIPTION OF SECURITIES AND RATINGS
I. DESCRIPTION OF CORPORATE BOND RATINGS
Excerpts from Moody's Investors Service, Inc. ("Moody's") description
of its highest bond ratings: Aaa -- judged to be the best quality; carry the
smallest degree of investment risk; Aa -- judged to be of high quality by all
standards; A- - possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as lower medium
grade obligations, i.e., they are neither highly protected nor poorly secured.
Excerpts from Standard & Poor's Rating Services ("S&P") description of
its highest bond ratings: AAA -- highest grade obligations; possess the ultimate
degree of protection as to principal and interest; AA -- also qualify as high
grade obligations, and in the majority of instances differs from AAA issues only
in small degree; A -- regarded as upper medium grade; have considerable
investment strength but are not entirely free from adverse effects of changes in
economic and trade conditions. Interest and principal are regarded as safe; BBB
- -- regarded as borderline between definitely sound obligations and those where
the speculative element begins to predominate; this group is the lowest which
qualifies for commercial bank investment.
II. DESCRIPTION OF U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by Federal agencies and U.S.
Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States.
In the case of securities not backed by the full faith and credit of
the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
and may not be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitment. Agencies which
are backed by the full faith and credit of the United States include the
Export-Import Bank, Farmers Home Administration, Federal Financing Bank, and
others. Certain agencies and instrumentalities, such as the Government National
Mortgage Association are, in effect, backed by the full faith and credit of the
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the U.S. Treasury, if needed to service
its debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by the
discretionary authority of the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies and instrumentalities, such as the Farm Credit System
and the Federal Home Loan Corporation, are federally chartered institutions
under Government supervision, but their debt securities are backed only by the
credit worthiness of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration, and the Tennessee Valley Authority.
III. DESCRIPTION OF COMMERCIAL PAPER
The Portfolios may invest in commercial paper (including variable
amount master demand notes) rated A-1 or better by S&P or, if unrated, issued by
a corporation having an outstanding unsecured debt issue rated A or better by
Moody's or S&P or Prime-1 by Moody's or by S&P. Commercial paper refers to
short-term, unsecured promissory notes issued by corporations to finance
short-term credit needs. Commercial paper is usually sold on a discount basis
and has a maturity at the time of issuance not exceeding nine months. Variable
amount master demand
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notes are demand obligations that permit the investment of fluctuating amounts
at varying market rates of interest pursuant to arrangement between the issuer
and a commercial bank acting as agent for the payees of such notes whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. Because variable amount master demand notes are direct lending
arrangements between a lender and a borrower, it is not generally contemplated
that such instruments will be traded, and there is no secondary market for these
notes, although they are redeemable (and thus immediately repayable by the
borrower) at face value, plus accrued interest, at any time. In connection with
the Portfolio's investment in variable amount master demand notes, the Adviser's
investment management staff will monitor, on an ongoing basis, the earning
power, cash flow and other liquidity ratios of the issuer and the borrower's
ability to pay principal and interest on demand.
Commercial paper rated A-1 by S&P has the following characteristics:
(1) liquidity ratios are adequate to meet cash requirements; (2) long-term
senior debt is rated "A" or better; (3) the issuer has access to at least two
additional channels of borrowing; (4) basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established, and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned. Relative strength or weakness of the above factors determine
whether the issuer's commercial paper is A-1, A-2 or A-3. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following: (1) evaluation of
the management of the issuer; (2) economic evaluation of the issuer's industry
or industries and the appraisal of speculative-type risks which may be inherent
in certain areas; (3) evaluation of the issuer's products in relation to
completion and customer acceptance; (4) liquidity; (5) amount and quality of
long term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of issuer of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations.
IV. DESCRIPTION OF BANK OBLIGATIONS
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Certificates of deposit are negotiable short-term obligations of commercial
banks. Variable rate certificates of deposit are certificates of deposit on
which the interest rate is periodically adjusted prior to their stated maturity
based upon a specified market rate. As a result of these adjustments, the
interest rate on these obligations may increase or decrease periodically.
Frequently, dealers selling variable rate certificates of deposit to the
Portfolio will agree to repurchase such instruments, at the Portfolio's option,
at par on or near the coupon dates. The dealers' obligations to repurchase these
instruments are subject to conditions imposed by various dealers, such
conditions typically are the continued credit standing of the issuer and the
existence of reasonably orderly market conditions. The Portfolio is also able to
sell variable rate certificates of deposit in the secondary market. Variable
rate certificates of deposit normally carry a higher interest rate than
comparable fixed rate certificates of deposit. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction to finance the import, export, transfer or
storage of goods. The borrower is liable for payment as well as the bank which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most acceptances have maturities of six months or less and are traded in
the secondary markets prior to maturity.
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APPENDIX B - COMPARISONS
(a) Dow Jones Composite Average or its component averages -- an unmanaged
index composed of 30 blue-chip industrial corporation stocks (Dow
Jones Industrial Average), 15 utilities company stocks and 20
transportation stocks.
(b) Standard & Poor's 500 Stock Index or its component indices-- an
unmanaged index composed of 400 industrial stocks, 40 financial
stocks, 40 utilities stocks and 20 transportation stocks.
(c) Standard & Poor's 400 Mid Cap Index - consists of 400 domestic stocks
chosen for market size, liquidity, and industry group representation.
It is also a market-value weighted index and was the first benchmark
of mid cap stock price movement.
(d) The New York Stock Exchange composite or component indices--
unmanaged indices of all industrial, utilities, transportation and
finance stocks listed on the New York Stock Exchange.
(e) Wilshire 5000 Equity Index or its component indices --represents the
return on the market value of all common equity securities for which
daily pricing is available.
(f) Lipper -- Mutual Fund Performance Analysis and Lipper --Fixed Income
Fund Performance Analysis -- measure total return and average current
yield for the mutual fund industry. Rank individual mutual fund
performance over specified time periods, assuming reinvestment of all
distributions, exclusive of any applicable sales charges.
(g) Lipper Capital Appreciation Funds Index - a fund that aims at maximum
capital appreciation, frequently by means of 100% or more portfolio
turnover, leveraging, purchasing unregistered securities, purchasing
options, etc. The fund may take large cash positions.
(h) Lipper Small Cap Funds Index- a fund that by prospectus or portfolio
practice invests primarily in companies with market capitalizations
of less than $1 billion at the time of purchase.
(i) Morgan Stanley Capital International EAFE Index and World Index --
respectively, arithmetic, market value-weighted averages of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East, and over 1,400
securities listed on the stock exchanges of these continents,
including North America.
(j) Goldman Sachs 100 Convertible Bond Index -- currently includes 67
bonds and 33 preferred. The original list of names was generated by
screening for convertible issues of 100 million or greater in market
capitalization. The index is priced monthly.
(k) Salomon Brothers GNMA Index -- includes pools of mortgages originated
by private lenders and guaranteed by the mortgage pools of the
Government National Mortgage Association.
(l) Salomon Brothers High Grade Corporate Bond Index -- consists of
publicly issued, non-convertible corporate bonds rated AA or AAA. It
is a value-weighted, total return index, including approximately 800
issues with maturities of 12 years or greater.
(m) Salomon Brothers Broad Investment Grade Bond Index -- is a market-
weighted index that contains approximately 4,700 individually priced
investment grade corporate bonds rated BBB or better, U.S.
Treasury/agency issues and mortgage pass through securities.
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(n) Lehman Brothers Treasury Bond Index -- is composed of all bonds
covered by the Lehman Brothers Treasury Bond Index with maturities of
10 years or greater.
(o) Lehman Brothers Government/Corporate Index-- is a combination of the
Government and Corporate Bond Indices. The Government Index includes
public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The
Corporate Bond Index includes fixed-rate nonconvertible corporate
debt. Also included are Yankee Bonds and nonconvertible debt issued
by or guaranteed by foreign or international governments and
agencies. All issues are investment grade (BBB) or higher, with
maturities of at least one year and an outstanding par value of at
least $100 million for U.S. Government issues and $25 million for
others. Any security downgraded during the month is held in the index
until month-end and then removed. All returns are market value
weighted inclusive of accrued income.
(p) NASDAQ Industrial Index -- is composed of more than 3,000 industrial
issues. It is a value-weighted index calculated on price change only
and does not include income.
(q) Value Line -- composed of over 1,600 stocks in the Value Line
Investment Survey.
(r) Russell 2000 Index -- composed of the 2,000 smallest stocks in the
Russell 3000, a market value-weighted index of the 3,000 largest U.S.
publicly-traded companies.
(s) Salomon Brothers 3 Month T-Bill Average - the average return for all
Treasury bills for the previous three month period.
(t) Composite Indices -- 60% Standard & Poor's 500 Stock Index, 30%
Lehman Brothers Long-Term Treasury Bond and 10% U.S. Treasury Bills;
70% Standard & Poor's 500 Stock Index and 30% NASDAQ Industrial
Index; 35% Standard & Poor's 500 Stock Index and 65% Salomon Brothers
High Grade Bond Index; all stocks on the NASDAQ system exclusive of
those traded on an exchange, and 65% Standard & Poor's 500 Stock
Index and 35% Salomon Brothers High Grade Bond Index.
(u) CDA Mutual Fund Report published by CDA Investment Technologies,
Inc. -- analyzes price, current yield, risk, total return and average
rate of return (average compounded growth rate) over specified time
periods for the mutual fund industry.
(v) Mutual Fund Source Book published by Morningstar, Inc. --analyzes
price, yield, risk and total return for equity funds.
(w) Financial publications: Business Week, Changing Times, Financial
World, Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial
Times, Global Investor, Wall Street Journal and Weisenberger
Investment Companies Service-- publications that rate fund
performance over specified time periods.
(x) Consumer Price Index (or Cost of Living Index), published by the U.S.
Bureau of Labor Statistics -- a statistical measure of change over
time in the price of goods and services in major expenditure groups.
(y) Stocks, Bonds, Bills and Inflation, published by Ibbotson
Associates -- historical measure of yield, price and total return for
common and small company stock, long-term government bonds, U.S.
Treasury bills and inflation.
(z) Savings and Loan Historical Interest Rates -- as published by the
U.S. Savings & Loan League Fact Book.
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(aa) Historical data supplied by the research departments of First Boston
Corporation; the J.P. Morgan companies; Salomon Brothers; Merrill
Lynch, Pierce, Fenner & Smith; Lehman Brothers, Inc.; and Bloomberg
L.P.
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