<PAGE>
UAM Funds
Semi-Annual Report
BHM&S Total Return
Bond Portfolio
- --------------------------------------------------------------------------------
October 31, 1998
UAM
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholders' Letter........................................................ 1
Portfolio of Investments.................................................... 5
Statement of Assets and Liabilities......................................... 8
Statement of Operations..................................................... 9
Statement of Changes in Net Assets.......................................... 10
Financial Highlights........................................................ 11
Notes to Financial Statements............................................... 13
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
November 19, 1998
Dear Shareholder:
The current fiscal quarter began July 31st with the long Treasury bond at
5.71%. Interest rates declined as concerns deepened over global market
conditions. U.S. Treasury investments became "king of the hill' as investors
sought the safety of the U.S. dollar. Federal Reserve policy changed on
September 29th with the first 25 basis point cut in the Federal Funds rate.
Bond market conditions suggested that a credit squeeze was continuing to
develop. Corporate and mortgage bonds underperformed Treasuries by the
greatest magnitude since the 1990-91 recession. Long Treasuries moved to a new
record low yield of 4.72% on October 5th.
On October 15th the Federal Reserve moved again to lower the Federal Funds
rate 25 basis points. This October move was unusual as the timing was not at a
regularly scheduled meeting. The bond market began to normalize with Treasury
rates moving up slightly and yield spreads for investment grade corporate
bonds improving. The market on the Treasury bond ended the fiscal quarter on
October 31st at 5.15%.
The following table reviews Treasury rates from the short term to the long
term.
TREASURY INTEREST RATES
<TABLE>
<CAPTION>
TREASURY 7/31/98 10/31/98 CHANGE
- -------- ------- -------- ------
<S> <C> <C> <C>
3 Month................................................. 5.08 4.32 -0.75
6 Month................................................. 5.19 4.35 -0.84
2 Year.................................................. 5.48 4.11 -1.38
5 Year.................................................. 5.50 4.23 -1.27
10 Year................................................. 5.49 4.60 -0.89
30 Year................................................. 5.72 5.15 -0.57
</TABLE>
Source: Bloomberg
We are a "bottom-value manager" focused not on market timing but on security
and sector selection. This process seeks to produce a yield in the portfolio
higher than the market benchmark with returns that are less volatile. This
philosophy did not perform well in the current fiscal quarter because of the
concern over a credit squeeze. The Federal Reserve has signaled a change in
policy as discussed above, and the current market valuations represent an
outstanding opportunity. We believe that focus on the so-called "spread
sectors"-investment grade corporates, mortgages, and asset-backed securities-
offers higher return potential. Current
1
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
strategies combine to produce the portfolio comparisons to the Lehman
Aggregate benchmark as shown below.
<TABLE>
<CAPTION>
10/31/98
10/31/98 LEHMAN
BHM&S AGGREGATE
PORTFOLIO INDEX
--------- ---------
<S> <C> <C>
SUPERIOR RETURNS BELOW AVERAGE VOLATILITY
Yield to Maturity........................................... 6.2% 5.4%
Current Yield............................................... 6.8% 6.6%
Quality..................................................... AA AAA
Average Maturity............................................ 9.0 Yrs. 7.7 Yrs.
Modified Duration........................................... 4.7 Yrs. 4.7 Yrs.
SECTORS*
U.S. Treasury/Agency........................................ 9.9% 47.5%
Mortgage-Backed............................................. 29.4% 30.9%
Asset-Backed................................................ 1.3% 0.9%
Industrial.................................................. 28.7% 7.6%
Utility..................................................... 1.9% 3.4%
Finance..................................................... 21.8% 5.8%
Yankee...................................................... 1.1% 3.9%
Cash........................................................ 4.5% N/A
</TABLE>
*Sectors percentages are based on net assets.
BHMS BOND INVESTMENT STRATEGIES
Overview
Our strategy of maintaining an overweighted position in yield advantaged
sectors ("spread product") has not been rewarding in an environment favoring
the safety of U.S. Treasury holdings. The panic buying of Treasuries and
virtual illiquidity of all other sectors has produced widening in spread
premiums not witnessed since the Gulf War induced economic slowdown of 1990-
91. Our disciplined selection process has however continued to produce
positive portfolio results, mitigating the impact of recent market turmoil and
wider spreads.
Corporates
Liquidity in the "over the counter" bond market is defined by the bid/offer
price spread. Investors in fixed income securities during the third quarter of
1998 have experienced a market environment as illiquid as any seen in decades.
The literal absence of capital committed to trading desks across Wall Street
during the Russian collapse created a vacuum in which there were effectively
no bids from the broker community. Coupled with hedge fund liquidations and
traditional investors already
2
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
fully exposed to "spread products", investors' and lenders' appetite for risk
disappeared. Yield spreads across the full spectrum of quality ratings and
maturities widened dramatically.
Lehman reports option-adjusted spreads for their Corporate Index have doubled
since the beginning of 1998, widening 64 bp during the third quarter of 1998
to 123bp. No segment of the bond market was immune to the credit crisis.
Higher quality "blue chip" names with solid credit fundamentals and other
Asian-resistant names did perform better than those exposed to global
commodity concerns and emerging market risks.
BHM&S security selection continues to focus on those individual credits which,
while sustaining wider spreads during the panic environment, still evidence
positive credit fundamentals. We have maintained our holdings in industrials,
banks and finance companies which offer credit rating upgrade potential. Our
research effort was again rewarded with the upgrade of Travelers Group to AA2
from AA3 by Moody's on August 28, 1998 while no credits were downgraded. Our
year-to-date research success now tallies 11 upgrades vs. 1 downgrade! We also
continue to limit exposure in those credits most susceptible to continued
global turmoil. Our single investment in the Yankee sector continues to be the
relatively safe Canadian Province of Quebec.
Mortgages
If you refinanced last quarter, call your broker back. It may be time to do so
again. With the dramatic decline in interest rates across the full spectrum of
maturities, these is virtually no single-family mortgage which is not now
eligible for refinancing. Mortgage rates are now at lows not seen since the
late '60s!
The current rate environment has had the anticipated impact on mortgage-backed
securities. With prepayment options so "deep in the money," mortgages spreads
have widened significantly. August alone witnessed 35 bp spread widening in
Agency pass-through securities. September's financial turmoil raised fears of
deleveraging by hedge funds heavily invested in mortgages, further pressuring
mortgage spreads. Option-adjusted spreads are consequently now at levels not
seen since the 1989 thrift crisis.
Our strategy to underweight the agency pass-through sector has therefore been
rewarded. Equally rewarding has been our preference for coupons with the best
"call risk" characteristics, namely 6.5-7.5% 30-year paper and 6-7% 15-year
issues. Most importantly however has been our disciplined use of empirical
duration measures in maintaining our overall portfolio duration target during
the spectacular Treasury rally. This environment is a repeat of the first half
of 1995 rally which devastated mortgage investors.
3
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT PERFORMANCE
The Portfolio has two separate classes of shares, Institutional Class Shares
("Institutional Shares") and Institutional Service Class Shares ("Service
Shares"). For the three months ending October 31, 1998 the total return,
encompassing both price change and income, for the Institutional Shares was
2.38% and the return of the Service Shares was 2.29% compared to the Lehman
Aggregate Index return of 3.46%.
Since inception on November 1, 1995 through October 31, 1998 the Institutional
Shares annualized total return is 22.81% and the return of the Service Shares
is 21.86% compared to the Lehman Aggregate Index return of 26.02%. The
shortfall in performance for both classes of shares compared to the market
index is explained by fund expenses that are not included in the market
index's return.
Sincerely,
Barrow, Hanley, Mewhinney & Strauss, Inc.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers and did not assume expenses on
behalf of the Portfolio, total return for the Portfolio would have been lower.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
DEFINITION OF THE COMPARATIVE INDEX
-----------------------------------
The Lehman Aggregate Bond Index is an unmanaged index made up of the
Government/Corporate Index, the Mortgage-Backed Securities Index and the
Asset-Backed Securities Index.
Please note that one cannot invest in an unmanaged index.
4
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
CORPORATE BONDS & NOTES - 52.4%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
---------- -----------
<S> <C> <C>
BANKS - 4.8%
Chase Manhattan Corp., 8.625%, 05/01/02.............. $ 400,000 $ 435,260
First Chicago Corp., 9.875%, 08/15/00................ 225,000 242,282
NationsBank Corp., Senior Notes, 7.00%, 09/15/01..... 500,000 517,005
-----------
1,194,547
-----------
ENERGY - 2.0%
Louis Dreyfus Natural Gas Corp., 6.875%, 12/01/07.... 540,000 514,447
-----------
FINANCIAL SERVICES - 17.0%
Allstate Corp., 6.90%, 05/15/38...................... 520,000 510,652
Caterpillar Financial Services, Series F, 6.32%,
09/01/00............................................ 825,000 847,456
Countrywide Home Loan, Series F, 6.38%, 10/08/02..... 400,000 413,252
Ford Motor Credit Corp.
6.125%, 04/28/03.................................... 345,000 353,849
6.625%, 06/30/03.................................... 450,000 471,033
General Motors Acceptance Corp., 6.375%, 12/01/01.... 450,000 460,805
Simon Property Group, Inc., 6.625%, 06/15/03......... 625,000 611,317
Travelers Property Casualty Corp., 6.75%, 04/15/01... 549,000 565,816
-----------
4,234,180
-----------
INDUSTRIAL - 23.6%
Auburn Hills Trust, 12.00%, 05/01/20................. 325,000 516,093
EOP Operating L.P., 6.376%, 02/15/02................. 420,000 414,838
May Department Stores Co., 7.625%, 08/15/13.......... 350,000 388,507
Occidental Petroleum Corp.
6.40%, 04/01/03..................................... 240,000 241,718
6.50%, 04/01/05..................................... 210,000 207,381
Potash Corp., 7.125%, 06/15/07....................... 425,000 439,127
R&B Falcon Corp., 7.375%, 04/15/18................... 880,000 867,900
Sears, Roebuck and Co., 7.41%, 03/30/00.............. 300,000 309,273
#Time Warner Inc. Pass-Through Asset Trust
Securities,
6.10%, 12/30/01..................................... 360,000 366,982
#U.S. Filter Corp., 6.50%, 05/15/03.................. 780,000 778,168
USA Waste Services, Inc., 7.00%, 07/15/28............ 475,000 451,363
Viacom, Inc., 7.75%, 06/01/05........................ 540,000 582,028
Williams Companies, Inc., 6.50%, 08/01/06............ 320,000 327,201
-----------
5,890,579
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATE BONDS & NOTES - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
---------- -----------
<S> <C> <C>
TECHNOLOGY - 1.9%
WMX Technologies, Inc., 6.65%, 05/15/05............... $ 450,000 $ 465,813
-----------
TELECOMMUNICATIONS - 1.4%
MCI WorldCom, Inc., 6.40%, 08/15/05................... 340,000 353,250
-----------
TRANSPORTATION - 1.2%
Federal Express Corp., 9.65%, 06/15/12................ 250,000 307,578
-----------
UTILITIES - 0.5%
Southern California Edison Co., 8.25%, 02/01/00....... 115,000 119,499
-----------
TOTAL CORPORATE BONDS & NOTES (Cost $12,928,317)...... 13,079,893
-----------
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 9.9%
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS - 7.5%
10.375%, 11/15/12..................................... 390,000 544,538
8.125%, 08/15/19...................................... 1,000,000 1,337,340
-----------
1,881,878
-----------
U.S. TREASURY NOTE - 2.4%
6.125%, 11/15/27...................................... 525,000 590,788
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $2,480,555).................................... 2,472,666
-----------
- --------------------------------------------------------------------------------
AGENCY SECURITIES - 29.4%
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 11.8%
Gold Pool #E00520
7.00%, 12/01/12...................................... 686,460 700,827
Gold Pool #E00540
6.00%, 03/01/13...................................... 821,142 824,476
Gold Pool #C00436
7.50%, 12/01/25...................................... 1,392,429 1,426,794
-----------
2,952,097
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.5%
Pool #303972
7.00%, 07/01/03...................................... 109,501 111,090
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AGENCY SECURITIES - CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE+
---------- -----------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 17.1%
Pool #407633
7.50%, 07/15/25...................................... $ 391,791 $ 403,419
Pool #439991
7.50%, 01/15/27...................................... 1,211,133 1,247,080
Pool #466318
7.00%, 01/15/28...................................... 2,564,102 2,624,999
-----------
4,275,498
-----------
TOTAL AGENCY SECURITIES (Cost $7,227,675)............. 7,338,685
-----------
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES - 1.3%
- -------------------------------------------------------------------------------
Green Tree Financial Corp., Series 1997-2, Class A4
6.66%, 06/15/28 (Cost $331,547)...................... 330,000 332,062
-----------
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BOND - 1.1%
- -------------------------------------------------------------------------------
Province of Quebec, Global Bond 7.00%, 01/30/07
(Cost $259,217)...................................... 250,000 268,368
-----------
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 4.5%
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Chase Securities, Inc. 4.90%, dated 10/30/98, due
11/02/98, to be repurchased at $1,131,462,
collateralized by $1,088,390 of various U.S. Treasury
Notes, 5.50%-14.00%, due 5/15/04-11/15/27, valued at
$1,131,015 (Cost $1,131,000)......................... 1,131,000 1,131,000
-----------
TOTAL INVESTMENTS - 98.6% (Cost $24,358,311)(a)....... 24,622,674
-----------
OTHER ASSETS AND LIABILITIES (NET) - 1.4%............. 352,328
-----------
NET ASSETS - 100%..................................... $24,975,002
===========
</TABLE>
+See Note A to Financial Statements.
#144A Security--Certain conditions for public sale may exist.
(a) The cost for federal income tax purposes was $24,358,311. At October 31,
1998, net unrealized appreciation for all securities based on tax cost was
$264,363. This consisted of aggregate gross unrealized appreciation for
all securities of $350,370 and aggregate gross unrealized depreciation for
all securities of $86,007.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
FOR THE SIX MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at Cost......................................... $24,358,311
===========
Investments, at Value........................................ $24,622,674
Cash......................................................... 1,178
Interest Receivable.......................................... 334,298
Receivable for Portfolio Shares Sold......................... 91,977
Receivable for Investments Sold.............................. 150,685
Other Assets................................................. 706
-----------
Total Assets................................................ 25,201,518
-----------
LIABILITIES
Payable for Investments Purchased............................ 110,707
Payable for Portfolio Shares Redeemed........................ 76,544
Payable for Investment Advisory Fees -- Note B............... 4,706
Payable for Administrative Fees -- Note C.................... 14,619
Payable for Distribution and Service Fees -- Note E.......... 5,509
Payable for Trustees' Fees -- Note G......................... 685
Other Liabilities............................................ 13,746
-----------
Total Liabilities........................................... 226,516
-----------
NET ASSETS................................................... $24,975,002
===========
NET ASSETS CONSIST OF:
Paid in Capital.............................................. $23,303,867
Undistributed Net Investment Income.......................... 185,726
Accumulated Net Realized Gain................................ 1,221,046
Unrealized Appreciation...................................... 264,363
-----------
NET ASSETS................................................... $24,975,002
===========
Institutional Class Shares
NET ASSETS................................................... $ 4,417,465
NET ASSET VALUE, Offering and Redemption Price Per Share
421,924 shares outstanding (unlimited authorization, no par
value)...................................................... $10.47
======
Institutional Service Class Shares
NET ASSETS................................................... $20,557,537
NET ASSET VALUE, Offering and Redemption Price Per Share
1,967,126 shares outstanding (unlimited authorization, no
par value).................................................. $10.45
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
FOR THE SIX MONTHS ENDED OCTOBER 31, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<S> <C>
INTEREST INCOME
Interest........................................................... $1,140,673
----------
EXPENSES
Investment Advisory Fees -- Note B................................. 61,951
Administrative Fees -- Note C...................................... 61,839
Distribution and Service Fees -- Note E............................ 23,461
Account Services Fees -- Note F.................................... 21,136
Filing and Registration Fees....................................... 11,623
Printing Fees...................................................... 8,645
Audit Fees......................................................... 7,856
Custodian Fees -- Note D........................................... 3,758
Legal Fees......................................................... 2,154
Trustees' Fees -- Note G........................................... 1,384
Other Expenses..................................................... 2,502
Account Service Fees Waived -- Note F.............................. (21,136)
Investment Advisory Fees Waived -- Note B.......................... (1,833)
----------
Net Expenses Before Expense Offset................................ 183,340
Expense Offset -- Note A........................................... (481)
----------
Net Expenses After Expense Offset................................. 182,859
----------
NET INVESTMENT INCOME.............................................. 957,814
----------
NET REALIZED GAIN ON INVESTMENTS................................... 685,535
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON INVESTMENTS.. (1,822)
----------
NET GAIN ON INVESTMENTS............................................ 683,713
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $1,641,527
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
OCTOBER 31, ENDED
1998 APRIL 30,
(UNAUDITED) 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................. $ 957,814 $ 1,708,499
Net Realized Gain................................. 685,535 719,181
Net Change in Unrealized
Appreciation/Depreciation........................ (1,822) 340,239
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... 1,641,527 2,767,919
------------ ------------
DISTRIBUTIONS:
Net Investment Income
Institutional Class............................... (427,217) (928,980)
Institutional Service Class....................... (575,427) (671,335)
Net Realized Gain:
Institutional Class............................... -- (76,247)
Institutional Service Class....................... -- (58,332)
------------ ------------
TOTAL DISTRIBUTIONS.............................. (1,002,644) (1,734,894)
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE K):
Institutional Class:
Issued............................................ 2,135,959 16,743,202
In Lieu of Cash Distributions..................... 427,217 1,005,227
Redeemed.......................................... (18,533,972) (11,553,123)
------------ ------------
Net Increase (Decrease) from Institutional Class
Shares.......................................... (15,970,796) 6,195,306
------------ ------------
Institutional Service Class:
Issued............................................ 6,633,999 14,982,887
In Lieu of Cash Distributions..................... 575,427 722,074
Redeemed.......................................... (2,560,628) (4,382,135)
------------ ------------
Net Increase from Institutional Service Class
Shares.......................................... 4,648,798 11,322,826
------------ ------------
NET INCREASE (DECREASE) FROM CAPITAL SHARE
TRANSACTIONS.................................... (11,321,998) 17,518,132
------------ ------------
TOTAL INCREASE (DECREASE)........................ (10,683,115) 18,551,157
NET ASSETS:
Beginning of Period............................... 35,658,117 17,106,960
------------ ------------
End of Period (including undistributed net
investment income of $185,726 and $230,556,
respectively).................................... $ 24,975,002 $ 35,658,117
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS
------------------------------------------
SIX MONTHS
ENDED YEARS ENDED NOVEMBER 1,
OCTOBER 31, APRIL 30, 1995*** TO
1998 ---------------- APRIL 30,
(UNAUDITED) 1998++ 1997++ 1996++
----------- ------- ------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.............................. $10.36 $ 9.96 $ 9.85 $10.00
------ ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.80 0.58 0.60 0.28
Net Realized and Unrealized Gain
(Loss) on Investments.............. (0.35) 0.41 0.05 (0.27)
------ ------- ------- ------
Total from Investment Operations.... 0.45 0.99 0.65 0.01
------ ------- ------- ------
DISTRIBUTIONS
Net Investment Income............... (0.34) (0.55) (0.54) (0.16)
Net Realized Gain................... -- (0.04) -- --
------ ------- ------- ------
Total Distributions................. (0.34) (0.59) (0.54) (0.16)
------ ------- ------- ------
NET ASSET VALUE, END OF PERIOD....... $10.47 $ 10.36 $ 9.96 $ 9.85
====== ======= ======= ======
TOTAL RETURN+........................ 4.35%** 10.16% 6.75% 0.08%**
====== ======= ======= ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)......................... $4,417 $19,927 $13,062 $2,445
Ratio of Expenses to Average Net
Assets.............................. 0.90%* 0.68% 0.57% 0.61%*
Ratio of Net Investment Income to
Average Net Assets.................. 5.60%* 5.69% 6.01% 5.53%*
Portfolio Turnover Rate.............. 71% 210% 151% 55%
Ratio of Voluntarily Waived Fees and
Expenses Assumed by Affiliates to
Average Net Assets.................. 0.12%* 0.52% 1.16% 4.63%*
Ratio of Expenses to Average Net
Assets Including Expense Offsets.... 0.90%* 0.68% 0.55% 0.55%*
</TABLE>
* Annualized.
** Not Annualized.
*** Commencement of Operations.
+ Total return would have been lower had certain fees not been waived and
expenses assumed by Affiliates during the period.
++ Per share amounts are based on average outstanding shares.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE CLASS
-----------------------------------------
SIX MONTHS
ENDED YEARS ENDED NOVEMBER 1,
OCTOBER 31, APRIL 30, 1995*** TO
1998 --------------- APRIL 30,
(UNAUDITED) 1998++ 1997++ 1996++
----------- ------- ------ -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 10.34 $ 9.95 $ 9.84 $10.00
------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............. 0.28 0.56 0.57 0.27
Net Realized and Unrealized Gain
(Loss) on Investments............. 0.16 0.40 0.05 (0.27)
------- ------- ------ ------
Total from Investment Operations... 0.44 0.96 0.62 --
------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income.............. (0.33) (0.53) (0.51) (0.16)
Net Realized Gain.................. -- (0.04) -- --
------- ------- ------ ------
Total Distributions................ (0.33) (0.57) (0.51) (0.16)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD...... $ 10.45 $ 10.34 $ 9.95 $ 9.84
======= ======= ====== ======
TOTAL RETURN+....................... 4.26%** 9.85% 6.47% (0.07)%**
======= ======= ====== ======
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)........................ $20,558 $15,732 $4,045 $2,871
Ratio of Expenses to Average Net
Assets............................. 1.15%* 0.95% 0.82% 0.83%*
Ratio of Net Investment Income to
Average Net Assets................. 5.25%* 5.42% 5.78% 5.44%*
Portfolio Turnover Rate............. 71% 210% 151% 55%
Ratio of Voluntarily Waived Fees and
Expenses Assumed by Affiliates to
Average Net Assets................. 0.14%* 0.45% 1.43% 3.99%*
Ratio of Expenses to Average Net
Assets Including Expense Offsets... 1.15%* 0.94% 0.80% 0.80%*
</TABLE>
* Annualized.
** Not Annualized.
*** Commencement of Operations.
+ Total return would have been lower had certain fees not been waived and
expenses assumed by Affiliates during the period.
++ Per share amounts are based on average outstanding shares.
The accompanying notes are an integral part of the financial statements.
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UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
UAM Funds Trust and UAM Funds, Inc. (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The BHM&S
Total Return Bond Portfolio (the "Portfolio"), a portfolio of UAM Funds Trust,
is a diversified, open-end management investment company. At October 31, 1998,
the UAM Funds were composed of forty-six active portfolios. The financial
statements of the remaining portfolios are presented separately. The Portfolio
is authorized to offer two separate classes of shares--Institutional Class
Shares and Institutional Service Class Shares. Both classes of shares have
identical voting rights (except Institutional Service Class shareholders have
exclusive voting rights with respect to matters relating to distribution and
shareholder servicing of such shares), dividend, liquidation and other rights.
The objective of the BHM&S Total Return Bond Portfolio is to provide a maximum
long term total return consistent with reasonable risk to principal by
investing in investment grade fixed income securities of varying maturities.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. SECURITY VALUATION: Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price from the exchange where the security is
primarily traded. If no sales are reported, as in the case of some
securities traded over-the-counter, the market value is determined using
the last reported bid price. Fixed income securities are stated on the
basis of valuation provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities,
quotations from dealers, market transactions in comparable securities and
various relationships between securities in determining value. Short-term
investments that have remaining maturities of sixty days or less at time
of purchase are valued at amortized cost, if it approximates market value.
The value of other assets and securities for which no quotations are
readily available are stated at fair value following procedures approved
by the Trustees.
2. FEDERAL INCOME TAXES: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
13
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UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
Code and to distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial
statements.
3. REPURCHASE AGREEMENTS: In connection with transactions involving
repurchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities ("collateral"), the value of which exceeds the
principal amount of the repurchase transaction, including accrued
interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is monitored on a daily basis to
determine the adequacy of the collateral. In the event of default on the
obligation to repurchase, the Portfolio has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. In
the event of default or bankruptcy by the counterparty to the agreement,
realization and/or retention of the collateral or proceeds may be subject
to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash
balances into a joint trading account which invests in one or more
repurchase agreement. This joint repurchase agreement is covered by the
same collateral requirements as discussed above.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income quarterly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing book and tax treatments for
paydown gains or losses and the timing of the recognition of gains or
losses on investments.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital.
Permanent book-tax differences, if any, are not included in ending
undistributed net investment income (loss) for the purpose of calculating
net investment income (loss) per share in the financial highlights.
5. OTHER: Security transactions are accounted for on trade date, the
date the trade was executed. Costs used in determining realized gains and
losses on the sale of investment securities are based on the specific
identification method. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized using the
14
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
effective yield basis over their respective lives. Most expenses of the
UAM Funds can be directly attributed to a particular portfolio. Expenses
which cannot be directly attributed are apportioned among the portfolios
of the UAM Funds based on their relative net assets. Income, expenses
(other than class specific expenses) and realized and unrealized gains or
losses are allocated to each class of shares based upon their relative net
assets. Custodian fees for the Portfolio are shown gross of expense
offsets, if any, for custodian balance credits.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Barrow, Hanley, Mewhinney, & Strauss, Inc. (the "Adviser"), a wholly-owned
subsidiary of United Asset Management Corporation ("UAM"), provides investment
advisory services to the Portfolio for a monthly fee calculated at an annual
rate of 0.35% of average daily net assets for the month. For the period from
May 1, 1997 through December 31, 1997, the Adviser had voluntarily agreed to
waive a portion of its advisory fees and to assume expenses, if necessary, in
order to keep the Portfolio's total annual operating expenses, after the
effect of expense offset arrangements, from exceeding 0.55% and 0.80% of
average daily net assets of the Portfolio's Institutional Class Shares and
Service Class Shares, respectively. For the period from January 1, 1998
through April 30, 1998, the Adviser has voluntarily agreed to waive a portion
of its advisory fees and to assume expenses, if necessary, in order to keep
the Portfolio's total annual operating expenses, after the effect of expense
offset arrangements, from exceeding 0.90% and 1.15% of average daily net
assets of the Portfolios' Institutional Class Shares and Service Class Shares,
respectively.
C. ADMINISTRATIVE SERVICES: UAM Funds Services, Inc. (the "Administrator"),
a wholly-owned subsidiary of UAM, provides and oversees administrative, fund
accounting, dividend disbursing, shareholder servicing and transfer agent
services to the UAM Funds under a Fund Administration Agreement (the
"Agreement"). The Administrator has entered into a Mutual Funds Service
Agreement (the "Mutual Funds Service Agreement") with Chase Global Funds
Services Company ("CGFSC"), a corporate affiliate of The Chase Manhattan Bank,
under which CGFSC provides certain services including, but not limited to,
administrative, fund accounting, dividend disbursing, shareholder servicing
and transfer agent services.
Pursuant to the Agreement, the Portfolio pays the Administrator a two part
monthly fee:
--a Portfolio-specific monthly fee of 0.04% per annum of the average daily
net assets of the Portfolio which is retained by the Administrator.
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<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
--a sub-administration fee (the "Sub-Administration Fee") which the
Administrator in turn pays to CGFSC on a monthly basis, calculated as
0.19% of the first $200 million of the combined aggregate net assets of
the UAM Funds; plus 0.11% of the next $800 million of the combined
aggregate net assets of the UAM Funds; plus 0.07% of the next $2 billion
of the combined aggregate net assets of the UAM Funds; plus 0.05% of the
combined aggregate net assets of the UAM Funds in excess of $3 billion.
The Sub-Administration Fee is allocated among the portfolios of the UAM
Funds on the basis of their relative net assets and is subject to a
graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two
years. For portfolios with more than one class of shares, the minimum
annual fee increases to $90,000 over the same period.
Effective October 23, 1998, the Mutual Funds Service Agreement with CGFSC
was revised to exclude dividend disbursing, shareholder servicing and transfer
agent services. Pursuant to the revised Mutual Funds Service Agreement, the
Sub-Administration Fee paid by the Portfolio to the Administrator and in turn
paid to CGFSC is calculated as a base fee per Portfolio of $52,500 annually
plus $7,500 annually for each additional class of shares; plus 0.039% of the
net assets of the Portfolio. Certain portfolios which commenced operations
after October 1, 1997 have a base fee of $39,500 for a period of twelve
months, which increases to $52,500 annually once the twelve months have
expired.
For the six months ended October 31, 1998, UAM Funds Services, Inc. earned
$61,839 from the Portfolio as Administrator of which $51,640 was paid to CGFSC
for its services as Sub-Administrator.
Also, effective October 23, 1998, dividend disbursing and transfer agent
services were sub-contracted to DST Systems, Inc. and shareholder servicing
has been sub-contracted to UAM Shareholder Service Center, Inc., an affiliate
of UAM. The portfolios pay dividend disbursing, transfer agent and shareholder
servicing fees to the Administrator who in turn pays them to DST Systems, Inc.
and UAM Shareholder Services Center, Inc., as appropriate. For the six months
ended October 31, 1998, the Portfolio incurred $179 in shareholder servicing
fees with UAM Shareholder Service Center, Inc. This fee is based on the number
of classes of shares and shareholder accounts.
D. CUSTODIAN: The Chase Manhattan Bank is custodian for the Portfolio's
assets and the assets are held in accordance with the custodian agreement.
16
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
E. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Portfolio has adopted Distribution and Service Plans (the "Plans") on behalf
of the Institutional Service Class Shares ("Service Class Shares") pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Under the Plans, the
Portfolio may not incur distribution and service fees which exceed an annual
rate of 0.75% of the Service Class Shares' net assets, however, the Board has
currently limited aggregate payments under the Plans to 0.50% per annum of the
Service Class Shares' net assets. The Portfolio's Service Class Shares are not
currently making payments for distribution fees, however the Service Class
Shares do pay service fees at an annual rate of 0.25% of the average daily
value of Service Class Shares owned by clients of the Service Agents.
F. ACCOUNT SERVICES: The UAM Funds have 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 UAM Funds in the accounts for which they provide
services. The Service Provider has voluntarily agreed to waive a portion of
its fees in order to keep the Portfolio's total annual operating expenses,
after the effect of expense offset arrangements, from exceeding 0.90% and
1.15% of average daily net assets of the Portfolio's Institutional Class
Shares and Institutional Service Class Shares, respectively.
G. TRUSTEES' FEES: Each Trustee, who is not an officer or affiliated person,
receives $2,000 per meeting attended plus reimbursement of expenses incurred
in attending Trustee meetings, which is allocated proportionally among the
active portfolios of UAM Funds, plus a quarterly retainer of $150 for each
active portfolio of the UAM Funds.
H. PURCHASES AND SALES: For the six months ended October 31, 1998, the
Portfolio made purchases of $7,339,780 and sales of $14,077,955 of investment
securities other than long-term U.S. Government and short-term securities.
Purchases and sales of long-term U.S. Government securities total $15,985,492
and $20,499,271, respectively.
I. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
17
<PAGE>
UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
- -------------------------------------------------------------------------------
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
Capital shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%.
In addition, a commitment fee of 0.08% per annum, payable at the end of each
calendar quarter, is accrued by each participating portfolio based on its
average daily unused portion of the line of credit. During the six months
ended October 31, 1998, the Portfolio had no borrowings under the agreement.
J. OTHER: At October 31, 1998, 100% and 65% of total shares outstanding were
held by 2 and 4 record shareholders of the Institutional Class Shares and the
Institutional Service Class Shares, respectively, owning 10% or greater of the
aggregate total shares outstanding.
K. CAPITAL SHARE TRANSACTIONS: Transactions in capital shares for the
Portfolios, by class, were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS INSTITUTIONAL SERVICE
SHARES CLASS SHARES
------------------------------- -------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, 1998 APRIL 30, 1998 OCTOBER 31, 1998 APRIL 30, 1998
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares Issued........... 203,711 1,644,535 635,524 1,470,225
In Lieu of Cash
Distributions......... 40,730 98,356 54,713 70,652
Shares Redeemed......... (1,745,748) (1,130,795) (244,430) (426,221)
---------- ---------- -------- ---------
Net Increase (Decrease)
from Capital Share
Transactions.......... (1,501,307) 612,096 445,807 1,114,656
========== ========== ======== =========
</TABLE>
During the year ended April 30, 1998, the Portfolio utilized capital loss
carryforwards for federal income tax purposes of totaling $34,317.
L. SUBSEQUENT EVENTS: UAM Retirement Plan Services, Inc. will no longer
provide services pursuant to the Account Services Agreement, effective at the
close of business December 31, 1998.
18
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UAM FUNDS BHM&S TOTAL RETURN BOND PORTFOLIO
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OFFICERS AND TRUSTEES
Norton H. Reamer William H. Park
Trustee, President and Chairman Vice President
John T. Bennett, Jr. Michael E. DeFao
Trustee Secretary
Nancy J. Dunn Gary L. French
Trustee Treasurer
Philip D. English Robert R. Flaherty
Trustee Assistant Treasurer
William A. Humenuk Michael J. Leary
Trustee Assistant Treasurer
Peter M. Whitman, Jr. Michelle Azrialy
Trustee Assistant Secretary
- --------------------------------------------------------------------------------
UAM FUNDS
P.O. Box 419081
Kansas City, MO 64141-6081
(toll free)
1-877-UAM-LINK (826-5465)
INVESTMENT ADVISER
Barrow, Hanley, Mewhinney & Strauss, Inc.
3232 McKinney Avenue, 15th Floor
Dallas, TX 75204
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
This report has been prepared for
shareholders and may be distributed
to others only if preceded or
accompanied by a current prospectus.
