<PAGE>
Securities Act File No. 33-79858
Investment Company Act of 1940 File No. 811-8544
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 29 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 30 /X/
UAM FUNDS TRUST
(Exact Name of Registrant as specified in Charter)
c/o UAM Fund Services, Inc.
211 Congress St., 4th Floor
Boston, Massachusetts 02110
Registrant's Telephone Number (617) 542-5440
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Michael E. DeFao, Secretary
UAM Fund Services, Inc.
211 Congress Street
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
---------------------------------------
COPY TO:
Audrey C. Talley, Esq.
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3469
IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[_] Immediately upon filing pursuant to Paragraph (b)
[_] on (date) pursuant to Paragraph (b)
[X] 60 days after filing pursuant to paragraph (a) (1)
[_] on (date) pursuant to paragraph (a) (1)
[_] 75 days after filing pursuant to Paragraph (a) (2)
[_] on (date) pursuant to Paragraph (a) (2) of Rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[_] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
PART A
UAM FUNDS TRUST
The following Prospectuses are included in this Post-Effective Amendment No. 28.
. Dwight Capital Preservation Portfolio Institutional Class Shares
. Dwight Capital Preservation Portfolio Institutional Service Class Shares
The following Prospectuses are contained in Post-Effective Amendment No. 27
filed February 5, 1999:
. Heitman Real Estate Portfolio Institutional Class Shares
. Heitman Real Estate Portfolio Advisor Class Shares
The following Prospectuses are contained in Post-Effective Amendment No. 24
filed July 10, 1998:
. BHM&S Total Return Bond Portfolio Institutional Class Shares
. BHM&S Total Return Bond Portfolio Institutional Service Class Shares
. Chicago Asset Management Intermediate Bond Portfolio Institutional Class
Shares
. Chicago Asset Management Value/Contrarian Portfolio Institutional Class
Shares
. FPA Crescent Portfolio Institutional Class Share
. FPA Crescent Portfolio Institutional Service Class Shares
. Hanson Equity Portfolio Institutional Class Shares
. Jacobs International Octagon Portfolio Institutional Class Shares
. MJI International Equity Portfolio Institutional Class Shares
. MJI International Equity Portfolio Institutional Service Class Shares
. TJ Core Equity Portfolio Institutional Service Class Shares
The following Prospectuses are contained in Post-Effective Amendment No. 23
filed July 2, 1998:
. Clipper Focus Portfolio Institutional Class Shares
. Clipper Focus Portfolio Institutional Service Class Shares
The Institutional Class Prospectus of PR Mid Cap Growth Portfolio is contained
in Post-Effective Amendment No. 22 filed June 24, 1998:
The Institutional Class Prospectus of Cambiar Opportunity Portfolio is contained
in Post-Effective Amendment No. 18 filed January 23, 1998:
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<PAGE>
PART B
UAM FUNDS TRUST
The Statement of Additional Information of Dwight Capital Preservation Portfolio
is included in this Post-Effective Amendment No. 28.
The Statement of Additional Information of Heitman Real Estate Portfolio is
contained in Post-Effective Amendment No. 27 filed February 5, 1999:
The following Statements of Additional Information are contained in Post-
Effective Amendment No. 24 filed on July 10, 1998:
. BHM&S Total Return Bond Portfolio Institutional Class Shares and
Institutional Service Class Shares
. Chicago Asset Management Intermediate Bond Portfolio Institutional Class
Shares and Chicago Asset Management Value/Contrarian Portfolio
Institutional Class Shares
. FPA Crescent Portfolio Institutional Class Share and Institutional Service
Class Shares
. Hanson Equity Portfolio Institutional Class Shares
. Jacobs International Octagon Portfolio Institutional Class Shares
. MJI International Equity Portfolio Institutional Class Shares and
Institutional Service Class Shares
. TJ Core Equity Portfolio Institutional Service Class Shares
The Statement of Additional Information of Clipper Focus Portfolio is contained
in Post-Effective Amendment No. 23 filed July 2, 1998:
The Statement of Additional Information of PR Mid Cap Growth Portfolio is
contained in Post-Effective Amendment No. 22 filed June 24, 1998:
The Statement of Additional Information of Cambiar Opportunity Portfolio is
contained in Post-Effective Amendment No. 18 filed January 23, 1998:
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<PAGE>
PART C
UAM FUNDS TRUST
OTHER INFORMATION
ITEM 23. EXHIBITS
Exhibits previously filed by the Fund are incorporated by reference to such
filings. The following table describes the location of all exhibits. In the
table, the following references are used: PEA 27 = Post-Effective Amendment No.
27 filed on February 5, 1999, PEA 24 = Post Effective Amendment No. 24 filed on
July 10, 1998; PEA 19 = Post-Effective Amendment No. 19 filed on February 3,
1998; PEA17 = Post-Effective Amendment No. 17 filed on December 15, 1997, PEA16
= Post-Effective Amendment No. 16 filed on July 10, 1997.
<TABLE>
<CAPTION>
Incorporated by
Reference to
Exhibit (Location):
==================================================================================================================================
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<S> <C>
A. 1. Agreement and Declaration of Trust PEA 24
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2. Certificate of Trust PEA 24
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3. Certificate of Amendment to Certificate of Trust PEA 24
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B.1. By-Laws PEA 24
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2. Amendment to By-Laws dated December 10, 1998 PEA 27
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C. 1. Form of Specimen Share Certificate PEA 24
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2. The rights of security holders are defined in the Registrant's Agreement and
Declaration of Trust and By-Laws PEA 24
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D.1. Investment Advisory Agreement between Registrant and Barrow, Hanley,
Mewhinney & Strauss PEA 27
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2. Investment Advisory Agreement between Registrant and Cambiar Investors, Inc. PEA 27
- ----------------------------------------------------------------------------------------------------------------------------------
3. Investment Advisory Agreement between Registrant and Chicago Asset Management Company
(Intermediate Bond Portfolio) PEA 27
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4. Investment Advisory Agreement between Registrant and Chicago Asset Management Company
(Value/Contrarian Portfolio) PEA 27
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5. Investment Advisory Agreement between Registrant and Dwight Asset Management Company PEA 27
- ----------------------------------------------------------------------------------------------------------------------------------
6. Investment Advisory Agreement between Registrant and First Pacific Advisors, Inc. PEA 27
- ----------------------------------------------------------------------------------------------------------------------------------
7. Investment Advisory Agreement between Registrant and Hanson Investment Management
Company PEA 27
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8. Investment Advisory Agreement between Registrant and Heitman/PRA Securities Advisors, Inc. PEA 27
- ----------------------------------------------------------------------------------------------------------------------------------
9. Investment Advisory Agreement between Registrant and Jacobs Asset Management, L.P. PEA 27
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10. Investment Advisory Agreement between Registrant and Murray Johnstone International Limited PEA 27
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11. Investment Advisory Agreement between Registrant and Pacific Financial Research, Inc. PEA 27
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12. Investment Advisory Agreement between Registrant and Pell Rudman Trust Company, N.A. PEA 27
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13. Investment Advisory Agreement between Registrant and Tom Johnson Investment Management PEA 27
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E. 1. Distribution Agreement between Registrant and UAM Fund Distributors PEA 24
- ----------------------------------------------------------------------------------------------------------------------------------
2. Distribution Agreement between Registrant and UAM Fund Distributors, Inc. dated as of March Filed herewith
31, 1999 (Advisor Class Shares)
- ----------------------------------------------------------------------------------------------------------------------------------
2. Distribution Agreement between Registrant and ACG Capital Corporation (Advisor Class Shares) PEA 19
- ----------------------------------------------------------------------------------------------------------------------------------
4. Amendment to Distribution Agreement between Registrant and ACG Capital Corporation dated as Filed herewith
of March 31, 1999
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5. Selling Dealer Agreement PEA 24
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F. Trustees' and Officers' Contracts and Programs Not applicable
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</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C>
G. 1. Global Custody Agreement PEA16
- ------------------------------------------------------------------------------------------
H. 1. Fund Administration Agreement PEA 27
- ------------------------------------------------------------------------------------------
2. Mutual Funds Service Agreement PEA16
- ------------------------------------------------------------------------------------------
I. Opinions and Consents of Counsel Filed herewith
- ------------------------------------------------------------------------------------------
J. Consent of Independent Auditors Not applicable
- ------------------------------------------------------------------------------------------
K. Other Financial Statements Not applicable
- ------------------------------------------------------------------------------------------
L. Purchase Agreement PEA 24
- ------------------------------------------------------------------------------------------
M. 1. Distribution Plan PEA 24
- ------------------------------------------------------------------------------------------
2. Shareholder Services Plan PEA 24
- ------------------------------------------------------------------------------------------
3. Service Agreement PEA 24
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N. Financial Data Schedule Not applicable
- ------------------------------------------------------------------------------------------
O. Amended and Restated Rule 18f-3 Multiple Class Plan PEA 24
- ------------------------------------------------------------------------------------------
P. Powers of Attorney PEA 24, PEA 27
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Not applicable.
ITEM 25. INDEMNIFICATION
Reference is made to Article VI of Registrant's Declaration of Trust, which is
incorporated herein by reference. Registrant hereby also makes the undertaking
consistent with Rule 484 under the Securities Act of 1933, as amended. Insofar
as indemnification for liability arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Provisions for indemnification of UAM Fund Services, Inc. are contained in
Section 6 of its Fund Administration Agreement with the Registrant.
Provisions for indemnification of the Registrant's investment advisers are
contained in Section 7 of their respective Investment Advisory Agreements with
the Registrant.
Provisions for indemnification of Registrant's principal underwriter, UAM Fund
Distributors, Inc., are contained in its Distribution Agreement with the
Registrant.
Provisions for indemnification of Registrant's custodian, The Chase Manhattan
Bank, are contained in Section 12 of its Fund Global Custody Agreement with the
Registrant.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the caption "Investment Adviser" in the Prospectuses
constituting Part A of this Registration Statement and "Investment Adviser" in
Part B of this Registration Statement. Except for information with respect to
Pell Rudman Trust Company, N.A., the information required by this Item 26 with
respect to each director, officer, or partner of each other investment adviser
of the Registrant is incorporated by reference to the Forms ADV filed by the
investment advisers listed below with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940, as amended, under the file
numbers indicated:
-5-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Investment Adviser File No.
=============================================================================================================================
Barrow, Hanley, Mewhinney & Strauss, Inc. 801-31237
- -----------------------------------------------------------------------------------------------------------------------------
Cambiar Investors, Inc. 801-09538
- -----------------------------------------------------------------------------------------------------------------------------
Chicago Asset Management Company 801-20197
- -----------------------------------------------------------------------------------------------------------------------------
Dwight Asset Management Company 801-45304
- -----------------------------------------------------------------------------------------------------------------------------
First Pacific Advisors, Inc. 801-39512
- -----------------------------------------------------------------------------------------------------------------------------
Hanson Investment Management Company 801-14817
- -----------------------------------------------------------------------------------------------------------------------------
Heitman/PRA Securities Advisors, Inc. 801-48252
- -----------------------------------------------------------------------------------------------------------------------------
Jacobs Asset Management, L.P. 801-49790
- -----------------------------------------------------------------------------------------------------------------------------
Murray Johnstone International Ltd. 801-34926
- -----------------------------------------------------------------------------------------------------------------------------
Pacific Financial Research, Inc. 801-54352
- -----------------------------------------------------------------------------------------------------------------------------
Tom Johnson Investment Management, Inc. 801-42549
</TABLE>
<TABLE>
<CAPTION>
Positions and Offices with Pell Rudman Positions and Offices with Pell
Name and Principal Business Address Trust Company, N.A. Rudman & Co., Inc.
===============================================================================================================================
<S> <C> <C>
Jeffrey S. Thomas Director Chief Financial Officer of
100 Federal Street Pell, Rudman & Co., Inc.
Boston, Massachusetts
- -------------------------------------------------------------------------------------------------------------------------------
Edward I. Rudman Director Chairman and President of Pell,
100 Federal Street Rudman & Co., Inc.
Boston, Massachusetts
- -------------------------------------------------------------------------------------------------------------------------------
James S. McDonald Director Executive Vice President of
100 Federal Street Pell, Rudman & Co., Inc.
Boston, Massachusetts
- -------------------------------------------------------------------------------------------------------------------------------
Susan W. Hunnewell Director Senior Vice President of Pell,
100 Federal Street Rudman & Co., Inc.
Boston, Massachusetts
</TABLE>
Barrow, Hanley, Mewhinney & Strauss, Inc., Cambiar Investors, Inc., Chicago
Asset Management Company, Dwight Asset Management Company, First Pacific
Advisors, Inc., Hanson Investment Management Company, Heitman/PRA Securities
Advisors, Inc., Jacobs Asset Management, L.P., Murray Johnstone International
Ltd., Pacific Financial Research, Inc., Pell Rudman Trust Company, N.A., and Tom
Johnson Investment Management, Inc., are affiliates of United Asset Management
Corporation ("UAM"), a Delaware corporation owning firms engaged primarily in
institutional investment management.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Except for Heitman Real Estate Portfolio Advisor Class Shares, UAM Fund
Distributors, Inc. ("UAMFDI") acts as sole distributor of the registrant's
shares. ACG Capital Corporation ("ACG") acts as sole distributor of the
Heitman Real Estate Portfolio Advisor Class Shares.
(b) The information required with respect to each director and officer of
UAMFDI is incorporated by reference to Schedule A of Form BD filed pursuant
to the Securities and Exchange Act of 1934 (SEC File No. 8-41126).
(c) The information required with respect to each Director and officer of ACG
is incorporated by reference to Schedule A of Form BD filed pursuant to the
Securities and Exchange Act of 1934 (SEC File No. 8-47813).
(d) Not applicable.
-6-
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
Name and Address of Service Provider Relationship with Registrant
================================================================================
The Chase Manhattan Bank Custodian bank
4 Chase MetroTech Center
Brooklyn, New York, 11245
- --------------------------------------------------------------------------------
Chase Global Funds Services Company Sub-administrator
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------------------------------
UAM Fund Services, Inc. Administrator
211 Congress Street, 4th Floor
Boston, Massachusetts 02110
- --------------------------------------------------------------------------------
UAM Shareholder Services Center, Inc. Sub-shareholder servicing agent
825 Duportail Road
Wayne, PA 19087
- --------------------------------------------------------------------------------
DST Systems, Inc. Sub-transfer agent
210 West 10th Street
Kansas City, Missouri 64105
The registrant's investment advisers will also maintain physical possession of
certain of the books, accounts and other documents required by Section 31(a)
under the Investment Company Act of 1940, as amended, and the rules promulgated
thereunder.
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
Not Applicable.
-7-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston and Commonwealth of Massachusetts on the
9th day of April, 1999.
UAM FUNDS TRUST
/s/ Michael E. DeFao
-----------------------------
Michael E. DeFao
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the 9th day of April, 1999:
*
___________________________________
Norton H. Reamer, Chairman and
President
*
___________________________________
John T. Bennett, Jr., Trustee
*
___________________________________
Nancy J. Dunn, Trustee
*
___________________________________
Philip D. English, Trustee
*
___________________________________
William A. Humenuk, Trustee
*
___________________________________
Peter M. Whitman, Jr., Trustee
/s/ Gary L. French
- -----------------------------------
Gary L. French, Treasurer
/s/ Michael E. DeFao
- -----------------------------------
* Michael E. DeFao
(Attorney-in-Fact)
-8-
<PAGE>
UAM Funds
Funds for the Informed
Investor/SM/
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
INSTITUTIONAL SERVICE CLASS PROSPECTUS April __, 1999
UAM
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PORTFOLIO SUMMARY...................................................... 1
WHAT ARE THE OBJECTIVES OF THE PORTFOLIO?........................... 1
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE PORTFOLIO?...... 1
WHAT ARE THE PRINCIPAL RISKS OF THE ^ERROR! BOOKMARK NOT
DEFINED. ^PORTFOLIO?................................................ 1
WHAT ARE THE FEES AND EXPENSES OF THE PORTFOLIO?.................... 2
INVESTING WITH THE UAM FUNDS ERROR! BOOKMARK NOT DEFINED.
BUYING SHARES....................................................... 3
REDEEMING SHARES.................................................... 4
TRANSACTION POLICIES................................................ 4
ACCOUNT POLICIES....................................................... 7
SMALL ACCOUNTS...................................................... 7
DISTRIBUTIONS....................................................... 7
FEDERAL TAXES....................................................... 7
FUND DETAILS........................................................... 9
PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO.................... 9
OTHER INVESTMENT PRACTICES AND STRATEGIES........................... 12
YEAR 2000........................................................... 13
INVESTMENT MANAGEMENT............................................... 13
SHAREHOLDER SERVICING ARRANGEMENTS.................................. 14
</TABLE>
<PAGE>
PORTFOLIO SUMMARY
The Dwight Capital Preservation Portfolio offers its shares only to individual
investors who invest in the portfolio through an individual retirement account
("IRA"), Education IRA, SEP-IRA, Simple IRA, ROTH-IRA or KEOGH Plan.
WHAT ARE THE OBJECTIVES OF THE PORTFOLIO?
The portfolio seeks a level of current income higher than that of money market
funds, while attempting to preserve principal and maintain a stable net asset
value per share (NAV). The portfolio cannot guarantee it will meet its
investment objectives. The portfolio may change its investment objectives
without shareholder approval.
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE PORTFOLIO?
- --------------------------------------------------------------------------------
This section summarizes the principal investment strategies of the portfolio.
For more information see "PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO."
The portfolio is designed to produce higher returns than a money market fund,
while seeking to maintain a NAV that is considerably more stable than a
typical high-quality fixed-income fund.
Like other high-quality fixed-income funds, the portfolio invests primarily in
debt securities that a nationally recognized statistical rating agency (rating
agency), such as Moody's Investors Service or Standard & Poor's Rating Group,
has rated in its top rating category at the time of purchase. Unlike other
fixed-income funds, however, the portfolio seeks to stabilize its NAV by
purchasing wrapper agreements from financial institutions, such as insurance
companies and banks (wrap providers). A wrapper agreement is a contract that
obligates the wrap provider to maintain the adjusted cost basis (book value)
of some or all of the assets of the portfolio. For example, if the portfolio
were to sell a security for less than its book value, the wrap provider may be
obligated to pay the portfolio the difference, and vice versa.
In purchasing a wrapper agreement, the portfolio trades the potential for
capital appreciation and some yield for protection from a decline in the value
of its holdings caused by changes in interest rates.
WHAT ARE THE PRINCIPAL RISKS OF THE PORTFOLIO?
- --------------------------------------------------------------------------------
This section summarizes the principal risks associated with investing in the
portfolio. For more information see "PRINCIPAL INVESTMENTS AND RISKS OF THE
PORTFOLIO."
<PAGE>
RISKS COMMON TO ALL MUTUAL FUNDS
As with all mutual funds, at any time your investment in a portfolio may be
worth more or less than the price that you originally paid for it. You may
lose money by investing in the portfolio because:
. The value of the securities it owns changes, sometimes rapidly and
unpredictably.
. The portfolio is not successful in reaching its goal because of its
strategy or because it did not implement its strategy properly.
. Unforeseen occurrences in the securities markets negatively affect the
portfolio.
DWIGHT CAPITAL PRESERVATION PORTFOLIO
The portfolio cannot guarantee that the combination of securities and wrapper
agreements will provide a constant NAV or a current rate of return that is
higher than a money market mutual fund.
The portfolio tries to offset changes in the value of it investments and to
maintain a stable NAV by combining its investments in debt securities with
wrapper agreements. However, without wrapper agreements, the portfolio will
not be able to maintain a stable NAV. This could happen if:
. A provider of a wrapper agreement defaults on its obligation.
. The portfolio cannot purchase wrapper agreements.
. The portfolio buys wrapper agreements that do not offset changes in its
NAV.
If the portfolio's attempts to stabilize its NAV fail, the value of its
investments could fall because:
. Of market conditions and economic and political events.
. Interest rates rise, which tends to cause the value of debt securities to
fall.
. A security's credit rating worsens or its issuer becomes unable to honor
its financial obligations.
2
<PAGE>
WHAT ARE THE FEES AND EXPENSES OF THE PORTFOLIO?
- --------------------------------------------------------------------------------
Fees and Expenses of the Portfolio
This table describes the fees and expenses that you may pay if you buy and
hold shares of the portfolio.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Shareholder Fees (Fees Paid Directly From Your Account)
<S> <C>
Redemption Fee (as a percentage of amount redeemed) 2.00%
- --------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses That Are Deducted From the Assets of the Portfolio)
Management Fees 0.50%
- --------------------------------------------------------------------------------------------------------
Service (12b-1) Fees 0.25%
- --------------------------------------------------------------------------------------------------------
Other Expenses+ 0.60%
- --------------------------------------------------------------------------------------------------------
Total Expenses* 1.35%
-------------- ----
</TABLE>
+ Other Expenses are based on estimated amounts for the first fiscal year of
the portfolio. Other Expenses include the fees the portfolio expects to pay
for wrapper agreements.
* Actual Fees and Expenses The portfolio expects that the ratios stated in the
table above are higher than the expenses you will actually pay as an
investor in the portfolio. Due to certain expense limits by the adviser and
expense offsets, investors in the portfolio actually paid the total
operating expenses listed in the table below during its first fiscal year.
The adviser may cancel its expense limitation at any time.
----------------------------------------------------------------------------
Actual Expenses 1.25%
--------------- -----
EXAMPLE
This example can help you to compare the cost of investing in this portfolio
to the cost of investing in other mutual funds. The example assumes you invest
$10,000 in the portfolio for the periods shown and then redeem all of your
shares at the end of those periods. The example also assumes that you earned
a 5% return on your investment each year and that you paid the total expenses
stated above (which do not reflect any expense limitations) throughout the
period of your investment. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 Year 3 Years
- --------------------------------------------------------------------------------
If you redeem your shares $345 $650
- --------------------------------------------------------------------------------
If you did not redeem your shares, you would pay $137 $428
3
<PAGE>
Investing with the UAM Funds
BUYING SHARES
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT TO BUY MORE SHARES
- -----------------------------------------------------------------------------------
<S> <C> <C>
By Mail Send a check or money Send a check and, if possible,
order and your account the "Invest by Mail" stub that
application to the UAM accompanied your statement to
Funds. Make checks the UAM Funds. Be sure your
payable to "UAM Funds" check identifies clearly your
(the UAM Funds will not name, account number and the
accept third-party UAM Fund into which you want
checks). to invest.
- -----------------------------------------------------------------------------------
By Wire Call 1-877-826-5465 for Call 1-877-826-5465 to get a
an account number and wire control number and wire
wire control number and your money to the UAM Funds.
then send your completed
account application to
the UAM Funds.
Wiring Instructions
United Missouri Bank
ABA # 101000695
UAM Funds
DDA Acct. # 9870964163
Ref: portfolio name/account number/
account name/wire control number
- -----------------------------------------------------------------------------------
By Automatic Not Available To set up a plan, mail a
Investment Plan (Via completed application to the
ACH) UAM Funds. To cancel or
change a plan, write to the
UAM Funds. Allow up to 15
days to create the plan and 3
days to cancel or change it.
- -----------------------------------------------------------------------------------
Minimum $2,500 $100
Investments
</TABLE>
UAM Funds
PO Box 419081
Kansas City, MO 64141-6081
(Toll free) 1-877-UAM-LINK (826-5465)
4
<PAGE>
REDEEMING SHARES
- --------------------------------------------------------------------------------
By Mail Send a letter signed by all registered parties on the
account to the UAM Funds specifying:
. The UAM Fund.
. The account number.
. The dollar amount or number of shares you wish to
redeem.
Certain shareholders may have to include additional
documents. Please see the Statement of Additional
Information (SAI) if you need more information.
- --------------------------------------------------------------------------------
By Telephone You must first establish the telephone redemption
privilege (and, if desired, the wire redemption
privilege) by completing the appropriate sections of the
account application.
Call 1-877-UAM-Link (862-5465) to redeem your shares.
Based on your instructions, the UAM Funds will mail your
proceeds to you or wire them to your bank.
- --------------------------------------------------------------------------------
By If your account balance is at least $10,000, you may
Systematic transfer as little as $100 per month from your UAM
Withdrawal Plan account to your financial institution.
(Via ACH) To participate in this service, you must complete the
appropriate sections of the account application and mail
it to the UAM Funds.
TRANSACTION POLICIES
- --------------------------------------------------------------------------------
Calculating Your Share Price
You may buy or sell shares of the portfolio at a price equal to its net asset
value (NAV) next computed after it receives your order. The portfolio
calculates its NAV as of the close of trading on the New York Stock Exchange
(NYSE) (generally 4:00 p.m. Eastern Time) on each day the NYSE is open.
Therefore, to receive the NAV on any given day, the UAM Funds must accept your
order by the close of trading on the NYSE that day. Otherwise, you will
receive the NAV that is calculated on the close of trading on the following
day. The UAM Funds are open for business on the same days as the NYSE, which
is closed on weekends and certain holidays.
Buying or Selling Shares through a Financial Intermediary
You may buy or redeem shares of the portfolio through a financial intermediary
(such as a financial planner or adviser). Generally, to buy or sell shares at
the NAV on any given day, your financial intermediary must receive your order
by the close of trading on the NYSE that day. Your financial intermediary is
responsible for transmitting all subscription and redemption
5
<PAGE>
requests, investment information, documentation and money to the UAM Funds on
time.
Certain financial intermediaries have agreements with the UAM Funds that allow
them to enter confirmed purchase or redemption orders on behalf of clients and
customers. Under this arrangement, the financial intermediary must send your
payment to the UAM Funds by the time they price their shares on the following
day. If your financial intermediary fails to do so, it may be responsible for
any resulting fees or losses.
CALCULATING NAV
The UAM Funds calculate their NAV by adding the total value of their assets,
subtracting their liabilities and then dividing the result by the number of
shares outstanding. The UAM Funds value their investments with readily
available market quotations at market value. Investments that do not have
readily available market quotations, such as wrapper agreements, are valued at
fair value, according to guidelines established by the UAM Funds. The UAM
Funds may also value securities at fair value when events occur that make
established valuation methods (such as stock exchange closing prices)
unreliable. The UAM Funds value debt securities that will mature in 60 days
or less at amortized cost, which approximates market value.
IN-KIND TRANSACTIONS
Under certain conditions and at the UAM Funds' discretion, you may pay for
shares of a portfolio with securities instead of cash.
PAYMENT OF REDEMPTION PROCEEDS
The UAM Funds will pay for all shares redeemed within seven days after they
receive a redemption request in proper order. If you redeem shares that were
purchased by check, you will not receive your redemption proceeds until the
check has cleared, which may take up to 15 days from purchase date. You may
avoid these delays by paying for shares with a certified check, bank check or
money order.
REDEMPTION FEE
The portfolio will deduct a 2.00% redemption fee from the redemption proceeds
of any shareholder redeeming shares of the portfolio, except those that:
. Die or become disabled.
. Are at least 59-1/2 1/2and have held their shares continuously for at least
12 months.
The portfolio charges the redemption fee primarily to offset certain
transaction costs and administrative expenses the portfolio incurs because of
the redemption. As the portfolio is intended for long-term investment,
the
6
<PAGE>
redemption fee is also designed to discourage shareholders from trying to take
advantage of short-term interest rate movements.
SIGNATURE GUARANTEE
You must have your signature guaranteed when (1) you want the proceeds from
your redemption sent to a person or address different from that registered on
the account, or (2) you request a transfer of your shares.
You may obtain a signature guarantee from most banks, savings institutions,
securities dealers, national securities exchanges, registered securities
associations, clearing agencies and other guarantor institutions. A notary
public cannot guarantee a signature.
TELEPHONE TRANSACTIONS
The UAM Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; they may be liable for any losses if
they fail to do so. The UAM Funds will not be responsible for any loss,
liability, cost or expense for following instructions received by telephone
that it reasonably believes to be genuine.
RIGHTS RESERVED BY THE UAM FUNDS
PURCHASES
At any time and without notice, the UAM Funds may:
. Stop offering shares of a portfolio.
. Reject any purchase order.
. Bar an investor engaged in a pattern of excessive trading from buying
shares of any portfolio. (Excessive trading can hurt the performance of a
portfolio by disrupting its management and by increasing its expenses.)
REDEMPTIONS
At any time, the UAM Funds may change or eliminate any of the redemption
methods described above, except redemption by mail. The UAM Funds may suspend
your right to redeem if:
. Trading on the NYSE is restricted.
. The SEC allows the UAM Funds to delay redemptions.
7
<PAGE>
ACCOUNT POLICIES
SMALL ACCOUNTS
The UAM Funds may redeem your shares without your permission if the value of
your account falls below 50% of the required minimum initial investment. This
provision does not apply:
. To retirement accounts and certain other accounts.
. When the value of your account falls because of market fluctuations and
not your redemptions.
The UAM Funds will notify you before liquidating your account and allow you 60
days to increase the value of your account.
DISTRIBUTIONS
Normally, the portfolio declares its net investment income daily and pays
it monthly. In addition, it distributes its net capital gains once a year. The
UAM Funds will automatically reinvest dividends and distributions in
additional shares of the portfolio, unless you elect on your account
application to receive them in cash.
To maintain a stable NAV, the portfolio may have to declare and pay
dividends in amounts that are not equal to the amount of net investment income
it actually earns. This may cause the portfolio to take some or all of the
following actions:
. If the portfolio distributes more money than it actually earned, it may have
to make a distribution that may be considered a return of capital.
. If the income the portfolio earns exceeds the amount of dividends
distributed, the portfolio may have to distribute that excess income to
shareholders and declare a reverse split of its shares.
The portfolio may split its shares when it distributes its net capital gains.
Share splits or reverse share splits will cause the number of shares owned by
shareholders to increase or decrease while allowing the NAV of the portfolio
to remain stable.
FEDERAL TAXES
The following is a summary of the federal income tax consequences of investing
in the UAM Funds. You may also have to pay state and local taxes on your
investment. You should always consult your tax advisor for specific guidance
regarding the tax effect of your investment in the UAM Funds.
8
<PAGE>
TAXES ON DISTRIBUTIONS
The distributions of the portfolio will generally be taxable to shareholders
as ordinary income or capital gains (which may be taxable at different rates
depending on the length of time the portfolio held the relevant assets). You
will be subject to income tax on these distributions regardless of whether
they are paid in cash or reinvested in additional shares. Once a year UAM
Funds will send you a statement showing the types and total amount of
distributions you received during the previous year.
You should note that if you purchase shares just before a distribution, the
purchase price would reflect the amount of the upcoming distribution. In this
case, you would be taxed on the entire amount of the distribution received,
even though, as an economic matter, the distribution simply constitutes a
return of your investment. This is known as "buying into a dividend" and
should be avoided.
TAXES ON REDEMPTIONS
When you redeem shares in any UAM Fund, you may recognize a gain or loss for
income tax purposes. This gain or loss will be based on the difference between
your tax basis in the shares and the amount you receive for them. (To aid in
computing your tax basis, you generally should retain your account statements
for the periods during which you held shares.) Any loss realized on shares
held for six months or less will be treated as a long-term capital loss to the
extent of any capital gain dividends that were received with respect to the
shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-
qualified plan) will not be currently taxable, but they may be taxable at some
time in the future.
BACKUP WITHHOLDING
By law, the UAM Funds must withhold 31% of your distributions and proceeds if
you have not provided complete, correct taxpayer information.
9
<PAGE>
FUND DETAILS
PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO
The following briefly describes the principal investment strategies that the
Dwight Capital Preservation Portfolio may employ in seeking its objectives.
For more information concerning these investment practices and their
associated risks, please read the "PORTFOLIO SUMMARY" and the statement of
additional information (SAI). The portfolio may change these strategies
without shareholder approval.
The portfolio invests primarily in debt securities that a nationally
recognized statistical rating agency (rating agency), such as Moody's
Investors Service or Standard & Poor's Rating Group, has rated in its top
rating category at the time of purchase. The portfolio may also invest
in:
. Liquid short-term investments, such as money market instruments, that a
rating agency has rated in one of its top two short-term rating categories
at the time of purchase.
. Other investments, including commingled pools of the securities described
above.
The average duration of the portfolio will normally range from 1.5 to 4.0
years. The portfolio expects its dollar weighted average maturity to be six
years or less.
The portfolio seeks to stabilize its NAV by purchasing wrapper agreements from
financial institutions, such as insurance companies and banks (wrap
providers). The portfolio will buy wrapper agreements from wrap providers that
a rating agency has rated in one of its top two rating categories at the time
of purchase. The portfolio expects to purchase enough wrapper agreements to
cover all of its debt securities, but not its cash, cash equivalents or other
liquid short-term investments.
COMPARISON TO MONEY MARKET FUNDS AND OTHER FIXED INCOME FUNDS
While not fixed at $1.00 per share like a money market fund, the wrapper
agreements are likely to cause the net asset value of the portfolio to be
considerably more stable than a typical high-quality fixed-income fund. A
money market fund will generally have a shorter average maturity than the
portfolio and its yield will tend to more closely track the direction of
current market rates than the yield of the portfolio. Over the long-term,
however, the adviser believes the portfolio will offset those differences by
producing higher returns than a money market fund. The portfolio cannot,
however, guarantee that the combination of securities and wrapper agreements
will provide a constant NAV or a current rate of return that is higher than a
money market mutual fund.
10
<PAGE>
DEBT SECURITIES
A debt security is an interest bearing security that corporations and
governments use to borrow money from investors. The issuer of a debt security
promises to pay interest at a stated rate, which may be variable or fixed, and
to repay the amount borrowed at maturity (dates when debt securities are due
and payable). Debt securities include securities issued by the corporations
and the U.S. government and its agencies, mortgage-backed and asset-backed
securities (securities that are backed by pools of loans or mortgages
assembled for sale to investors), commercial paper and certificates of
deposit.
The concept of duration is useful in assessing the sensitivity of an income
fund to interest rate movements, which are the main source of risk for almost
all income funds. Duration measures price volatility by estimating the change
in price of a debt security for a 1% change in its yield. For example, a
duration of five means the price of a debt security will change about 5% for
every 1% change in its yield. Thus, the higher the duration, the more volatile
the security.
The price of a debt security generally moves in the opposite direction from
interest rates (i.e., if interest rates go up the price of the bond will go
down, and vice versa). Some types of debt securities are more affected by
changes in interest rates than others. For example, changes in rates may cause
people to pay off or refinance the loans underlying mortgage-backed and asset-
backed securities earlier or later than expected, which would shorten or
lengthen the maturity of the security. This behavior can negatively affect the
performance of a portfolio by shortening or lengthening its average maturity
and, thus, reducing its effective duration. The unexpected timing of mortgage
backed and asset-backed prepayments caused by changes in interest rates may
also cause the portfolio to reinvest its assets at lower rates, reducing the
yield of the portfolio.
The credit rating or financial condition of an issuer may affect the value of
a debt security. Generally, the lower the quality rating of a security, the
greater the risk that the issuer will fail to pay interest fully and return
principal in a timely manner. To compensate investors for assuming more risk,
issuers with lower credit ratings usually offer their investors higher "risk
premium" in the form of higher interest rates than they would find with a
safer security, such as a U.S. Treasury security. However, since the interest
rate is fixed on a debt security at the time it is purchased, investors
reflect changes in confidence regarding the certainty of interest and
principal by adjusting the price they are willing to pay for the security.
This will affect the yield-to-maturity of the security. If an issuer defaults
or becomes unable to honor its financial obligations, the security may lose
some or all of its value.
WRAPPER AGREEMENTS
A wrapper agreement obligates the wrap provider to maintain the book value of
some or all of the portfolio's assets (covered assets). Under a typical
wrapper agreement, if the portfolio sells a covered asset for less than book
value, the
11
<PAGE>
wrap provider will pay the portfolio the difference. If the portfolio sells a
security for more than its book value, the portfolio will pay the wrap
provider the difference. The book value of the covered assets is their
purchase price:
. Plus interest on the covered assets at a rate specified in the wrapper
agreement (crediting rate), which the portfolio.
. Less an adjustment to reflect any defaulted securities.
The portfolio and the wrapper provider calculate the crediting rate used in
computing book value according to a formula specified in the wrapper
agreement. Usually, the crediting rate is
. The actual interest earned on the covered assets, or an index-based
approximation of the interest earned on the covered assets.
. Plus or minus an adjustment for an amount receivable from or payable to the
wrapper provider based on fluctuations in the market value of the covered
assets.
ACCOUNTING FOR WRAPPER AGREEMENTS
The portfolio anticipates that the value of the wrapper agreements will move
in the opposite direction from the value of the covered assets. When the value
of the covered assets is less than their book value, the portfolio will treat
the difference as an asset. Similarly, when the value of the covered assets is
more than their book value, the excess will be a liability of the portfolio.
Normally, the portfolio expects the sum of the total value of its wrapper
agreements plus the total value of all of its covered assets to equal the book
value of its covered assets.
The terms of the wrapper agreements vary concerning when payments must
actually be made between the portfolio and the wrap provider. In some cases,
payments may be due upon disposition of the covered assets. Other wrapper
agreements only provide for settlement when the wrapper agreement terminates
or the portfolio sells all of the covered assets.
RISKS OF WRAPPER AGREEMENTS
The crediting rate will generally reflect movements in prevailing interest
rates, though, it may at any time be different from than these rates or the
actual interest income earned on the covered assets. The costs the portfolio
incurs when buying wrapper agreements may reduce its return as compared to a
direct investment in the covered assets. Consequently, the portfolio may not
perform as well as other high-quality fixed-income funds of comparable
duration.
The following are some of the factors that may cause the value of your shares
to decline:
. The portfolio may have to maintain a specified percentage of its total
assets in short-term investments (liquidity reserve) to cover redemptions
12
<PAGE>
and portfolio expenses. This may result in a lower return for the portfolio
than if it had invested in longer-term debt securities.
1. An issuer of a security may defaults on payments of principal or interest
or have its credit rating downgraded, which may require the portfolio to
sell covered assets quickly and at prices that may not fully reflect their
current value. Wrap providers do not typically assume the credit risk
associated with the issuer of any covered assets. In addition, downgrades
below investment-grade and defaults by the issuer of covered assets usually
will cause the wrap provider to remove such assets from the coverage of a
wrapper agreement.
. The portfolio might not be able to replace existing wrapper agreements with
other suitable wrapper agreement if (1) they mature or terminate or (2) the
wrap provider defaults.
. The portfolio may be unable to obtain suitable wrapper agreements or may
elect not to cover some or all of its assets with wrapper agreements.
This could occur if wrapper agreements are not available or if the adviser
believes that the terms of available wrapper agreements are
unfavorable.
. There is no active trading market for wrapper agreements and the portfolio
does not expect one to develop; therefore, the portfolio will consider
wrapper agreements illiquid. The portfolio may invest up to 15% of its net
assets in illiquid securities.
OTHER INVESTMENT PRACTICES AND STRATEGIES
As described below the portfolios may invest in derivatives and may deviate
from their investment strategies from time to time. In addition, they may
employ investment practices that are not described in this prospectus,
including foreign securities, repurchase agreements, when-issued and forward
commitment transactions, lending of securities, borrowing and other
techniques. For more information concerning the risks associated with these
investment practices, you should read the SAI.
DERIVATIVES
The portfolio may use options, futures and swaps, which are types of
derivatives. Derivatives are often more volatile than other investments and
may magnify a portfolio's gains or losses. A portfolio may lose money if the
adviser:
. Fails to predict correctly the direction in which the underlying asset or
economic factor will move.
. Judges market conditions incorrectly.
. Employs a strategy that does not correlate well with the investments of the
portfolio.
13
<PAGE>
PORTFOLIO TURNOVER
The portfolio may buy and sell investments relatively often and estimates that
its annual portfolio turnover rate will not exceed 200%. Such a strategy often
involves higher expenses, including brokerage commissions, and may increase
the amount of capital gains, particularly short-term gains realized by the
portfolio. Shareholders must pay tax on such capital gains.
YEAR 2000
Many computer programs in use today cannot distinguish the year 2000 from the
year 1900 because of the way they encode and calculate dates. Consequently,
these programs may not be able to perform necessary functions and could
disrupt the operations of the UAM Funds or financial markets in general. The
year 2000 issue affects all companies and organizations, including those that
provide services to the UAM Funds and those in which the UAM Funds invest.
The UAM Funds and their advisers, administrator, distributor and transfer
agent are taking steps they believe are reasonably necessary to address any
portfolio-related year 2000-related computer problems. They are actively
working on necessary changes to their own computer systems to prepare for the
year 2000 and expect that their systems will be adapted before that date. They
are also requesting information on each service provider's state of readiness
and contingency plan. However, at this time the degree to which the year 2000
issue will affect the UAM Funds' investments or operations cannot be
predicted. Any negative consequences could adversely affect your investment in
the UAM Funds.
INVESTMENT MANAGEMENT
INVESTMENT ADVISER
Dwight Asset Management Company, a Delaware corporation located at 125 College
Street, Burlington, Vermont 05401, is the investment adviser to the portfolio.
The adviser manages and supervises the investment of the portfolio's assets on
a discretionary basis. The adviser , an affiliate of United Asset Management
Corporation, has provided investment management services to corporations,
pension and profit-sharing plans, 401(k) and thrift plans since1983. For its
services, the portfolio pays the adviser a fee of 0.50% of its average net
assets.
In addition, the adviser has voluntarily agreed to limit the total annual fund
operating expenses of the portfolio to 1.00%. To maintain this expense limit,
the adviser may waive a portion of its management fee and/or reimburse certain
expenses of the portfolio. The adviser intends to continue this expense
limitation until further notice.
14
<PAGE>
PORTFOLIO MANAGERS
A team of investment professionals of the adviser is primarily responsibility
for the day-to-day management of the portfolio.
The adviser manages accounts of debt securities that have substantially
similar investment objectives as the portfolio. The adviser manages these
accounts using techniques and strategies substantially similar, though not
always identical, to those used to manage the portfolio. A composite of the
performance of all of these accounts are listed below. The performance data
for the managed accounts reflects deductions of all fees and expenses. All
fees and expenses of the separate accounts were less than the operating
expenses of the portfolio. If the performance of the managed accounts was
adjusted to reflect fees and expenses of the portfolio, the composite's
performance would have been lower.
The adviser calculated its performance according to the method used by the
Association for Investment Management and Research. Had the adviser
calculated its performance using the SEC's method, its results might have
differed.
The separately managed accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code. If they were, their returns
might have been lower. The performance of these separate accounts is not
intended to predict or suggest the performance of the portfolio and may be
calculated differently than the performance of the portfolio.
<TABLE>
<CAPTION>
Dwight Asset
Management Company Ryan 5 Year GIC Master
All Funds Composite* Index+
- -----------------------------------------------------------------------------------
<S> <C> <C>
Calendar Years 6.94% 6.57%
1998
1997 7.11% 6.58%
1996 7.28% 6.73%
1995 7.63% 7.19%
1994 8.10% 7.52%
1993 8.69% 8.15%
1992 9.37% 8.70%
Average Annualized Return For
Various Periods Ended 3/31/99
1-year 6.85% 6.59%
- -----------------------------------------------------------------------------------
3-years 7.05% 6.61%
- -----------------------------------------------------------------------------------
5-years 7.33% 6.86%
- -----------------------------------------------------------------------------------
10-Years 8.65% 7.83%
</TABLE>
* All returns are dollar weighted, and are net of fees and expenses. Returns
are net fees, which are based on a dollar weight average of 0.10% as of
12/31/98.
SHAREHOLDER SERVICING ARRANGEMENTS
15
<PAGE>
DISTRIBUTION PLANS
The UAM Funds have adopted distribution plans and shareholder services plans
under Rule 12b-1 of the Investment Company Act of 1940 that permit them to pay
broker-dealers, financial institutions and other third parties for marketing,
distribution and shareholder services. The UAM Funds' 12b-1 plans allow the
portfolio to pay up to 1.00% of its average daily net assets annually for
these services. However, the board of the UAM Funds has authorized the
portfolio to pay only 0.25% per year. Because Institutional Service Class
Shares pay these fees out of their assets on an ongoing basis, over time, your
shares may cost more than if you had paid another type of sales charge. Long-
term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by rules of the National Association of
Securities Dealers, Inc.
SHAREHOLDER SERVICING
Certain financial intermediaries (service agents) may charge their clients
account fees for buying or redeeming shares of the UAM Funds, which are not
subject to the Fund's Distribution Plan or Shareholder Servicing Plan. These
fees may include transaction fees and/or service fees paid from the assets of
the UAM Funds attributable to the service agent. The UAM Funds do not pay
these fees on shares purchased directly from UAM Fund Distributors. The
service agents may provide shareholder services to their clients that are not
available to a shareholder dealing directly with the UAM Funds. Each service
agent is responsible for transmitting to its clients a schedule of any such
fees and information regarding any additional or different purchase or
redemption conditions. You should consult your service agent for information
regarding these fees and conditions.
Anyone entitled to receive compensation for selling or servicing shares of the
UAM Funds may receive different compensation with respect to one particular
class of shares over another.
The adviser may pay its affiliated companies for referring investors to a
portfolio. The adviser and its affiliates may, at their own expense, pay
qualified service providers for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to a portfolio.
The UAM Funds also offer Institutional Class shares, which do not pay
marketing or shareholder servicing fees, and Advisor Class shares, which
impose a sales load and fees for marketing and shareholder servicing, for
certain of its portfolios. Not all of the UAM Funds offer all of these
classes.
16
<PAGE>
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
For investors who want more information about the portfolio, the following
documents are available upon request.
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional detailed information about the portfolio and is
incorporated by reference into (legally part of) this prospectus.
HOW TO GET MORE INFORMATION
Investors can receive free copies of these materials, request other
information about the portfolio and make shareholder inquiries by writing to
or calling:
UAM Funds
PO Box 419081
Kansas City, MO 64141-6081
(toll free) 1-877-UAM-LINK (826-5465)
www.uam.com
For a fee, you can get copies of the reports of the portfolio and SAI by
writing to the SEC's Public Reference Section, Washington, D.C. 20459-6009, or
by calling the SEC at 1-800-SEC-0330. You can get copies of this information
for free, on the SEC's Internet site at www.sec.gov.
The portfolio's Investment Company Act of 1940 file number is 811-8544.
UAM
<PAGE>
UAM FUNDS
Funds for the Informed
Investor(SM)
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
Institutional Class Prospectus April , 1999
UAM
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PORTFOLIO SUMMARY......................................................... 1
WHAT ARE THE OBJECTIVES OF THE PORTFOLIO?.............................. 1
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE PORTFOLIO?......... 1
WHAT ARE THE PRINCIPAL RISKS OF THE PORTFOLIO?......................... 1
WHAT ARE THE FEES AND EXPENSES OF THE PORTFOLIO?....................... 2
INVESTING WITH THE UAM FUNDS BOOKMARK NOT DEFINED.
BUYING SHARES.......................................................... 3
REDEEMING SHARES....................................................... 4
TRANSACTION POLICIES................................................... 4
ACCOUNT POLICIES.......................................................... 7
SMALL ACCOUNTS......................................................... 7
DISTRIBUTIONS.......................................................... 7
FEDERAL TAXES.......................................................... 7
FUND DETAILS.............................................................. 9
PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO....................... 9
OTHER INVESTMENT PRACTICES AND STRATEGIES.............................. 12
YEAR 2000.............................................................. 13
INVESTMENT MANAGEMENT.................................................. 13
SHAREHOLDER SERVICING ARRANGEMENTS..................................... 16
</TABLE>
<PAGE>
PORTFOLIO SUMMARY
The Dwight Capital Preservation Portfolio offers its shares only to individual
investors who invest in the portfolio through an individual retirement account
("IRA"), Education IRA, SEP-IRA, Simple IRA, ROTH-IRA or KEOGH Plan.
WHAT ARE THE OBJECTIVES OF THE PORTFOLIO?
The portfolio seeks a level of current income higher than that of money market
funds, while attempting to preserve principal and maintain a stable net asset
value per share (NAV). The portfolio cannot guarantee it will meet its
investment objectives. The portfolio may change its investment objectives
without shareholder approval.
WHAT ARE THE PRINCIPAL INVESTMENT STRATEGIES OF THE PORTFOLIO?
This section summarizes the principal investment strategies of the portfolio.
For more information see "PRINCIPAL INVESTMENTS AND RISKS OF THE
PORTFOLIO."
The portfolio is designed to produce higher returns than a money market fund,
while seeking to maintain a NAV that is considerably more stable than a
typical high-quality fixed-income fund.
Like other high-quality fixed-income funds, the portfolio invests primarily in
debt securities that a nationally recognized statistical rating agency (rating
agency), such as Moody's Investors Service or Standard & Poor's Rating Group,
has rated in its top rating category at the time of purchase. Unlike other
fixed-income funds, however, the portfolio seeks to stabilize its NAV by
purchasing wrapper agreements from financial institutions, such as insurance
companies and banks (wrap providers). A wrapper agreement is a contract that
obligates the wrap provider to maintain the adjusted cost basis (book value)
of some or all of the assets of the portfolio. For example, if the portfolio
were to sell a security for less than its book value, the wrap provider may be
obligated to pay the portfolio the difference, and vice versa.
In purchasing a wrapper agreement, the portfolio trades the potential for
capital appreciation and some yield for protection from a decline in the value
of its holdings caused by changes in interest rates.
WHAT ARE THE PRINCIPAL RISKS OF THE PORTFOLIO?
This section summarizes the principal risks associated with investing in the
portfolio. For more information see "PRINCIPAL INVESTMENTS AND RISKS OF THE
PORTFOLIO."
1
<PAGE>
RISKS COMMON TO ALL MUTUAL FUNDS
As with all mutual funds, at any time your investment in a portfolio may be
worth more or less than the price that you originally paid for it. You may
lose money by investing in the portfolio because:
The value of the securities it owns changes, sometimes rapidly and
unpredictably.
The portfolio is not successful in reaching its goal because of its strategy
or because it did not implement its strategy properly.
Unforeseen occurrences in the securities markets negatively affect the
PORTFOLIO.
DWIGHT CAPITAL PRESERVATION PORTFOLIO
The portfolio cannot guarantee that the combination of securities and wrapper
agreements will provide a constant NAV or a current rate of return that is
higher than a money market mutual fund.
The portfolio tries to offset changes in the value of it investments and to
maintain a stable NAV by combining its investments in debt securities with
wrapper agreements. However, without wrapper agreements, the portfolio will
not be able to maintain a stable NAV. This could happen if:
. A provider of a wrapper agreement defaults on its obligation.
. The portfolio cannot purchase wrapper agreements.
. The portfolio buys wrapper agreements that do not offset changes in its
NAV.
If the portfolio's attempts to stabilize its NAV fail, the value of its
investments could fall because:
. Of market conditions and economic and political events.
. Interest rates rise, which tends to cause the value of debt securities to
fall.
. A security's credit rating worsens or its issuer becomes unable to honor
its financial obligations.
2
<PAGE>
WHAT ARE THE FEES AND EXPENSES OF THE PORTFOLIO?
FEES AND EXPENSES OF THE PORTFOLIO
This table describes the fees and expenses that you may pay if you buy and
hold shares of the portfolio.
<TABLE>
<S> <C>
Shareholder Fees (Fees Paid Directly From Your Account)
Redemption Fee (as a percentage of amount redeemed) 2.00%
- --------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses That Are Deducted From the Assets of the Portfolio)
Management Fees 0.50%
- --------------------------------------------------------------------------------------------------------
Other Expenses=+ 0.60%
Total Expenses* 1.10%
</TABLE>
+ OTHER EXPENSES are based on estimated amounts for the first fiscal year of
the portfolio. Other Expenses include the fees the portfolio expects to pay
for wrapper agreements.
* ACTUAL FEES AND EXPENSES The portfolio expects that the ratios stated in the
table above are higher than the expenses you will actually pay as an
investor in the portfolio. Due to certain expense limits by the adviser and
expense offsets, investors in the portfolio actually paid the total
operating expenses listed in the table below during its first fiscal year.
The adviser may cancel its expense limitation at any time..
Actual Expenses 1.00%
EXAMPLE
This example can help you to compare the cost of investing in this portfolio
to the cost of investing in other mutual funds. The example assumes you invest
$10,000 in the portfolio for the periods shown and then redeem all of your
shares at the end of those periods. The example also assumes that you earned
a 5% return on your investment each year and that you paid the total expenses
stated above (which do not reflect any expense limitations) throughout the
period of your investment. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS
If you redeem your shares $320 $574
If you did not redeem your shares, you would pay $112 $350
3
<PAGE>
INVESTING WITH THE UAM FUNDS
BUYING SHARES
TO OPEN AN ACCOUNT TO BUY MORE SHARES
BY MAIL Send a check or money Send a check and, if possible,
order and your account the "Invest by Mail" stub that
application to the UAM accompanied your statement to
Funds. Make checks the UAM Funds. Be sure your
payable to "UAM Funds" check identifies clearly your
(the UAM Funds will not name, account number and the
accept third-party UAM Fund into which you want
checks). to invest.
BY WIRE Call 1-877-826-5465 for Call 1-877-826-5465 to get a
an account number and wire control number and wire
wire control number and your money to the UAM Funds.
then send your completed
account application to
the UAM Funds.
Wiring Instructions
United Missouri Bank
ABA # 101000695
UAM Funds
DDA Acct. # 9870964163
Ref: portfolio name/account number/
account name/wire control number
BY AUTOMATIC Not Available To set up a plan, mail a
INVESTMENT PLAN completed application to the
(VIA ACH) UAM Funds. To cancel or
change a plan, write to the
UAM Funds. Allow up to 15
days to create the plan and 3
days to cancel or change
it.
MINIMUM $2,500 $100
INVESTMENTS
UAM FUNDS
PO BOX 419081
KANSAS CITY, MO 64141-6081
(TOLL FREE) 1-877-UAM-LINK (826-5465)
4
<PAGE>
REDEEMING SHARES
BY MAIL Send a letter signed by all registered parties on the
account to the UAM Funds specifying:
. The UAM Fund.
. The account number.
. The dollar amount or number of shares you wish to
redeem.
. Certain shareholders may have to include additional
documents. Please see the Statement of Additional
Information (SAI) if you need more information.
BY TELEPHONE You must first establish the telephone redemption
privilege (and, if desired, the wire redemption
privilege) by completing the appropriate sections of the
account application.
Call 1-877-UAM-Link (862-5465) to redeem your shares.
Based on your instructions, the UAM Funds will mail your
proceeds to you or wire them to your bank.
BY If your account balance is at least $10,000, you may
SYSTEMATIC transfer as little as $100 per month from your UAM
WITHDRAWAL PLAN account to your financial institution.
(VIA ACH) To participate in this service, you must complete the
appropriate sections of the account application and mail
it to the UAM Funds.
TRANSACTION POLICIES
CALCULATING YOUR SHARE PRICE
You may buy or sell shares of the portfolio at a price equal to its net asset
value (NAV) next computed after it receives your order. The portfolio
calculates its NAV as of the close of trading on the New York Stock Exchange
(NYSE) (generally 4:00 p.m. Eastern Time) on each day the NYSE is open.
Therefore, to receive the NAV on any given day, the UAM Funds must accept your
order by the close of trading on the NYSE that day. Otherwise, you will
receive the NAV that is calculated on the close of trading on the following
day. The UAM Funds are open for business on the same days as the NYSE, which
is closed on weekends and certain holidays.
BUYING OR SELLING SHARES THROUGH A FINANCIAL INTERMEDIARY
You may buy or redeem shares of the portfolio through a financial intermediary
(such as a financial planner or adviser). Generally, to buy or sell shares at
the NAV on any given day, your financial intermediary must receive your order
by the close of trading on the NYSE that day. Your financial intermediary is
responsible for transmitting all subscription and redemption
5
<PAGE>
requests, investment information, documentation and money to the UAM Funds on
time.
Certain financial intermediaries have agreements with the UAM Funds that allow
them to enter confirmed purchase or redemption orders on behalf of clients and
customers. Under this arrangement, the financial intermediary must send your
payment to the UAM Funds by the time they price their shares on the following
day. If your financial intermediary fails to do so, it may be responsible for
any resulting fees or losses.
CALCULATING NAV
The UAM Funds calculate their NAV by adding the total value of their assets,
subtracting their liabilities and then dividing the result by the number of
shares outstanding. The UAM Funds value their investments with readily
available market quotations at market value. Investments that do not have
readily available market quotations, such as wrapper agreements, are valued at
fair value, according to guidelines established by the UAM Funds. The UAM
Funds may also value securities at fair value when events occur that make
established valuation methods (such as stock exchange closing prices)
unreliable. The UAM Funds value debt securities that will mature in 60 days
or less at amortized cost, which approximates market value.
IN-KIND TRANSACTIONS
Under certain conditions and at the UAM Funds' discretion, you may pay for
shares of a portfolio with securities instead of cash.
PAYMENT OF REDEMPTION PROCEEDS
The UAM Funds will pay for all shares redeemed within seven days after they
receive a redemption request in proper order. If you redeem shares that were
purchased by check, you will not receive your redemption proceeds until the
check has cleared, which may take up to 15 days from purchase date. You may
avoid these delays by paying for shares with a certified check, bank check or
money order.
REDEMPTION FEE
The portfolio will deduct a 2.00% redemption fee from the redemption proceeds
of any shareholder redeeming shares of the portfolio, except those that:
. Die or become disabled.
. Are at least 59-1/2 1/2and have held their shares continuously for at
least 12 months.
The portfolio charges the redemption fee primarily to offset certain
transaction costs and administrative expenses the portfolio incurs because of
the redemption. As the portfolio is intended for long-term investment,
the
6
<PAGE>
redemption fee is also designed to discourage shareholders from trying to take
advantage of short-term interest rate movements.
SIGNATURE GUARANTEE
You must have your signature guaranteed when (1) you want the proceeds from
your redemption sent to a person or address different from that registered on
the account, or (2) you request a transfer of your shares.
You may obtain a signature guarantee from most banks, savings institutions,
securities dealers, national securities exchanges, registered securities
associations, clearing agencies and other guarantor institutions. A notary
public cannot guarantee a signature.
TELEPHONE TRANSACTIONS
The UAM Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine; they may be liable for any losses if
they fail to do so. The UAM Funds will not be responsible for any loss,
liability, cost or expense for following instructions received by telephone
that it reasonably believes to be genuine.
RIGHTS RESERVED BY THE UAM FUNDS
PURCHASES
At any time and without notice, the UAM Funds may:
. Stop offering shares of a portfolio.
. Reject any purchase order.
. Bar an investor engaged in a pattern of excessive trading from buying
shares of any portfolio. (Excessive trading can hurt the performance of a
portfolio by disrupting its management and by increasing its
expenses.)
REDEMPTIONS
At any time, the UAM Funds may change or eliminate any of the redemption
methods described above, except redemption by mail. The UAM Funds may suspend
your right to redeem if:
. Trading on the NYSE is restricted.
. The SEC allows the UAM Funds to delay redemptions.
7
<PAGE>
ACCOUNT POLICIES
SMALL ACCOUNTS
The UAM Funds may redeem your shares without your permission if the value of
your account falls below 50% of the required minimum initial investment. This
provision does not apply:
. To retirement accounts and certain other accounts.
. When the value of your account falls because of market fluctuations and
not your redemptions.
The UAM Funds will notify you before liquidating your account and allow you 60
days to increase the value of your account.
DISTRIBUTIONS
Normally, the portfolio declares its net investment income daily and pays it
monthly. In addition, it distributes its net capital gains once a year. The
UAM Funds will automatically reinvest dividends and distributions in
additional shares of the portfolio, unless you elect on your account
application to receive them in cash.
To maintain a stable NAV, the portfolio may have to declare and pay dividends
in amounts that are not equal to the amount of net investment income it
actually earns. This may cause the portfolio to take some or all of the
following actions:
. If the portfolio distributes more money than it actually earned, it may
have to make a distribution that may be considered a return of capital.
. If the income the portfolio earns exceeds the amount of dividends
distributed, the portfolio may have to distribute that excess income to
shareholders and declare a reverse split of its shares.
The portfolio may split its shares when it distributes its net capital gains.
Share splits or reverse share splits will cause the number of shares owned by
shareholders to increase or decrease while allowing the NAV of the portfolio
to remain stable.
FEDERAL TAXES
The following is a summary of the federal income tax consequences of investing
in the UAM Funds. You may also have to pay state and local taxes on your
investment. You should always consult your tax advisor for specific guidance
regarding the tax effect of your investment in the UAM Funds.
8
<PAGE>
TAXES ON DISTRIBUTIONS
The distributions of the portfolio will generally be taxable to shareholders
as ordinary income or capital gains (which may be taxable at different rates
depending on the length of time the portfolio held the relevant assets). You
will be subject to income tax on these distributions regardless of whether
they are paid in cash or reinvested in additional shares. Once a year UAM
Funds will send you a statement showing the types and total amount of
distributions you received during the previous year.
You should note that if you purchase shares just before a distribution, the
purchase price would reflect the amount of the upcoming distribution. In this
case, you would be taxed on the entire amount of the distribution received,
even though, as an economic matter, the distribution simply constitutes a
return of your investment. This is known as "buying into a dividend" and
should be avoided.
TAXES ON REDEMPTIONS
When you redeem shares in any UAM Fund, you may recognize a gain or loss for
income tax purposes. This gain or loss will be based on the difference
between your tax basis in the shares and the amount you receive for them. (To
aid in computing your tax basis, you generally should retain your account
statements for the periods during which you held shares.) Any loss realized
on shares held for six months or less will be treated as a long-term capital
loss to the extent of any capital gain dividends that were received with
respect to the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other tax-
qualified plan) will not be currently taxable, but they may be taxable at some
time in the future.
BACKUP WITHHOLDING
By law, the UAM Funds must withhold 31% of your distributions and proceeds if
you have not provided complete, correct taxpayer information.
9
<PAGE>
Fund Details
PRINCIPAL INVESTMENTS AND RISKS OF THE PORTFOLIO
The following briefly describes the principal investment strategies that the
Dwight Capital Preservation Portfolio may employ in seeking its objectives.
For more information concerning these investment practices and their
associated risks, please read the "PORTFOLIO SUMMARY" and the statement of
additional information (SAI). The portfolio may change these strategies
without shareholder approval.
The portfolio invests primarily in debt securities that a nationally
recognized statistical rating agency (rating agency), such as Moody's
Investors Service or Standard & Poor's Rating Group, has rated in its top
rating category at the time of purchase. The portfolio may also invest in:
Liquid short-term investments, such as money market instruments, that a
rating agency has rated in one of its top two short-term rating categories
at the time of purchase.
Other investments, including commingled pools of the securities described
above.
The average duration of the portfolio will normally range from 1.5 to 4.0
years. The portfolio expects its dollar weighted average maturity to be six
years or less.
The portfolio seeks to stabilize its NAV by purchasing wrapper agreements from
financial institutions, such as insurance companies and banks (wrap
providers). The portfolio will buy wrapper agreements from wrap providers that
a rating agency has rated in one of its top two rating categories at the time
of purchase. The portfolio expects to purchase enough wrapper agreements to
cover all of its debt securities, but not its cash, cash equivalents or other
liquid short-term investments.
Comparison to Money Market Funds and Other Fixed Income Funds
While not fixed at $1.00 per share like a money market fund, the wrapper
agreements are likely to cause the net asset value of the portfolio to be
considerably more stable than a typical high-quality fixed-income fund. A
money market fund will generally have a shorter average maturity than the
portfolio and its yield will tend to more closely track the direction of
current market rates than the yield of the portfolio. Over the long-term,
however, the adviser believes the portfolio will offset those differences by
producing higher returns than a money market fund. The portfolio cannot,
however, guarantee that the combination of securities and wrapper agreements
will provide a constant NAV or a current rate of return that is higher than a
money market mutual fund.
10
<PAGE>
Debt Securities
A debt security is an interest bearing security that corporations and
governments use to borrow money from investors. The issuer of a debt security
promises to pay interest at a stated rate, which may be variable or fixed, and
to repay the amount borrowed at maturity (dates when debt securities are due
and payable). Debt securities include securities issued by the corporations
and the U.S. government and its agencies, mortgage-backed and asset-backed
securities (securities that are backed by pools of loans or mortgages
assembled for sale to investors), commercial paper and certificates of
deposit.
The concept of duration is useful in assessing the sensitivity of an income
fund to interest rate movements, which are the main source of risk for almost
all income funds. Duration measures price volatility by estimating the change
in price of a debt security for a 1% change in its yield. For example, a
duration of five means the price of a debt security will change about 5% for
every 1% change in its yield. Thus, the higher the duration, the more
volatile the security.
The price of a debt security generally moves in the opposite direction from
interest rates (i.e., if interest rates go up the price of the bond will go
down, and vice versa). Some types of debt securities are more affected by
changes in interest rates than others. For example, changes in rates may
cause people to pay off or refinance the loans underlying mortgage-backed and
asset-backed securities earlier or later than expected, which would shorten or
lengthen the maturity of the security. This behavior can negatively affect
the performance of a portfolio by shortening or lengthening its average
maturity and, thus, reducing its effective duration. The unexpected timing of
mortgage backed and asset-backed prepayments caused by changes in interest
rates may also cause the portfolio to reinvest its assets at lower rates,
reducing the yield of the portfolio.
The credit rating or financial condition of an issuer may affect the value of
a debt security. Generally, the lower the quality rating of a security, the
greater the risk that the issuer will fail to pay interest fully and return
principal in a timely manner. To compensate investors for assuming more risk,
issuers with lower credit ratings usually offer their investors higher "risk
premium" in the form of higher interest rates than they would find with a
safer security, such as a U.S. Treasury security. However, since the interest
rate is fixed on a debt security at the time it is purchased, investors
reflect changes in confidence regarding the certainty of interest and
principal by adjusting the price they are willing to pay for the security.
This will affect the yield-to-maturity of the security. If an issuer defaults
or becomes unable to honor its financial obligations, the security may lose
some or all of its value.
Wrapper Agreements
A wrapper agreement obligates the wrap provider to maintain the book value of
some or all of the portfolio's assets (covered assets). Under a typical
wrapper agreement, if the portfolio sells a covered asset for less than book
value, the
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wrap provider will pay the portfolio the difference. If the portfolio sells a
security for more than its book value, the portfolio will pay the wrap
provider the difference. The book value of the covered assets is their
purchase price:
. Plus interest on the covered assets at a rate specified in the wrapper
agreement (crediting rate), which the portfolio.
. Less an adjustment to reflect any defaulted securities.
The portfolio and the wrapper provider calculate the crediting rate used in
computing book value according to a formula specified in the wrapper
agreement. Usually, the crediting rate is
. The actual interest earned on the covered assets, or an index-based
approximation of the interest earned on the covered assets.
. Plus or minus an adjustment for an amount receivable from or payable to the
wrapper provider based on fluctuations in the market value of the covered
assets.
Accounting for Wrapper Agreements
The portfolio anticipates that the value of the wrapper agreements will move
in the opposite direction from the value of the covered assets. When the value
of the covered assets is less than their book value, the portfolio will treat
the difference as an asset. Similarly, when the value of the covered assets
is more than their book value, the excess will be a liability of the
portfolio. Normally, the portfolio expects the sum of the total value of its
wrapper agreements plus the total value of all of its covered assets to equal
the book value of its covered assets.
The terms of the wrapper agreements vary concerning when payments must
actually be made between the portfolio and the wrap provider. In some cases,
payments may be due upon disposition of the covered assets. Other wrapper
agreements only provide for settlement when the wrapper agreement terminates
or the portfolio sells all of the covered assets.
Risks of Wrapper Agreements
The crediting rate will generally reflect movements in prevailing interest
rates, though, it may at any time be different from than these rates or the
actual interest income earned on the covered assets. The costs the portfolio
incurs when buying wrapper agreements may reduce its return as compared to a
direct investment in the covered assets. Consequently, the portfolio may not
perform as well as other high-quality fixed-income funds of comparable
duration.
The following are some of the factors that may cause the value of your shares
to decline:
. The portfolio may have to maintain a specified percentage of its total
assets in short-term investments (liquidity reserve) to cover redemptions
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<PAGE>
and portfolio expenses. This may result in a lower return for the portfolio
than if it had invested in longer-term debt securities.
. An issuer of a security may defaults on payments of principal or interest
or have its credit rating downgraded, which may require the portfolio to
sell covered assets quickly and at prices that may not fully reflect their
current value. Wrap providers do not typically assume the credit risk
associated with the issuer of any covered assets. In addition, downgrades
below investment-grade and defaults by the issuer of covered assets usually
will cause the wrap provider to remove such assets from the coverage of a
wrapper agreement.
. The portfolio might not be able to replace existing wrapper agreements with
other suitable wrapper agreement if (1) they mature or terminate or (2) the
wrap provider defaults.
The portfolio may be unable to obtain suitable wrapper agreements or may elect
not to cover some or all of its assets with wrapper agreements. . This
could occur if wrapper agreements are not available or if the adviser
believes that the terms of available wrapper agreements are unfavorable.
. There is no active trading market for wrapper agreements and the portfolio
does not expect one to develop; therefore, the portfolio will consider
wrapper agreements illiquid. The portfolio may invest up to 15% of its net
assets in illiquid securities.
OTHER INVESTMENT PRACTICES AND STRATEGIES
As described below the portfolios may invest in derivatives and may deviate
from their investment strategies from time to time. In addition, they may
employ investment practices that are not described in this prospectus,
including foreign securities, repurchase agreements, when-issued and forward
commitment transactions, lending of securities, borrowing and other
techniques. For more information concerning the risks associated with these
investment practices, you should read the SAI.
Derivatives
The portfolio may use options, futures and swaps, which are types of
derivatives. Derivatives are often more volatile than other investments and
may magnify a portfolio's gains or losses. A portfolio may lose money if the
adviser:
. Fails to predict correctly the direction in which the underlying asset or
economic factor will move.
. Judges market conditions incorrectly.
. Employs a strategy that does not correlate well with the investments of the
portfolio.
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<PAGE>
Portfolio Turnover
The portfolio may buy and sell investments relatively often and estimates that
its annual portfolio turnover rate will not exceed 200%. Such a strategy
often involves higher expenses, including brokerage commissions, and may
increase the amount of capital gains, particularly short-term gains realized
by the portfolio. Shareholders must pay tax on such capital gains.
YEAR 2000
Many computer programs in use today cannot distinguish the year 2000 from the
year 1900 because of the way they encode and calculate dates. Consequently,
these programs may not be able to perform necessary functions and could
disrupt the operations of the UAM Funds or financial markets in general. The
year 2000 issue affects all companies and organizations, including those that
provide services to the UAM Funds and those in which the UAM Funds invest.
The UAM Funds and their advisers, administrator, distributor and transfer
agent are taking steps they believe are reasonably necessary to address any
portfolio-related year 2000-related computer problems. They are actively
working on necessary changes to their own computer systems to prepare for the
year 2000 and expect that their systems will be adapted before that date.
They are also requesting information on each service provider's state of
readiness and contingency plan. However, at this time the degree to which the
year 2000 issue will affect the UAM Funds' investments or operations cannot be
predicted. Any negative consequences could adversely affect your investment in
the UAM Funds.
INVESTMENT MANAGEMENT
Investment Adviser
Dwight Asset Management Company, a Delaware corporation located at 125 College
Street, Burlington, Vermont 05401, is the investment adviser to the portfolio.
The adviser manages and supervises the investment of the portfolio's assets
on a discretionary basis. The adviser , an affiliate of United Asset
Management Corporation, has provided investment management services to
corporations, pension and profit-sharing plans, 401(k) and thrift plans
since1983. For its services, the portfolio pays the adviser a fee of 0.50% of
its average net assets.
In addition, the adviser has voluntarily agreed to limit the total annual fund
operating expenses of the portfolio to 1.00%. To maintain this expense limit,
the adviser may waive a portion of its management fee and/or reimburse certain
expenses of the portfolio. The adviser intends to continue this expense
limitation until further notice.
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<PAGE>
Portfolio Managers
A team of investment professionals of the adviser is primarily responsibility
for the day-to-day management of the portfolio.
Adviser's Historical Performance
The adviser manages accounts of debt securities that have substantially
similar investment objectives as the portfolio. The adviser manages these
accounts using techniques and strategies substantially similar, though not
always identical, to those used to manage the portfolio. A composite of the
performance of all of these accounts are listed below. The performance data
for the managed accounts reflects deductions of all fees and expenses. All
fees and expenses of the separate accounts were less than the operating
expenses of the portfolio. If the performance of the managed accounts was
adjusted to reflect fees and expenses of the portfolio, the composite's
performance would have been lower.
The adviser calculated its performance according to the method used by the
Association for Investment Management and Research. Had the adviser calculated
its performance using the SEC's method, its results might have differed.
The separately managed accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code. If they were, their returns
might have been lower. The performance of these separate accounts is not
intended to predict or suggest the performance of the portfolio and may be
calculated differently than the performance of the portfolio.
<TABLE>
<CAPTION>
Dwight Asset
Management Company Ryan 5 Year GIC Master
All Funds Composite* Index+
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Calendar Years
1998 6.94% 6.57%
1997 7.11% 6.58%
1996 7.28% 6.73%
1995 7.63% 7.19%
1994 8.10% 7.52%
1993 8.69% 8.15%
1992 9.37% 8.70%
Average Annualized Return For
Various Periods Ended 3/31/99
1-year 6.85% 6.59%
3-years 7.05% 6.61%
5-years 7.33% 6.86%
10-Years 8.65% 7.83%
</TABLE>
15
<PAGE>
* All returns are dollar weighted, and are net of fees and expenses. Returns
are net fees, which are based on a dollar weight average of 0.10% as of
12/31/98.
16
<PAGE>
SHAREHOLDER SERVICING ARRANGEMENTS
Shareholder Servicing
Certain financial intermediaries (service agents) may charge their clients
account fees for buying or redeeming shares of the UAM Funds. These fees may
include transaction fees and/or service fees paid by the UAM Funds from their
assets attributable to the service agent. The UAM Funds do not pay these fees
on shares purchased directly from UAM Fund Distributors. The service agents
may provide shareholder services to their clients that are not available to a
shareholder dealing directly with the UAM Funds. Each service agent is
responsible for transmitting to its clients a schedule of any such fees and
information regarding any additional or different purchase or redemption
conditions. You should consult your service agent for information regarding
these fees and conditions.
The adviser may pay its affiliated companies for referring investors to the
portfolio. The adviser and its affiliates may, at their own expense, pay
qualified service providers for marketing, shareholder servicing, record-
keeping and/or other services performed with respect to the portfolio.
The UAM Funds also offer Institutional Service Class shares, which pay
marketing or shareholder servicing fees, and Adviser Class shares, which
impose a sales load and fees for marketing and shareholder servicing, for
certain of its portfolios. The portfolio and other UAM Funds may not offer
all of these classes.
17
<PAGE>
THE DWIGHT CAPITAL PRESERVATION PORTFOLIO
For investors who want more information about the portfolio, the following
documents are available upon request.
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional detailed information about the portfolio and is
incorporated by reference into (legally part of) this prospectus.
HOW TO GET MORE INFORMATION
Investors can receive free copies of these materials, request other
information about the portfolio and make shareholder inquiries by writing to
or calling:
UAM FUNDS
PO BOX 419081
KANSAS CITY, MO 64141-6081
(TOLL FREE) 1-877-UAM-LINK (826-5465)
WWW.UAM.COM
For a fee, you can get copies of the reports of the portfolio and SAI by
writing to the SEC's Public Reference Section, Washington, D.C. 20459-6009, or
by calling the SEC at 1-800-SEC-0330. You can get copies of this information
for free, on the SEC's Internet site at www.sec.gov.
The portfolio's Investment Company Act of 1940 file number is 811-8544.
UAM
<PAGE>
UAM Funds
PO Box 419081
Kansas City, MO 64141-6081
(Toll free) 1-877-UAM-LINK (826-5465)
Dwight Capital Preservation Portfolio
Institutional Class Shares
Institutional Service Class Shares
Statement of Additional Information
__________, 1999
This statement of additional information (SAI) is not a prospectus. However,
youshould read it in conjunction with the prospectus of Dwight Capital
PreservationPortfolio Institutional Class Shares dated _______, 1999 and the
prospectus ofDwight Capital Preservation Portfolio Institutional Service Class
Shares dated_____, 1999. You may obtain a prospectus for Dwight Capital
PreservationPortfolio by contacting the UAM Funds at the address listed above.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Definitions.......................................................... 3
The Fund............................................................. 3
Description of the Portfolio and Its Investments and Risks........... 3
Debt Securities..................................................... 3
Derivatives......................................................... 7
Illiquid and Restricted Securities.................................. 13
Investment Companies................................................ 13
Repurchase Agreements............................................... 13
Securities Lending.................................................. 14
Short-Term Investments.............................................. 14
When-Issued, Forward Commitment And Delayed Delivery Transactions... 15
Wrapper Agreements.................................................. 15
Investment Policies................................................. 18
Management of the Portfolio.......................................... 19
Code of Ethics....................................................... 20
Investment Advisory and Other Services............................... 20
Investment Adviser.................................................. 20
Distributor......................................................... 22
Administration And Transfer Agency Services......................... 22
Custodian........................................................... 23
Independent Public Accountant....................................... 23
Service And Distribution Plans...................................... 23
Brokerage Allocation and Other Practices............................. 25
Selection of Brokers................................................ 25
Simultaneous Transactions........................................... 26
Brokerage Commissions............................................... 26
Capital Stock and Other Securities................................... 26
Description Of Shares And Voting Rights............................. 26
Dividends And Capital Gains Distributions............................ 27
Purchase Redemption and Pricing of Shares............................ 27
Purchase Of Shares.................................................. 27
In-Kind Purchases................................................... 28
Redemption Of Shares................................................ 28
Transfer of Shares.................................................. 29
Valuation of Shares................................................. 29
Performance Calculations............................................. 30
Total Return........................................................ 30
Yield............................................................... 31
Comparisons......................................................... 31
Taxes............................................................... 31
Appendix A: Description Of Securities And Ratings................... 33
Moody's Investors Service, Inc. .................................... 33
Standard & Poor's Ratings Services.................................. 35
Duff & Phelps Credit Rating Co. .................................... 37
FITCH IBCA RATINGS.................................................. 38
Appendix B - Comparisons............................................. 40
</TABLE>
<PAGE>
Definitions
The "Fund" is UAM Funds Trust.
The term "adviser" means Dwight Asset Management Company, the portfolio's
investment adviser.
UAM is United Asset Management Corporation.
UAM is United Asset Management Corporation.
UAMFSI is UAM Fund Services, Inc., the Fund's administrator.
UAMFDI is UAM Fund Distributors, Inc., the Fund's distributor.
UAMSSC is UAM Fund Shareholder Servicing Center, the Fund's sub-shareholder-
servicing agent.
CGFSC is Chase Global Funds Service Company, the Fund's sub-administrator.
UAM Funds Complex includes UAM Funds, Inc., UAM Funds Trust, UAM Funds Trust
II and all of their portfolios.
The term "the portfolio" is used to refer to Dwight Capital Preservation
Portfolio, while "portfolio" or "portfolios" refers to some or all portfolios
of the UAM Funds Complex.
The terms "board" and "governing board" refer to the Fund's Board of Directors
as a group, while "board member" refers to a single member of the board.
All other defined terms, which are not otherwise defined in this SAI, have the
same meaning in the SAI as they do in the prospectus of Dwight Capital
Preservation Portfolio.
The Fund
The Fund was organized under the name The Regis Fund II as a Delaware business
trust on May 18, 1994. On October 31, 1995, the name of the Fund was changed
to "UAM Funds Trust." The Fund's principal executive office is located at One
International Place, Boston, MA 02110; shareholders should direct all
correspondence to the address listed on the cover of this SAI.
The Fund is an open-end, management investment company under the Investment
Company Act of 1940. Dwight Capital Preservation Portfolio is a diversified
series of the Fund. This means that with respect to 75% of its total assets,
the portfolio may not invest more than 5% of its total assets in the
securities of any one issuer (except U.S. government securities). The
remaining 25% of its total assets are not subject to this restriction. To the
extent the portfolio invests a significant portion of its assets in the
securities of a particular issuer, it will be subject to an increased risk of
loss if the market value of such issuer's securities declines.
Description of the Portfolio and Its Investments and
Risks
DEBT SECURITIES
- --------------------------------------------------------------------------------
Debt securities are used by corporations and governments to borrow money from
investors. Most debt securities promise a variable or fixed rate of return and
repayment of the amount borrowed at maturity. Some debt securities, such as
zero-coupon bonds, do not pay current interest and are purchased at a discount
from their face value. Debt securities may include, among other things, all
types of bills, notes, bonds, mortgage-backed securities or asset-backed
securities. The portfolio may invest in fixed-income securities issued by
corporate and government issuers and may have varying interest rate schedules.
Asset-backed and mortgage backed securities
<PAGE>
are securities that are backed by pools of loans or mortgages assembled for
sale to investors by various governmental agencies and private issuers.
Mortgage-backed securities may generally take two forms: pass-throughs and
collateralized mortgage obligations (CMOs).
Since the portfolio invests in fixed-income securities, adverse changes in
interest rates could cause the value of its investments to fall. This
typically occurs when interest rates rise. The portfolio also could lose
money if a security's credit rating worsens or its issuer becomes unable to
honor its financial obligations. Interest rate changes may cause people to pay
off mortgage-backed and asset-backed securities earlier or later than
expected, which may shorten or lengthen the maturity or duration (a measure
of the investment life of a security) of the portfolio and may cause its
share price and yield to fall.
Interest Rates
The value of a debt security generally moves in the opposite direction from
interest rates (i.e., if interest rates go up the value of the bond will go
down, and vice versa).
Credit Rating
The credit rating or financial condition of an issuer may affect the value of
a debt security. Generally, the lower the quality rating of a security, the
greater the risks that the issuer will fail to pay interest and return
principal. To compensate investors for taking on increased risk, issuers with
lower credit ratings usually offer their investors higher interest rates than
issuers with better credit ratings. If an issuer defaults, the bond will lose
some or all of its value.
Rating agencies are organizations that assign ratings to securities based
primarily on the rating agency's assessment of the issuer's financial
strength. The portfolio currently uses ratings compiled by Standard and
Poor's Ratings Services, Duff & Phelps Rating Co., Fitch IBCA, Inc. and,
Moody's Investor Services. Credit ratings are only an agency's opinion, not an
absolute standard of quality, and they do not reflect an evaluation of market
risk. APPENDIX A contains further information concerning the ratings of
certain rating agencies and their significance.
The adviser may use ratings produced by ratings agencies as guidelines to
determine the rating of a security at the time the portfolio buys it. A rating
agency may change its credit ratings at any time. The adviser monitors the
rating of the security and will take appropriate actions if a rating agency
reduces the security's rating. Unless otherwise provided in a Wrapper
Agreement, the portfolio is not obligated to dispose of securities whose
issuers subsequently are in default or which are downgraded below the above-
stated ratings.
A security rated within the four highest rating categories by a rating agency
is called investment-grade because its issuer is more likely to pay interest
and repay principal than an issuer of a lower rated bond. Adverse economic
conditions or changing circumstances, however, may weaken the capacity of the
issuer to pay interest and repay principal. If a security is not rated or is
rated under a different system, the adviser may determine that it is of
investment-grade.
U.S. Government Securities
For a discussion of these securities see "SHORT-TERM INVESTMENTS - GOVERNMENT
SECURITIES" below.
Mortgage-Backed Securities and Mortgage Pass-Through Securities
Mortgage-backed securities are interests in pools of mortgage loans that
various governmental, government-related and private organizations assemble as
securities for sale to investors. Mortgage-backed securities differ from other
forms of debt securities because they make monthly payments that consist of
both interest and principal payments. (Other debt securities normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates.) In effect, these payments are a "pass-
through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities.
Governmental entities, private insurers and the mortgage poolers may insure or
guarantee the timely payment of interest and principal of these pools through
various forms of insurance or guarantees, including individual loan,
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title, pool and hazard insurance and letters of credit issue the insurance and
guarantees. The adviser will consider such insurance and guarantees and the
creditworthiness of the issuers thereof in determining whether a mortgage-
related security meets its investment quality standards. It is possible that
the private insurers or guarantors will not meet their obligations under the
insurance policies or guarantee arrangements.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable.
Government National Mortgage Association (GNMA)
GNMA, a wholly owned U.S. government corporation within the Department of
Housing and Urban Development, is the principal governmental guarantor of
mortgage-related securities. GNMA, which is backed by the faith and credit of
the U.S. government, guarantees the timely payment of principal and interest
on securities issued by institutions approved by GNMA and backed by pools of
FHA-insured or VA-guaranteed mortgages. GNMA does not guarantee the market
value or yield of mortgage-backed securities or the value of portfolio shares.
To buy GNMA securities, the portfolio may have to pay a premium over the
maturity value of the underlying mortgages, which the portfolio may lose it if
prepayment occurs.
Federal National Mortgage Association (FNMA)
FNMA is a government-sponsored corporation owned entirely by private
stockholders. FNMA, which is regulated by the Secretary of Housing and Urban
development, purchases conventional mortgages from a list of approved
seller/servicers, including state and federally-chartered savings and loan
associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to
timely payment of principal and interest by FNMA, but are not backed by the
full faith and credit of the U.S. government.
Federal Home Loan Mortgage Corporation (FHLMC)
FHLMC is a corporate instrumentality of the U.S. Government whose stock is
owned by the twelve Federal Home Loan Banks. Congress created FHLMC in 1970
to increase the availability of mortgage credit for residential housing. FHLMC
issues Participation Certificates (PCs) which represent interests in
conventional mortgages from its national portfolio. Like FNMA, FHLMC
guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the U.S.
Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional mortgage loans. In addition to
guaranteeing the mortgage-related security, such issuers may service and/or
have originated the underlying mortgage loans. Pools created by these issuers
generally offer a higher rate of interest than pools created by GNMA, FNMA &
FHLMC because they are not guaranteed by a government agency.
Risk of Investing in Mortgage-Backed Securities
Yield characteristics of mortgage-backed securities differ from those of
traditional fixed income securities. The major differences include interest
and principal payments that are more frequent (usually monthly), adjustable
interest rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
The portfolio may fail to recover fully its investment in mortgage-backed
securities notwithstanding any direct or indirect governmental, agency or
other guarantee because the counter-party failed to meet its commitments.
Changes in interest rates and a variety of economic, geographic, social and
other factors, such as the sale of the underlying property, refinancing or
foreclosure, can cause the loans underlying a mortgage-backed security to be
repaid sooner than expected. If the prepayment rates increase, the portfolio
may have to reinvest its principal at a rate of interest that is lower than
the rate on existing mortgage-backed securities. Conversely, when interest
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rates are rising many mortgage-backed securities will see a decline in the
prepayment rate, extending their average life. Extending the average life of a
mortgage-backed security increases the risk of depreciation due to future
increases in market interest rates. For these reasons, mortgage-backed
securities may be less effective than other types of U.S. government
securities as a means of "locking in" interest rates.
Collateralized Mortgage Obligations (CMOs)
CMOs are hybrids between mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, CMOs usually pay interest and prepaid principal
monthly. While whole mortgage loans may collateralize CMOs, portfolios of
mortgage-backed securities guaranteed by GNMA, FHLMC, or FNMA, and their
income streams more typically collateralize them.
A REMIC is a CMO that qualifies for special tax treatment under the Internal
Revenue Code of 1986, as amended, and invests in certain mortgages primarily
secured by interests in real property and other permitted investments.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Each class of CMO or REMIC certificate, often referred to as a
"tranche," is issued at a specific interest rate and must be fully retired by
its final distribution date. Generally, all classes of CMOs or REMIC
certificates pay or accrue interest monthly. Investing in the lowest tranche
of CMOs and REMIC certificates involves risks similar to those associated with
investing in equity securities.
Other Asset-Backed Securities
A broad range of assets, including automobile loans, computer leases and
credit card receivables, are being securitized in pass-through structures
similar to the mortgage pass-through or CMO structures described above. In
general, the collateral supporting these securities is of shorter maturity
than mortgage loans and is less likely to experience substantial prepayments
with interest rate fluctuations.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities may not have the
benefit of any security interest in the related assets, which raises the
possibility that recoveries on repossessed collateral may not be available to
support payments on these securities. For example, credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which allow debtors
to reduce their balances by offsetting certain amounts owed on the credit
cards. Most issuers of asset-backed securities backed by automobile
receivables permit the servicers of such receivables to retain possession of
the underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the rated asset-backed securities. Because
of the large number of vehicles involved and technical requirements under
state laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables.
To lessen the effect of failures by obligors on underlying assets to make
payments, the entity administering the pool of assets may agree to ensure the
receipt of payments on the underlying pool occurs in a timely fashion
("liquidity protection"). In addition, asset-backed securities may obtain
insurance, such as guarantees, policies or letters of credit obtained by the
issuer or sponsor from third parties, for some or all of the assets in the
pool ("credit support"). Delinquency or loss more than that anticipated or
failure of the credit support could adversely affect the return on an
investment in such a security.
A portfolio may also invest in residual interests in asset-backed securities,
which is the excess cash flow remaining after making required payments on the
securities and paying related administrative expenses. The amount of residual
cash flow resulting from a particular issue of asset-backed securities depends
in part on the characteristics of the underlying assets, the coupon rates on
the securities, prevailing interest rates, the amount of administrative
expenses and the actual prepayment experience on the underlying assets.
Stripped Mortgage-Backed Securities
Stripped mortgage-backed securities are derivative multiple-class mortgage-
backed securities. Stripped mortgage-backed securities usually have two
classes that receive different proportions of interest and principal
distributions
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on a pool of mortgage assets. Typically, one class will receive some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In extreme cases, one class will
receive all of the interest ("interest only" or "IO" class) while the other
class will receive the entire principal (the "principal only" or "PO" class).
The cash flows and yields on IOs and POs are extremely sensitive to the rate
of principal payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments may
adversely affect the yield to maturity of IOs. Slower than anticipated
prepayments of principal may adversely affect the yield to maturity of a PO.
The yields and market risk of interest only and principal only stripped
mortgage-backed securities, respectively, may be more volatile than those of
other fixed income securities, including traditional mortgage-backed
securities.
Yankee Bonds
Yankee bonds are dollar-denominated bonds issued inside the United States by
foreign entities. Investment in these securities involve certain risks which
are not typically associated with investing in domestic securities. Foreign
securities, especially those of companies in emerging markets, can be riskier
and more volatile than domestic securities. Adverse political and economic
developments or changes in the value of foreign currency can make it harder
for a portfolio to sell its securities and could reduce the value of your
shares. Changes in tax and accounting standards and difficulties obtaining
information about foreign companies can negatively affect investment
decisions.
Zero Coupon Bonds
These securities make no periodic payments of interest, but instead are sold
at a discount from their face value. When held to maturity, their entire
income, which consists of accretion of discount, comes from the difference
between the issue price and their value at maturity. The amount of the
discount rate varies depending on factors including the time remaining until
maturity, prevailing interest rates, the security's liquidity and the issuer's
credit quality. The market value of zero coupon securities may exhibit
greater price volatility than ordinary debt securities because a stripped
security will have a longer duration than an ordinary debt security with the
same maturity. A portfolio's investments in pay-in-kind, delayed and zero
coupon bonds may require it to sell certain of its portfolio securities to
generate sufficient cash to satisfy certain income distribution requirements.
These securities may include U.S. Treasury securities that have had their
interest payments ("coupons") separated from the underlying principal
("corpus") by their holder, typically a custodian bank or investment brokerage
firm. Once the holder of the security has stripped or separated corpus and
coupons, it may sell each component separately. The principal or corpus is
then sold at a deep discount because the buyer receives only the right to
receive a future fixed payment on the security and does not receive any rights
to periodic interest (cash) payments. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold
bundled in such form. The underlying U.S. Treasury security is held in book-
entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells
itself.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record keeping system. Under a Federal Reserve program
known as "STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities," a portfolio can record its beneficial ownership of the coupon or
corpus directly in the book-entry record-keeping system.
DERIVATIVES
________________________________________________________________________________
Derivatives are financial instruments whose value is based on an underlying
asset, such as a stock or a bond, or an underlying economic factor, such as an
interest rate or an index. The portfolio tries to minimize its loss by
investing in derivatives to protect them from broad fluctuations in market
prices, interest rates or foreign currency exchange rates. Investing in
derivatives for these purposes is known as "hedging." When hedging is
successful, the portfolio will have offset any depreciation in the value of
its portfolio securities by the appreciation in the value of the derivative
position. Although techniques other than the sale and purchase of derivatives
could be used to
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control the exposure of the portfolio to market fluctuations, the use of
derivatives may be a more effective means of hedging this exposure. The
portfolio may invest in the following types of derivatives:
Futures
A futures contract is an agreement between two parties whereby one party is
obligated to buy and the other is obligated to sell a financial instrument at
an agreed upon price and time. The parties to a futures contract do not have
to pay for or deliver the underlying financial instrument until the delivery
date. The parties to a futures contract can hold the contract until its
delivery date, although in many cases they close the contract early by taking
an opposite position in an identical contract. The financial instrument
underlying the contract may be a stock, stock index, bond, bond index,
interest rate, foreign exchange rate or other similar instrument. The
portfolio will incur commission expenses in both opening and closing futures
positions.
Futures contracts are traded in the United States on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for such trading
and regulated by the Commodity Futures Trading Commission, a federal agency.
These contract markets standardize the terms, including the maturity date and
underlying financial instrument, of all futures contracts. Contract markets
require both the purchaser and seller to deposit "initial margin" with a
futures broker, known as a futures commission merchant, when they enter into
the contract. Initial margin deposits are typically equal to a percentage of
the contract's value. After they open a futures contract, the parties to the
transaction must compare the purchase price of the contract to its daily
market value. If the value of the futures contract changes in such a way that
a party's position declines, that party must make additional "variation
margin" payments so that the margin payment is adequate. On the other hand,
the value of the contract may change in such a way that there is excess margin
on deposit, possibly entitling the party that has a gain to receive all or a
portion of this amount.
The portfolio may take a "short position" by selling futures contracts on
securities it owns or on securities with characteristics similar to those of
securities it owns. For example, when the portfolio expects interest rates to
rise or securities prices to fall, it can seek to offset a decline in the
value of its holdings by selling futures contracts so that the portfolio is
obligated to sell the Securities at a future lower price. When the
portfolio's short hedging position is successful, the appreciation in the
value of the futures position will offset substantially any depreciation in
the value of the holdings of the portfolio. On the other hand, a decline in
the value of the futures position would offset any unanticipated appreciation
in the value of the holdings of the portfolio.
On other occasions, the portfolio may take a "long" position by purchasing
futures contracts. For example, when the portfolio expects interest rates to
fall or securities' prices to rise, it can seek to secure a better rate or
price than might later be available by purchasing a futures contract. The
portfolio may also buy futures contracts as a substitute for transactions in
securities, to alter the investment characteristics of portfolio securities or
to gain or increase its exposure to a particular securities market.
Indexed Securities
The indexed securities in which the Portfolio may invest include debt
securities whose value at maturity is determined by reference to the relative
prices of various currencies or to the price of a stock index. The value of
such securities depends on the price of foreign currencies, securities indices
or other financial values or statistics. These securities may be positively or
negatively indexed; that is, their value may increase or decrease if the
underlying instrument appreciates.
Options
An option is a contract between two parties for the purchase and sale of a
financial instrument for a specified price (known as the "strike price" or
"exercise price") at any time during the option period. Unlike a futures
contract, an option grants a right (not an obligation) to buy or sell a
financial instrument. Generally, a seller of an option can grant a buyer two
kinds of rights: a "call" (the right to buy the security) or a "put" (the
right to sell the security). Options have various types of underlying
instruments, including specific securities, indices of securities prices,
foreign currencies, interest rates and futures contracts. Options may be
traded on an exchange (exchange-traded-options) or may be customized
agreements between the parties (over-the-counter or OTC options). Like
futures, a financial intermediary, known as a clearing corporation,
financially backs exchange-traded options.
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However, OTC options have no such intermediary and are subject to the risk
that the counter-party will not fulfill its obligations under the contract.
Purchasing Put and Call Options
When the portfolio purchases a put option, it buys the right to sell the
instrument underlying the option at a fixed strike price. In return for this
right, the portfolio pays the current market price for the option (known as
the "option premium"). The portfolio may purchase put options to offset or
hedge against a decline in the market value of its securities ("protective
puts") or to benefit from a decline in the price of securities that it does
not own. The portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying securities decreased below the exercise
price sufficiently to cover the premium and transaction costs. However, if
the price of the underlying instrument does not fall enough to offset the cost
of purchasing the option, a put buyer would lose the premium and related
transaction costs.
Call options are similar to put options, except that the portfolio obtains the
right to purchase, rather than sell, the underlying instrument at the option's
strike price. The portfolio would normally purchase call options in
anticipation of an increase in the market value of securities it owns or wants
to buy. The portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying instrument exceeded the exercise price
plus the premium paid and related transaction costs. Otherwise, the portfolio
would realize either no gain or a loss on the purchase of the call option.
The purchaser of an option may terminate its position by:
. Allowing it to expire and losing its entire premium;
. Exercising the option and either selling (in the case of a put option) or
buying (in the case of a call option) the underlying instrument at
the strike price; or
. Closing it out in the secondary market at its current price.
Selling (Writing) Put and Call Options
When the portfolio writes a call option it assumes an obligation to sell
specified securities to the holder of the option at a specified price if the
option is exercised at any time before the expiration date. Similarly, when
the portfolio writes a put option it assumes an obligation to purchase
specified securities from the option holder at a specified price if the option
is exercised at any time before the expiration date. The portfolio may
terminate its position in an exchange-traded put option before exercise by
buying an option identical to the one it has written. Similarly, it may
cancel an over-the-counter option by entering into an offsetting transaction
with the counter-party to the option.
The portfolio could try to hedge against an increase in the value of
securities it would like to acquire by writing a put option on those
securities. If security prices rise, the portfolio would expect the put
option to expire and the premium it received to offset the increase in the
security's value. If security prices remain the same over time, the
portfolio would hope to profit by closing out the put option at a lower price.
If security prices fall, the portfolio may lose an amount of money equal to
the difference between the value of the security and the premium it received.
Writing covered put options may deprive the portfolio of the opportunity to
profit from a decrease in the market price of the securities it would like to
acquire.
The characteristics of writing call options are similar to those of writing
put options, except that call writers expect to profit if prices remain the
same or fall. The portfolio could try to hedge against a decline in the value
of securities it already owns by writing a call option. If the price of that
security falls as expected, the portfolio would expect the option to expire
and the premium it received to offset the decline of the security's value.
However, the portfolio must be prepared to deliver the underlying instrument
in return for the strike price, which may deprive it of the opportunity to
profit from an increase in the market price of the securities it holds.
The portfolio is permitted only to write covered options. The portfolio can
cover a call option by owning, at the time of selling the option:
. The underlying security (or securities convertible into the underlying
security without additional consideration), index, interest rate, foreign
currency or futures contract.
. A call option on the same security or index with the same or lesser
exercise price.
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. A call option on the same security or index with a greater exercise price,
with the difference between the exercise prices maintained as a segregated
account containing cash or liquid securities.
. Cash or liquid securities equal to at least the market value of the
optioned securities, interest rate, foreign currency or futures contract.
. In the case of an index, the portfolio of securities that corresponds to
the index.
The portfolio can cover a put option by, at the time of selling the option:
. Entering into a short position in the underlying security.
. Purchasing a put option on the same security, index, interest rate, foreign
currency or futures contract with the same or greater exercise price.
. Purchasing a put option on the same security, index, interest rate, foreign
currency or futures contract with a lesser exercise price, with the
difference between the exercise prices maintained as a segregated account
containing cash or liquid securities.
. Maintaining the entire exercise price in liquid securities.
Options on Securities Indices
Options on securities indices are similar to options on securities, except
that the exercise of securities index options requires cash settlement
payments and does not involve the actual purchase or sale of securities. In
addition, securities index options are designed to reflect price fluctuations
in a group of securities or segment of the securities market rather than price
fluctuations in a single security.
Options on Futures
An option on a futures contract provides the holder with the right to buy a
futures contract (in the case of a call option) or sell a futures contract (in
the case of a put option) at a fixed time and price. Upon exercise of the
option by the holder, the contract market clearing house establishes a
corresponding short position for the writer of the option (in the case of a
call option) or a corresponding long position (in the case of a put option).
If the option is exercised, the parties will be subject to the futures
contracts. In addition, the writer of an option on a futures contract is
subject to initial and variation margin requirements on the option position.
Options on futures contracts are traded on the same contract market as the
underlying futures contract.
The buyer or seller of an option on a futures contract may terminate the
option early by purchasing or selling an option of the same series (i.e., the
same exercise price and expiration date) as the option previously purchased or
sold. The difference between the premiums paid and received represents the
trader's profit or loss on the transaction.
The portfolio may purchase put and call options on futures contracts instead
of selling or buying futures contracts. The portfolio may buy a put option on
a futures contract for the same reasons it would sell a futures contract. It
also may purchase such put options in order to hedge a long position in the
underlying futures contract. The portfolio may buy call options on futures
contracts for the same purpose as the actual purchase of the futures
contracts, such as in anticipation of favorable market conditions.
The portfolio may write a call option on a futures contract to hedge against a
decline in the prices of the instrument underlying the futures contracts. If
the price of the futures contract at expiration were below the exercise price,
the portfolio would retain the option premium, which would offset, in part,
any decline in the value of its portfolio securities.
The writing of a put option on a futures contract is similar to the purchase
of the futures contracts, except that, if market price declines, the portfolio
would pay more than the market price for the underlying instrument. The
premium received on the sale of the put option, less any transaction costs,
would reduce the net cost to the portfolio.
Combined Positions
The portfolio may purchase and write options in combination with each other,
or in combination with futures or forward contracts, to adjust the risk and
return characteristics of the overall position. For example, the portfolio
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could construct a combined position whose risk and return characteristics are
similar to selling a futures contract by purchasing a put option and writing a
call option on the same underlying instrument. Alternatively, the portfolio
could write a call option at one strike price and buy a call option at a lower
price to reduce the risk of the written call option in the event of a
substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Swap agreements
Swap agreements are contracts that allow one party to "swap" some pre-agreed
interest rate (either fixed rate or floating), index return, credit risk
exposure, or certain cash flows in exchange for some different obligation or
cash flow. For instance, one party may agree to exchange one variable floating
rate interest rate contract based off of LIBOR for the total return of a bond
index such as the Lehman Aggregate Bond Index.
Neither the principal nor the actual interest payments change hands. Instead,
the net difference between the two interest rates is determined - monthly,
semiannually, or annually - and is paid by the party whose payment obligation
exceeds that of the other.
Swap agreements can be a valuable tool for controlling risk (e.g., by aiding
duration management) or gaining sector exposure without exposure to individual
bond issues.
Swapping can allow investment managers to efficiently revise their investment
profile to take advantage of current or expected future market conditions or
to better optimize the structure of their investment portfolio.
The swapper is exposed to the risk that the counter-party will default on the
contract.
If unfavorable interest rates develop, the swapper must pay to unwind, or
assign, the swap. This termination of the swap places additional costs on the
swapper. Market risk of swaps is similar to that of holding a portfolio of
bonds.
Additional Risks of Derivatives
While transactions in derivatives may reduce certain risks, these transactions
themselves entail certain other risks. For example, unanticipated changes in
interest rates, securities prices or currency exchange rates may result in a
poorer overall performance of the portfolio than if it had not entered into
any derivatives transactions. Derivatives may magnify the portfolio's gains
or losses, causing it to make or lose substantially more than it invested.
When used for hedging purposes, increases in the value of the securities the
portfolio holds or intends to acquire should offset any losses incurred with a
derivative. Purchasing derivatives for purposes other than hedging could
expose the portfolio to greater risks.
Correlation of Prices
The portfolio's ability to hedge its securities through derivatives depends on
the degree to which price movements in the underlying index or instrument
correlate with price movements in the relevant securities. In the case of poor
correlation, the price of the securities the portfolio is hedging may not move
in the same amount, or even in the same direction as the hedging instrument.
The adviser will try to minimize this risk by investing only in those
contracts whose behavior it expects to resemble the portfolio securities it is
trying to hedge. However, if the portfolio's prediction of interest and
currency rates, market value, volatility or other economic factors is
incorrect, the portfolio may lose money, or may not make as much money as it
could have.
Derivative prices can diverge from the prices of their underlying instruments,
even if the characteristics of the underlying instruments are very similar to
the derivative. Listed below are some of the factors that may cause such a
divergence.
Current and anticipated short-term interest rates, changes in volatility of
the underlying instrument, and the time remaining until expiration of the
contract.
A difference between the derivatives and securities markets, including
different levels of demand, how the instruments are traded, the imposition of
daily price fluctuation limits or trading of an instrument stops.
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Differences between the derivatives, such as different margin requirements,
different liquidity of such markets and the participation of speculators in
such markets.
Derivatives based upon a narrower index of securities, such as those of a
particular industry group, may present greater risk than derivatives based on
a broad market index. Since narrower indices are made up of a smaller number
of securities, they are more susceptible to rapid and extreme price
fluctuations because of changes in the value of those securities.
While currency futures and options values are expected to correlate with
exchange rates, they may not reflect other factors that affect the value of
the investments of the portfolio. A currency hedge, for example, should
protect a Yen-denominated security from a decline in the Yen, but will not
protect the portfolio against a price decline resulting from deterioration in
the issuer's creditworthiness. Because the value of the portfolio's foreign-
denominated investments changes in response to many factors other than
exchange rates, it may not be possible to match the amount of currency options
and futures to the value of the portfolio's investments precisely over time.
Lack of Liquidity
Before a futures contract or option is exercised or expires, the portfolio can
terminate it only by entering into a closing purchase or sale transaction.
This requires a secondary market for such instruments on the exchange where
the portfolio originally entered into the transaction. If there is no
secondary market for the contract, or the market is illiquid, the portfolio
may have to purchase or sell the instrument underlying the contract, make or
receive a cash settlement or meet ongoing variation margin requirements. The
inability to close out derivative positions could have an adverse impact on
the ability of the portfolio to hedge its investments and may prevent the
portfolio from realizing profits or limiting its losses.
Derivatives may become illiquid (i.e., difficult to sell at a desired time and
price) under a variety of market conditions. For example:
. During periods of market volatility, a commodity exchange may suspend or
limit trading in a particular derivative instrument, an entire category of
derivatives or all derivatives.
. The portfolio may have difficulty liquidating its existing positions or
recovering excess variation margin payments because of exchange or clearing
house equipment failures, government intervention, insolvency of a
brokerage firm or clearing house or other disruptions of normal trading
activity.
. Investors may lose interest in a particular derivative or category of
derivatives.
.
Management Risk
If the adviser incorrectly predicts stock market and interest rate trends, the
portfolio may lose money by investing in derivatives. For example, if the
portfolio were to write a call option based on its adviser's expectation that
the price of the underlying security would fall, but the price were to rise
instead, the portfolio could be required to sell the security upon exercise at
a price below the current market price. Similarly, if the portfolio were to
write a put option based on the adviser's expectation that the price of the
underlying security would rise, but the price were to fall instead, the
portfolio could be required to purchase the security upon exercise at a price
higher than the current market price.
Margin
Because of the low margin deposits required upon the opening of a derivative
position, such transactions involve an extremely high degree of leverage.
Consequently, a relatively small price movement in a derivative may result in
an immediate and substantial loss (as well as gain) to the portfolio and it
may lose more than it originally invested in the derivative.
If the price of a futures contract changes adversely, the portfolio may have
to sell securities at a time when it is disadvantageous to do so to meet its
minimum daily margin requirement. The portfolio may lose its margin deposits
if a broker with whom it has an open futures contract or related option
becomes insolvent or declares bankruptcy.
<PAGE>
ILLIQUID AND RESTRICTED SECURITIES
- -------------------------------------------------------------------------------
Mutual funds do not typically hold a significant amount of illiquid securities
because of the potential for delays on resale and uncertainty in valuation.
Limitations on resale may have an adverse effect on the marketability of
portfolio securities, and a mutual fund might be unable to dispose of illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register restricted securities in order to dispose of them, resulting
in additional expense and delay. Adverse market conditions could impede such
a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale of such
investments to the general public or to certain institutions may not be
indicative of their liquidity.
The portfolio may purchase restricted securities that are not registered for
sale to the general public but which are eligible for resale to qualified
institutional investors under Rule 144A of the Securities Act of 1933. Under
the supervision of the governing board, the Adviser determines the liquidity
of such investments by considering all relevant factors. Provided that a
dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of
the portfolio's investment limitations. The portfolio may invest up to 15% of
its net assets in illiquid securities. The priced realized from the sales of
these securities could be more or less than those originally paid by the
portfolio or less than what may be considered the fair value of such
securities.
INVESTMENT COMPANIES
- -------------------------------------------------------------------------------
The portfolio reserve the right to invest up to 10% of its total assets,
calculated at the time of investment, in the securities of other open-ended or
closed-end investment companies. No more than 5% of the investing portfolio's
total assets may be invested in the securities of any one investment company
nor may it acquire more than 3% of the voting securities of any other
investment company. The portfolio will indirectly bear its proportionate
share of any management fees paid by an investment company in which it invests
in addition to the advisory fee paid by the portfolio.
The Fund has received permission from the SEC to allow each of its portfolios
to invest, for cash management purposes, the greater of 5% of its total assets
or $2.5 million in the Fund's DSI Money Market Portfolio provided that the
investment is consistent with the portfolio's investment policies and
restrictions. Based upon the portfolio's assets invested in the DSI Money
Market Portfolio, the investing portfolio's adviser will waive its investment
advisory and any other fees earned as a result of the portfolio's investment
in the DSI Money Market Portfolio. The investing portfolio will bear expenses
of the DSI Money Market Portfolio on the same basis as all of its other
shareholders.
REPURCHASE AGREEMENTS
- -------------------------------------------------------------------------------
In a repurchase agreement, the portfolio buys a security for a relatively
short period (usually not more than 7 days) and simultaneously agrees to sell
it back at a specified date and price. The portfolio normally uses repurchase
agreements to earn income on assets that are not invested. The portfolio will
require the counter-party to the agreement to deliver securities serving as
collateral for each repurchase agreement to its custodian either physically or
in book-entry form. The counter-party must add to the collateral whenever the
price of the repurchase agreement rises (i.e., the borrower "marks to the
market" on a daily basis).
If the seller of the security declares bankruptcy or otherwise becomes
financially unable to buy back the security, the portfolio's right to sell the
security may be restricted. In addition, the value of the security might
decline before the portfolio can sell it and the portfolio might incur
expenses in enforcing its rights.
<PAGE>
SECURITIES LENDING
- --------------------------------------------------------------------------------
To earn additional income, the portfolio may lend up to one-third of their
total assets (including the value of the collateral for the loans) at fair
market value to broker- dealers or other financial institutions. The portfolio
may reinvest any cash collateral in short-term securities and money market
funds. The portfolio will only lend its securities if:
. The borrower provides collateral at least equal to the market value of the
securities loaned
. The collateral pledged and maintained by the borrower must consist of cash,
an irrevocable letter of credit issued by a domestic U.S. bank or
securities issued or guaranteed by the United States Government.
. The borrower adds to the collateral whenever the price of the securities
loaned rises (i.e., the borrower "marks to the market" on a daily basis).
. The portfolio can terminate the loan at any time; and
. The portfolio receives reasonable interest on the loan (which may include
the Portfolio investing any cash collateral in interest bearing short-term
investments).
These risks are similar to the ones involved with repurchase agreements. When
the portfolio lends securities, there is a risk that it will lose money
because the borrower fails to return the securities involved in the
transaction. In addition, the borrower may become financially unable to honor
its contractual obligations, which may delay or prevent the portfolio from
liquidating the collateral.
SHORT-TERM INVESTMENTS
- --------------------------------------------------------------------------------
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.
Bank Obligations
The portfolio will only invest in a security issued by a commercial bank if
the bank:
. Has total assets of at least $1 billion, or the equivalent in other
currencies;
. Is a U.S. bank and a member of the Federal Deposit Insurance Corporation;
and
. Is a foreign branch of a U.S. bank and the adviser believes the security is
of an investment quality comparable with other debt securities that the
portfolio may purchase.
Time Deposits
Time deposits are non-negotiable deposits, such as savings accounts or
certificates of deposit, held by a financial institution for a fixed term with
the understanding that the depositor can withdraw its money only by giving
notice to the institution. However, there may be early withdrawal penalties
depending upon market conditions and the remaining maturity of the obligation.
The portfolio may only purchase time deposits maturing from two business days
through seven calendar days.
Certificates of deposit
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or savings and loan association for a definite
period of time and earning a specified return.
Banker's Acceptance
A banker's acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with an international commercial transaction
(to finance the import, export, transfer or storage of goods).
Commercial Paper
Commercial paper is short-term obligation with maturity ranging from 2 to 270
days issued by banks, corporations and other borrowers. Such investments are
unsecured and usually discounted. The portfolio may invest in commercial
paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's, or, if not
rated, issued by a corporation having an outstanding unsecured debt issue
rated A or better by Moody's or by S&P. See APPENDIX A for a description of
commercial paper ratings.
<PAGE>
Investment-Grade Short-Term Corporate Obligations
See the discussion of debt securities above.
U.S. Government Securities
The portfolio may buy debt securities that are issued or guaranteed by the
U.S. Treasury or by an agency or instrumentality of the U.S. government. Some
U.S. government securities, such as Treasury bills, notes and bonds are
supported by the full faith and credit of the U.S. government. Others,
however, are supported only by the right of the instrumentality to borrow from
the U.S. government.
While U.S. government securities are guaranteed as to principal and interest,
their market value is not guaranteed. U.S. government securities are subject
to the same interest rate and credit risks as other fixed income securities.
However, since U.S. government securities are of the highest quality, the
credit risk is minimal. The U.S. government does not guarantee the net asset
value of the assets of the portfolio.
WHEN-ISSUED, FORWARD COMMITMENT AND DELAYED DELIVERY TRANSACTIONS
- -------------------------------------------------------------------------------
A when-issued security is one whose terms are available and for which a market
exists, but which have not been issued. In a forward delivery transaction, the
portfolio contracts to purchase securities for a fixed price at a future date
beyond customary settlement time. "Delayed delivery" refers to securities
transactions on the secondary market where settlement occurs in the future.
In each of these transactions, the parties fix the payment obligation and the
interest rate that they will receive on the securities at the time the parties
enter the commitment; however, they do not pay money or delivery securities
until a later date. Typically, no income accrues on securities the portfolio
has committed to purchase before the securities are delivered, although the
portfolio may earn income on securities it has in a segregated account. The
portfolio will only enter into these types of transactions with the intention
of actually acquiring the securities, but may sell them before the settlement
date.
The portfolio uses when-issued, delayed-delivery and forward delivery
transactions to secure what it considers being an advantageous price and yield
at the time of purchase. When the portfolio engages in when-issued, delayed-
delivery and forward delivery transactions, it relies on the other party to
consummate the sale. If the other party fails to complete the sale, the
portfolio may miss the opportunity to obtain the security at a favorable price
or yield.
When purchasing a security on a when-issued, delayed delivery, or forward
delivery basis, the portfolio assumes the rights and risks of ownership of the
security, including the risk of price and yield changes. At the time of
settlement, the market value of the security may be more or less than the
purchase price. The yield available in the market when the delivery takes
place also may be higher than those obtained in the transaction itself.
Because the portfolio does not pay for the security until the delivery date,
these risks are in addition to the risks associated with its other
investments.
The portfolio will add liquid assets to the account daily so that the value of
the assets in the account is equal to the amount of such commitments. Such
segregated securities either will mature or, if necessary, be sold on or
before the settlement date.
WRAPPER AGREEMENTS
- --------------------------------------------------------------------------------
Wrapper agreements are used in order to stabilize the NAV of the portfolio.
Each wrapper agreement obligates the wrapper provider to maintain the "book
value" of a portion of the portfolio's assets (covered assets) up to a
specified maximum dollar amount, upon the occurrence of certain specified
events. Generally, the book value of the covered assets is their (1) purchase
price plus interest on the covered assets accreted at a rate specified in the
wrapper agreement (crediting rate) less an adjustment to reflect any defaulted
securities. The crediting rate used in computing book value is calculated by a
formula specified in the wrapper agreement and is adjusted periodically. In
the case of wrapper agreements purchased by the portfolio, the crediting rate
is the actual interest earned on the covered assets, or an index-based
approximation thereof, plus or minus an adjustment for an amount receivable
from or payable to the wrapper provider based on fluctuations in the market
value of the covered assets. As a result, while the crediting rate will
generally reflect movements in the market rates of interest, it may at any
time be more or less than these rates or the actual interest income earned on
the covered assets. The
<PAGE>
crediting rate may also be impacted by defaulted securities and by increases
and decreases of the amount of covered assets as a result of contributions and
withdrawals tied to the purchase and redemption of shares. In no event will
the crediting rate fall below zero percent under the wrapper agreements
entered into by the portfolio.
Wrapper providers are banks, insurance companies and other financial
institutions. The number of wrapper providers has been increasing in recent
years. As of April 1998, there were approximately fifteen wrapper providers
rated in one of the top two long-term rating categories by Moody's, S&P or
another NRSRO. The cost of wrapper agreements is typically 0.10% to 0.25% per
dollar of covered assets per annum.
Generally, under the terms of a wrapper agreement, if the market value (plus
accrued interest on the underlying securities) of the covered assets is less
than their book value at the time the covered assets are liquidated in order
to provide proceeds for withdrawals of portfolio interests resulting from
redemptions of shares by IRA Owners, the wrapper provider becomes obligated to
pay to the portfolio the difference. Conversely, the portfolio becomes
obligated to make a payment to the wrapper provider if it is necessary for the
portfolio to liquidate covered assets at a price above their book value in
order to make withdrawal payments. (Withdrawals generally will arise when the
portfolio must pay shareholders who redeem shares.) Because it is anticipated
that each wrapper agreement will cover all covered assets up to a specified
dollar amount, if more than one wrapper provider becomes obligated to pay to
the portfolio the difference between book value and market value (plus accrued
interest on the underlying securities), each wrapper provider will be
obligated to pay an amount as designated by their contract according to the
withdrawal hierarchy specified by the Adviser in the wrapper agreement. Thus,
the portfolio will not have the option of choosing which wrapper agreement to
draw upon in any such payment situation.
The terms of the wrapper agreements vary concerning when these payments must
actually be made between the portfolio and the wrapper provider. In some
cases, payments may be due upon disposition of covered assets; other wrapper
agreements provide for settlement of payments only upon termination of the
wrapper agreement or total liquidation of the covered assets.
The portfolio expects that the use of wrapper agreements by the portfolio will
under most circumstances permit the portfolio to maintain a constant NAV and
to pay dividends that will generally reflect over time both the interest
income of, and market gains and losses on, the covered assets held by the
portfolio less the expenses of the portfolio. However, there can be no
guarantee that the portfolio will maintain a constant NAV or that any
shareholder will realize the same investment return as might be realized by
investing directly in the portfolio assets other than the wrapper agreements.
For example, a default by the issuer of a portfolio Security or a wrapper
provider on its obligations might result in a decrease in the value of the
portfolio assets and, consequently, the shares. The wrapper agreements
generally do not protect the portfolio from loss if an issuer of portfolio
securities defaults on payments of interest or principal. Additionally, a
portfolio shareholder may realize more or less than the actual investment
return on the portfolio Securities. Furthermore, there can be no assurance
that the portfolio will be able at all times to obtain wrapper agreements.
Although it is the current intention of the portfolio to obtain such
agreements covering all of its assets (with the exceptions noted), the
portfolio may elect not to cover some or all of its assets with wrapper
agreements should wrapper agreements become unavailable or should other
conditions such as cost, in the Adviser's sole discretion, render their
purchase inadvisable.
If, in the event of a default of a wrapper provider, the portfolio were unable
to obtain a replacement wrapper agreement, participants redeeming shares might
experience losses if the market value of the portfolio's assets no longer
covered by the wrapper agreement is below book value. The combination of the
default of a wrapper provider and an inability to obtain a replacement
agreement could render the portfolio and the portfolio unable to achieve their
investment objective of maintaining a stable NAV. If the governing board
determines that a wrapper provider is unable to make payments when due, that
Board may assign a fair value to the wrapper agreement that is less than the
difference between the book value and the market value (plus accrued interest
on the underlying securities) of the applicable covered assets and the
portfolio might be unable to maintain NAV stability.
Some wrapper agreements require that the portfolio maintain a specified
percentage of its total assets in short-term investments (liquidity reserve).
These short-term investments must be used for the payment of withdrawals from
the portfolio and portfolio expenses. To the extent the liquidity reserve
falls below the specified percentage of total assets, the portfolio is
obligated to direct all net cash flow to the replenishment of the liquidity
reserve. The obligation to maintain a liquidity reserve may result in a lower
return for the portfolio than if these funds were
<PAGE>
invested in longer-term debt securities. The liquidity reserve required by all
wrapper agreements is not expected to exceed 2-10% of the portfolio's total
assets.
Wrapper agreements may also require that the covered assets have a specified
duration or maturity, consist of specified types of securities or be of a
specified investment quality. The portfolio will purchase wrapper agreements
whose criteria in this regard are consistent with the portfolio's investment
objective and policies.
Wrapper agreements may also require the disposition of securities whose
ratings are downgraded below a certain level. This may limit the portfolio's
ability to hold such downgraded securities.
Wrapper agreements are structured with a number of different features. Wrapper
agreements purchased by the portfolio are of three basic types: (1) non-
participating, (2) participating and (3) "hybrid." In addition, the wrapper
agreements will either be of fixed-maturity or open-end maturity
("evergreen"). The portfolio enters into particular types of wrapper
agreements depending upon their respective cost to the portfolio and the
wrapper provider's creditworthiness, as well as upon other factors. Under most
circumstances, it is anticipated that the portfolio will enter into
participating wrapper agreements of open-end maturity and hybrid wrapper
agreements.
Types of Wrapper Agreements
Non-Participating Wrapper Agreement
Under a non-participating wrapper agreement, the wrapper provider becomes
obligated to make a payment to the portfolio whenever the portfolio sells
covered assets at a price below book value to meet withdrawals of a type
covered by the wrapper agreement (a "Benefit Event"). Conversely, the
portfolio becomes obligated to make a payment to the wrapper provider whenever
the portfolio sells covered assets at a price above their book value in
response to a Benefit Event. In neither case is the crediting rate adjusted at
the time of the Benefit Event. Accordingly, under this type of wrapper
agreement, while the portfolio is protected against decreases in the market
value of the covered assets below book value, it does not realize increases in
the market value of the covered assets above book value; those increases are
realized by the wrapper providers.
Participating Wrapper Agreement
Under a participating wrapper agreement, the obligation of the wrapper
provider or the portfolio to make payments to each other typically does not
arise until all of the covered assets have been liquidated. Instead of
payments being made on the occurrence of each Benefit Event, these obligations
are a factor in the periodic adjustment of the crediting rate.
Hybrid Wrapper Agreement
Under a hybrid wrapper agreement, the obligation of the wrapper provider or
the portfolio to make payments does not arise until withdrawals exceed a
specified percentage of the covered assets, after which time payment covering
the difference between market value and book value will occur. For example, a
50/50 hybrid wrap on $100mm of securities would provide for a participating
wrapper be in place for the first $50 million of withdrawals which might lead
to adjustments in the crediting rate, with a non-participating wrapper in
place for the next $50 million of withdrawals, with those withdrawals not
creating any adjustment to the crediting rate.
Fixed-Maturity Wrapper Agreement
A fixed-maturity wrapper agreement terminates at a specified date, at which
time settlement of any difference between book value and market value of the
covered assets occurs. A fixed-maturity wrapper agreement tends to ensure that
the covered assets provide a relatively fixed rate of return over a specified
period of time through bond immunization, which targets the duration of the
covered assets to the remaining life of the wrapper agreement.
Evergreen Wrapper Agreement
An evergreen wrapper agreement has no fixed maturity date on which payment
must be made, and the rate of return on the covered assets accordingly tends
to vary. Unlike the rate of return under a fixed-maturity wrapper agreement,
the rate of return on assets covered by an evergreen wrapper agreement tends
to more closely track
<PAGE>
prevailing market interest rates and thus tends to rise when interest rates
rise and fall when interest rates fall. An Evergreen wrapper agreement may be
converted into a fixed-maturity wrapper agreement that will mature in the
number of years equal to the duration of the covered assets.
Additional Risks of Wrapper Agreements
In the event of the default of a wrapper provider, the portfolio could
potentially lose the book value protections provided by the wrapper agreements
with that wrapper provider. However, the impact of such a default on the
portfolio as a whole may be minimal or non-existent if the market value of the
covered assets thereunder is greater than their book value at the time of the
default, because the wrapper provider would have no obligation to make
payments to the portfolio under those circumstances. In addition, the
portfolio may be able to obtain another wrapper agreement from another wrapper
provider to provide book value protections with respect to those covered
assets. The cost of the replacement wrapper agreement might be higher than the
initial wrapper agreement due to market conditions or if the market value
(plus accrued interest on the underlying securities) of those covered assets
is less than their book value at the time of entering into the replacement
agreement. Such cost would also be in addition to any premiums previously paid
to the defaulting wrapper provider. If the portfolio were unable to obtain a
replacement wrapper agreement, participants redeeming shares might experience
losses if the market value of the portfolio's assets no longer covered by the
wrapper agreement is below book value. The combination of the default of a
wrapper provider and an inability to obtain a replacement agreement could
render the portfolio and the portfolio unable to achieve its investment
objective of seeking to maintain a stable NAV.
With respect to payments made under the wrapper agreements between the
portfolio and the wrapper provider, some wrapper agreements, as noted in the
portfolio's prospectus, provide that payments may be due upon disposition of
the covered assets, while others provide for payment only upon the total
liquidation of the Covered assets or upon termination of the wrapper
agreement. In none of these cases, however, would the terms of the wrapper
agreements specify which portfolio securities are to be disposed of or
liquidated. Moreover, because it is anticipated that each wrapper agreement
will cover all covered assets up to a specified dollar amount, if more than
one wrapper provider becomes obligated to pay to the portfolio the difference
between book value and market value (plus accrued interest on the underlying
securities), each wrapper provider will pay a pro-rata amount in proportion to
the maximum dollar amount of coverage provided. Thus, the portfolio will not
have the option of choosing which wrapper agreement to draw upon in any such
payment situation. Under the terms of most wrapper agreements, the wrapper
provider will have the right to terminate the wrapper agreement in the event
that material changes are made to the portfolio's investment objectives or
limitations or to the nature of the portfolio's operations. In such event, the
portfolio may be obligated to pay the wrapper provider termination fees. The
portfolio will have the right to terminate a wrapper agreement for any reason.
Such right, however, may also be subject to the payment of termination fees.
In the event of termination of a wrapper agreement or conversion of an
Evergreen Wrapper Agreement to a fixed maturity, some wrapper agreements may
require that the duration of some portion of the portfolio's securities be
reduced to correspond to the fixed maturity or termination date and that such
securities maintain a higher credit rating than is normally required, either
of which requirements might adversely affect the return of the portfolio.
INVESTMENT POLICIES
- -------------------------------------------------------------------------------
Whenever an investment limitation sets forth a percentage limitation on
investment or utilization of assets, such limitation shall (with the exception
of a limitation relating to borrowing) be determined immediately after and as
a result of the portfolio's acquisition of such security or other asset.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered when determining
whether the investment complies with the investment limitations of the
portfolio. The following investment limitations are fundamental, which means
the portfolio cannot change them without shareholder approval. The portfolio
will not:
. Make any investment that is inconsistent with its classification as a
diversified investment management company under the Investment Company Act
of 1940, as amended.
<PAGE>
. Concentrate its investments in securities of issuers primarily engaged in
any particular industry (other securities issued or guaranteed by the
United States government or its agencies or instrumentalities or when the
portfolio adopts a temporary defensive position).
. Issue senior securities, except as permitted by the Investment Company Act
of 1940, as amended.
. Invest in physical commodities or contracts on physical commodities.
. Purchase or sell real estate or real estate limited partnerships, although
it may purchase and sell securities of companies which deal in real estate
and may purchase and sell securities which are secured by interests in real
estate.
. Make loans except (i) by that the acquisition of investment securities or
other investment instruments in accordance with the portfolio's prospectus
and statement of additional information shall not be deemed to be the
making of a loan; and (ii) that the portfolio may lend its portfolio
securities in accordance with applicable law and the guidelines set forth
in the portfolio's prospectus and statement of additional information, as
they may be amended from time to time.
. Underwrite the securities of other issuers.
. Borrow money, except to the extent permitted by applicable law and the
guidelines set forth in the portfolio's prospectus and statement of
additional information, as they may be amended from time to time.
Management of the Portfolio
The business of the Fund is managed by its governing board, which, in turn,
elects officers who are responsible for the day-to-day operations of the Fund
and who execute policies formulated by the board. The Fund pays each board
member who is not also an officer or affiliated person (independent board
member) a $150 quarterly retainer fee per active portfolio per quarter and a
$2,000 meeting fee. In addition, each independent board member is reimbursed
for travel and other expenses incurred while attending board meetings. The
$2,000 meeting fee and expense reimbursements are aggregated for all of the
board members and allocated proportionately among the portfolio of the UAM
Funds complex. The Fund does not pay the remaining board members for their
services. UAM or its affiliates or Chase Global Funds Services Company pay the
Fund's officers.
The following table lists the board members and officers of the Fund and
provides information regarding their present positions, date of birth,
address, principal occupations during the past five years, aggregate
compensation received from the Fund and total compensation received from the
UAM Funds complex.
<TABLE>
<CAPTION>
Aggregate Compensation
Position UAM from Registrant as of
Name, Address, DOB Funds, Inc. Principal Occupations During the Past 5 years October 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
John T. Bennett, Jr. Director President of Squam Investment Management Company, $29,465
College Road -- RFD 3 Inc. and Great Island Investment Company, Inc.;
Meredith, NH 03253 President of Bennett Management Company from
1/26/29 1988 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Nancy J. Dunn Director Financial Officer of World Wildlife Fund since 1999. $29,465
World Wildlife Fund Formerly, Vice President for Finance and Administration
1250 24th Street, N.W., and Treasurer of Radcliffe College from 1991 to 1999.
4th Floor
Washington, D.C. 20037
8/14/51
- ------------------------------------------------------------------------------------------------------------------------------------
William A. Humenuk Director Executive Vice President and Chief Administrative Officer of $29,465
100 King Street West Philip Services Corp.; Director, Hofler Corp.; Formerly, a
P.O. Box 2440, LCD-1, Partner in the Philadelphia office of the law firm Dechert
Hamilton Ontario, Price & Rhoads.
Canada L8N-4J6
4/21/42
- ------------------------------------------------------------------------------------------------------------------------------------
Philip D. English Director President and Chief Executive Officer of Broventure Company, $29,465
16 West Madison Street Inc.; Chairman of the Board of Chektec Corporation and Cyber
Baltimore, MD 21201 Scientific, Inc
8/5/48
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total
Compensation
From UAM
Funds Complex as of
Name, Address, DOB October 31, 1998
- -----------------------------------------------
<S> <C>
John T. Bennett, Jr. $37,000
College Road -- RFD 3
Meredith, NH 03253
1/26/29
- -----------------------------------------------
Nancy J. Dunn $37,000
World Wildlife Fund
1250 24th Street, N.W.,
4th Floor
Washington, D.C. 20037
8/14/51
- -----------------------------------------------
William A. Humenuk $37,000
100 King Street West
P.O. Box 2440, LCD-1,
Hamilton Ontario,
Canada L8N-4J6
4/21/42
- -----------------------------------------------
Philip D. English $37,000
16 West Madison Street
Baltimore, MD 21201
8/5/48
- ----------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregate Compensation
from Registrant as of
Principal Occupations During the Past 5 years October 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Norton H. Reamer* Director, Chairman, Chief Executive Officer and a Director of United 0
One International Place President and Asset Management Corporation; Director, Partner or Trustee
Boston, MA 02110 Chairman of each of the Investment Companies of the Eaton Vance Group
3/21/35 Mutual Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter M. Whitman, Jr.* Director President and Chief Investment Officer of Dewey Square 0
One Financial Center Investors Corporation since 1988; Director and Chief
Boston, MA 02111 Executive Officer of H.T. Investors, Inc., formerly a
7/1/43 subsidiary of Dewey Square.
- ------------------------------------------------------------------------------------------------------------------------------------
James P. Pappas* Director Senior Vice President of UAM Investment Services, Inc. and 0
211 Congress Street UAM Trust Company since January 1996; Principal of UAM Fund
Boston, Ma 02110 Distributors, Inc. since December 12, 1995; formerly a
2/24/53 Director and Chief Operating Officer of CS First Boston
Investment Management from 1993-1995.
- ------------------------------------------------------------------------------------------------------------------------------------
William H. Park Vice President Executive Vice President and Chief Financial Officer of 0
One International Place United Asset Management Corporation.
Boston, MA 02110
9/19/47
- ------------------------------------------------------------------------------------------------------------------------------------
Gary L. French Treasurer President of UAMFSI and UAMFDI, formerly Vice President of 0
211 Congress Street Operations, Development and Control of Fidelity Investments
Boston, MA 02110 in 1995; Treasurer of the Fidelity Group of Mutual Funds
7/4/51 from 1991 to 1995.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael E. DeFao Secretary Vice President and General Counsel of UAMFSI and UAMFDI; 0
211 Congress Street Associate Attorney of Ropes & Gray (a law firm) from 1993 to
Boston, MA 02110 1995.
2/28/68
- ------------------------------------------------------------------------------------------------------------------------------------
Robert R. Flaherty Assistant Vice President of UAMFSI; formerly Manager of Fund 0
211 Congress Street Treasurer Administration and Compliance of CGFSC from 1995 to 1996;
Boston, MA 02110 Deloitte & Touche LLP from 1985 to 1995, Senior Manager.
9/18/63
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Leary Assistant Vice President of Chase Global Funds Services Company since 0
73 Tremont Street Treasurer 1993. Manager of Audit at Ernst & Young from 1988 to 1993.
Boston, MA 02108
11/23/65
- ------------------------------------------------------------------------------------------------------------------------------------
Michelle Azrialy Assistant Assistant Treasurer of Chase Global Funds Services Company 0
73 Tremont Street Secretary since 1996. Senior Public Accountant with Price Waterhouse
Boston, MA 02108 LLP from 1991 to 1994.
4/12/69
</TABLE>
<TABLE>
<CAPTION>
Total
Compensation
From UAM
Funds Complex as of
Name, Address, DOB October 31, 1998
- -----------------------------------------------
<S> <C>
Norton H. Reamer* 0
One International Place
Boston, MA 02110
3/21/35
- -----------------------------------------------
Peter M. Whitman, Jr.* 0
One Financial Center
Boston, MA 02111
7/1/43
- -----------------------------------------------
James P. Pappas* 0
211 Congress Street
Boston, Ma 02110
2/24/53
- -----------------------------------------------
William H. Park 0
One International Place
Boston, MA 02110
9/19/47
- -----------------------------------------------
Gary L. French 0
211 Congress Street
Boston, MA 02110
7/4/51
- -----------------------------------------------
Michael E. DeFao 0
211 Congress Street
Boston, MA 02110
2/28/68
- -----------------------------------------------
Robert R. Flaherty 0
211 Congress Street
Boston, MA 02110
9/18/63
- -----------------------------------------------
Michael J. Leary 0
73 Tremont Street
Boston, MA 02108
11/23/65
- -----------------------------------------------
Michelle Azrialy 0
73 Tremont Street
Boston, MA 02108
4/12/69
</TABLE>
*These people are "interested persons" of the Fund as that term is defined in
the 1940 Act.
Code of Ethics
The Fund has adopted a Code of Ethics that restricts to a certain extent
personal transactions by access persons of the Fund and imposes certain
disclosure and reporting obligations.
Investment Advisory and Other Services
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Control of Adviser
The Adviser is located at 125 College Street, Burlington, Vermont 05401. The
Adviser (or its predecessor), an affiliate of United Asset Management
Corporation, has provided investment management services to corporations,
pension and profit-sharing plans, 401(k), 403(b) and thrift plans since 1978.
UAM is a holding company incorporated in Delaware in December 1980 for the
purpose of acquiring and owning firms engaged primarily in institutional
investment management. Since its first acquisition in August
<PAGE>
1983, UAM has acquired or organized approximately 45 such affiliated firms
(the "UAM Affiliated Firms"). UAM believes that permitting UAM Affiliated
Firms to retain control over their investment advisory decisions is necessary
to allow them to continue to provide investment management services that are
intended to meet the particular needs of their respective clients.
Accordingly, after acquisition by UAM, UAM Affiliated Firms continue to
operate under their own firm name, with their own leadership and individual
investment philosophy and approach. Each UAM Affiliated Firm manages its own
business independently on a day-to-day basis. Investment strategies employed
and securities selected by UAM Affiliated Firms are separately chosen by each
of them. Several UAM Affiliated Firms also act as investment advisers to
separate series or portfolio of the UAM Funds complex.
Investment Advisory Agreement
Service Performed by Adviser
Pursuant to the Investment Advisory Agreement (Advisory Agreement) between the
Fund and the Adviser, the Adviser has agreed to:
. Manage the investment and reinvestment of the assets of the portfolio.
. Continuously review, supervise and administer the investment program of the
portfolio.
. Determine in its discretion the securities the portfolio will buy or sell
and the portion of its assets the portfolio will hold uninvested.
Limitation of Liability
In the absence of (1) willful misfeasance, bad faith, or gross negligence of
the part of the Adviser in the performance of its obligations and duties under
the Advisory Agreement, (2) reckless disregard by the Adviser of its
obligations and duties under the Advisory Agreement, or (3) a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation
for services, the Adviser shall not be subject to any liability whatsoever to
the Fund, for any error of judgment, mistake of law or any other act or
omission in the course of, or connected with, rendering services under the
Advisory Agreement.
Continuing an Advisory Agreement
Unless sooner terminated, an Advisory Agreement shall continue for periods of
one year so long as such continuance is specifically approved at least
annually (a) by a majority of those members of the governing board of the Fund
who are not parties to the Advisory Agreement or interested persons of any
such party and (b) by a majority of the governing board of the Fund or a
majority of the shareholders of the portfolio. An Advisory Agreement may be
terminated at any time by the Fund, without the payment of any penalty, by
vote of a majority of the portfolio' shareholders on 60 days' written notice
to the Adviser. The Adviser may terminate the Advisory Agreements at any time,
without the payment of any penalty, upon 90 days' written notice to the Fund.
An Advisory Agreement will automatically and immediately terminate if it is
assigned.
Investment Advisory Fee
For its services, the Adviser receives an advisory fee calculated annual rate
of 0.40% of the average daily net assets of the portfolio for the month. The
Adviser's fee is paid monthly.
Expense Limitation
The Adviser may voluntarily agree to limit the expenses of the portfolio. The
Adviser may reduce its compensation to the extent that the expenses of the
portfolio exceed such lower expense limitation as the Adviser may, by notice
to the portfolio, declare to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions, interest, taxes, deferred
organizational and extraordinary expenses and, if the fund has a distribution
plan, payments required under such plan. The prospectus describes the terms of
any expense limitation that are in effect from time to time.
<PAGE>
Representative Institutional Clients
As of the date of this SAI, the Adviser's representative institutional clients
included Morgan Stanley, MFS, SEI Corporation Chase Manhattan Bank, Asea Brown
Boveri, Hoffmann-LaRoche and the State of Vermont.
In compiling this client list, the Adviser used objective criteria such as
account size, geographic location and client classification. The Adviser did
not use any performance-based criteria. It is not known whether these clients
approve or disapprove of the Adviser or the advisory services provided.
DISTRIBUTOR
- --------------------------------------------------------------------------------
UAMFDI serves as the Fund's distributor. The Fund offers its shares
continuously. While UAMFDI will use its best efforts to sell shares of the
Fund, it is not obligated to sell any particular amount of shares. UAMFDI
receives no compensation for its services. UAMFDI, an affiliate of UAM, is
located at 211 Congress Street, Boston, Massachusetts 02110.
ADMINISTRATION AND TRANSFER AGENCY SERVICES
- --------------------------------------------------------------------------------
Administrator and Sub-Administrator
Administrator
Pursuant to a Fund Administration Agreement with the Fund, UAMFSI manages,
administers and conducts the general business activities of the Fund. As a
part of its responsibilities, UAMFSI provides and oversees the provision by
various third parties of administrative, fund accounting, dividend disbursing
and transfer agent services for the Fund. UAMFSI, an affiliate of UAM, has its
principal office at 211 Congress Street, Boston, Massachusetts 02110.
UAMFSI will bear all expenses in connection with the performance of its
services under the Fund Administration Agreement. Other expenses to be
incurred in the operation of the Fund will be borne by the Fund or other
parties, including
. Taxes, interest, brokerage fees and commissions.
. Salaries and fees of officers and members of the Board who are not
officers, directors, shareholders or employees of an affiliate of UAM,
including UAMFSI, UAMFDI or the Adviser.
. SEC fees and state Blue-Sky fees.
. EDGAR filing fees.
. Processing services and related fees.
. Advisory and administration fees.
. Charges and expenses of pricing and data services, independent public
accountants and custodians.
. Insurance premiums including fidelity bond premiums.
. Outside legal expenses.
. Costs of maintenance of corporate existence.
. Typesetting and printing of prospectuses for regulatory purposes and for
distribution to current shareholders of the Fund.
. Printing and production costs of shareholders' reports and corporate
meetings.
. Cost and expenses of Fund stationery and forms.
. Costs of special telephone and data lines and devices.
. Trade association dues and expenses.
. Any extraordinary expenses and other customary Fund expenses.
Unless sooner terminated, the Fund Administration Agreement shall continue in
effect from year to year provided the board specifically approves such
continuance at least annually. The Board or UAMFSI may terminate the Fund
Administration Agreement, without penalty, on not less than ninety (90) days'
written notice.
<PAGE>
The Fund Administration Agreement shall automatically terminate upon its
assignment by UAMFSI without the prior written consent of the Fund.
UAMFSI will from time to time employ or associate with such person or persons
as may be fit to assist them in the performance of the Fund Administration
Agreement. Such person or persons may be officers and employees who are
employed by both UAMFSI and the Fund. UAMFSI will pay such person or persons
for such employment. The Fund will not incur any obligations with respect to
such persons.
Sub-Administrator
UAMFSI has subcontracted some of the its administrative and fund accounting
services to CGFSC, an affiliate of The Chase Manhattan Bank, by a Mutual Funds
Service Agreement dated April 15, 1996. CGFSC is located at 73 Tremont Street,
Boston, Massachusetts 02108.
Sub-Transfer Agent and Sub-Shareholder Servicing Agent
UAMFSI has subcontracted its transfer agent and dividend-disbursing agent
services to DST Systems, Inc. under an Agency Agreement between UAMFSI and DST
Systems Inc. DST Systems, Inc., is located at P.O. Box 419534, Kansas City,
Missouri 64141-6534.
UAM Shareholder Service Center, Inc. ("UAMSSC"), an affiliate of UAM, serves
as sub-shareholder servicing agent for the Fund under an agreement between
UAMSSC and UAMFSI. The principal place of business of UAMSSC is 825 Duportail
Road, Wayne, Pennsylvania 19087.
Administration and Transfer Agency Services Fees
The portfolio pays a four-part fee to UAMFSI as follows:
. A portfolio specific fee to UAMFSI calculated at the annual rate of 0.06%
aggregate net assets of the portfolio.
. An annual base fee that UAMFSI pays to Chase Global Funds Services Company
for its sub-administration and other services calculated at the annual rate
of $52,500 for the first operational class; $7,500 for each additional
operational class; and 0.04% of their pro rata share of the combined assets
of the UAM Funds.
. An annual base fee that UAMFSI pays to DST Systems, Inc. for its services
as transfer agent and dividend-disbursing agent equal to $10,500 for the
first operational class and $10,500 for each additional class.
. An annual base fee that UAMFSI pays to UAMSSC for its services as sub-
shareholder-servicing agent equal to $7,500 for the first operational class
and $2,500 for each additional class.
CUSTODIAN
- --------------------------------------------------------------------------------
The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York 11245,
provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Fund.
INDEPENDENT PUBLIC ACCOUNTANT
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountants for the Fund.
SERVICE AND DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
The Fund has adopted a Distribution Plan and a Shareholder Servicing Plan (the
"Plans") for their Institutional Service Class Shares pursuant to Rule 12b-1
under the Investment Company Act of 1940.
Shareholder Servicing Plan
The Shareholder Servicing Plan (Service Plan) permits the Fund to compensate
broker-dealers or other financial institutions (Service Agents) that have
agreed with UAMFDI to provide administrative support services to Institutional
Service Class shareholders that are their customers. Under the Service Plan,
Institutional Service Class Shares may pay service fees at the maximum annual
rate of 0.25% of the average daily net asset value of
<PAGE>
such shares held by the Service Agent for the benefit of its customers. The
Fund pays these fees out of the assets allocable to Institutional Service
Class Shares to UAMFDI, to the Service Agent directly or through UAMFDI. Each
item for which a payment may be made under the Service Plan constitutes
personal service and/or shareholder account maintenance and may constitute an
expense of distributing Fund Service Class Shares as the SEC construes such
term under Rule 12b-1. Services for which Institutional Service Class Shares
may compensate Service Agents include:
. Acting as the sole shareholder of record and nominee for beneficial owners.
. Maintaining account records for such beneficial owners of the Fund's
shares.
. Opening and closing accounts.
. Answering questions and handling correspondence from shareholders about
their accounts.
. Processing shareholder orders to purchase, redeem and exchange shares.
. Handling the transmission of funds representing the purchase price or
redemption proceeds.
. Issuing confirmations for transactions in the Fund's shares by
shareholders.
. Distributing current copies of prospectuses, statements of additional
information and shareholder reports.
. Assisting customers in completing application forms, selecting dividend and
other account options and opening any necessary custody accounts.
. Providing account maintenance and accounting support for all transactions.
. Performing such additional shareholder services as may be agreed upon by
the Fund and the Service Agent, provided that any such additional
shareholder services must constitute a permissible non-banking activity in
accordance with the then current regulations of, and interpretations
thereof by, the Board of Governors of the Federal Reserve System, if
applicable.
Rule 12b-1 Distribution Plan
The Distribution Plan permits a portfolio to pay UAMFDI or others for certain
distribution, promotional and related expenses involved in marketing its
Institutional Service Class Shares. Under the Distribution Plan, Institutional
Service Class Shares may pay distribution fees at the maximum annual rate of
0.75% of the average daily net asset value of such shares held by the Service
Agent for the benefit of its customers. These expenses include, among other
things:
. Advertising the availability of services and products.
. Designing materials to send to customers and developing methods of making
such materials accessible to customers.
. Providing information about the product needs of customers.
. Providing facilities to solicit Fund sales and to answer questions from
prospective and existing investors about the Fund.
. Receiving and answering correspondence from prospective investors,
including requests for sales literature, prospectuses and statements of
additional information.
. Displaying and making available sales literature and prospectuses.
. Acting as liaison between shareholders and the Fund, including obtaining
information from the Fund and providing performance and other information
about the Fund.
.
In addition, the Service Class Shares may make payments directly to other
unaffiliated parties, who either aid in the distribution of their shares or
provide services to the Class.
Fees Paid under the Service and Distribution Plans
The Plans permit Institutional Service Class Shares to pay distribution and
service fees at the maximum annual rate of 0.75% of the class' average daily
net assets for the year. The Fund's governing board may reduce this amount at
any time and has limited the amount the Institutional Service Class may pay
under the Plans to 0.50% of the class' average daily net assets for the year.
Currently, however, the class is paying 0.25% of its average daily net assets.
The Fund will not reimburse the Distributor or others for distribution
expenses incurred in excess of the amount permitted by the Plans.
<PAGE>
Subject to seeking best price and execution, the Fund may buy or sell
portfolio securities through firms that receive payments under the Plans.
UAMFDI, at its own expense, may pay dealers for aid in distribution or for aid
in providing administrative services to shareholders.
Approving, Amending and Terminating the Fund's Distribution Arrangements
Shareholders of each portfolio have approved the Plans. The Plans also were
approved by the governing board of the Fund, including a majority of the
members of the board who are not interested persons of the Fund and who have
no direct or indirect financial interest in the operation of the Plans (Plan
Members), by votes cast in person at meetings called for the purpose of voting
on these Plans.
Continuing the Plans
The Plans continue in effect from year to year so long as they are approved
annually by a majority of the Fund's board members and its Plan Members. To
continue the Plans, the board must determine whether such continuation is in
the best interest of the Institutional Service Class shareholders and that
there is a reasonable likelihood of the Plans providing a benefit to the
Class. The Fund's board has determined that the Fund's distribution
arrangements are likely to benefit the Fund and its shareholders by enhancing
the Fund's ability to efficiently service the accounts of its Institutional
Service Class shareholders.
Amending the Plans
A majority of the Fund's governing board and a majority of its the Plan
Members must approve any material amendment to the Plans. Likewise, any
amendment materially increasing the maximum percentage payable under the Plans
must be approved by a majority of the outstanding voting securities of the
Class, as well as by a majority of the Plan Members.
Terminating the Plans
A majority of the Plan Members or a majority of the outstanding voting
securities of the Class may terminate the Plans at any time without penalty.
In addition, the Plans will terminate automatically upon their assignment.
Miscellaneous
So long as the Plans are in effect, the disinterested board members will
select and nominate the Plan Members of the Fund.
The Fund and UAMFDI intend to comply with the Conduct Rules of the National
Association of Securities Dealers relating to investment company sales
charges. with these rules.
Pursuant to the Plans, the board reviews, at least quarterly, a written report
of the amounts expended under each agreement with Service Agents and the
purposes for which the expenditures were made.
Additional Non-12b-1 Shareholder Servicing Arrangements
In addition to payments by the Fund under the Plans, UAM and any of its
affiliates, may, at its own expense, compensate a Service Agent or other
person for marketing, shareholder servicing, record-keeping and/or other
services performed with respect to the Fund, a portfolio or any class of
shares of a portfolio. The person making such payments may do so out of its
revenues, its profits or any other source available to it. Such services
arrangements, when in effect, are made generally available to all qualified
service providers. The Adviser may also compensate its affiliated companies
for referring investors to the portfolios.
Brokerage Allocation and Other Practices
SELECTION OF BROKERS
- --------------------------------------------------------------------------------
The Advisory Agreement authorizes the Adviser to select the brokers or dealers
that will execute the purchases and sales of investment securities for the
portfolio. The Advisory Agreement also directs the Adviser to use its best
<PAGE>
efforts to obtain the best execution with respect to all transactions for the
Adviser. The Adviser may select brokers based on research, statistical and
pricing services they provide to the portfolio. Information and research
provided by a broker will be in addition to, and not instead of, the services
the Adviser is required to perform under the Advisory Agreement. In so doing,
the portfolio may pay higher commission rates than the lowest rate available
when the Adviser believes it is reasonable to do so in light of the value of
the research, statistical, and pricing services provided by the broker
effecting the transaction. The Adviser may place portfolio orders with
qualified broker-dealers who refer clients to the Adviser.
SIMULTANEOUS TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser makes investment decisions for the portfolio independently of
decisions made for its other clients. When a security is suitable for the
investment objective of more than one client, it may be prudent for the
Adviser to engage in a simultaneous transaction, that is, buy or sell the same
security for more than one client. The Adviser strives to allocate such
transactions among its clients, including the portfolio, in a fair and
reasonable manner. Although there is no specified formula for allocating such
transactions, the Fund's governing board periodically reviews the various
allocation methods used by the Adviser, and the results of such allocations.
BROKERAGE COMMISSIONS
- --------------------------------------------------------------------------------
Debt Securities
Debt securities are usually bought and sold directly from the issuer or an
underwriter or market maker for the securities. Generally, each Fund will not
pay brokerage commissions for such purchases. When a debt security is bought
from an underwriter, the purchase price will usually include an underwriting
commission or concession. The purchase price for securities bought from
dealers serving as market makers will similarly include the dealer's mark up
or reflect a dealer's mark down. When the portfolio executes transactions in
the over-the-counter market, it will deal with primary market makers unless
prices that are more favorable are otherwise obtainable.
Capital Stock and Other Securities
DESCRIPTION OF SHARES AND VOTING RIGHTS
- --------------------------------------------------------------------------------
The Fund's Declaration of Trust, as amended, permit its governing board to
issue an unlimited number of shares without par value. The governing board has
the power to create and designate one or more series (portfolio) or classes of
shares of common stock and to classify or reclassify any unissued shares at
any time and without shareholder approval. When issued and paid for, the
shares of each series and class of the Fund are fully paid and nonassessable,
and have no pre-emptive rights or preference as to conversion, exchange,
dividends, retirement or other features. The shares of each series and class
have non-cumulative voting rights, which means that the holders of more than
50% of the shares voting for the election of members of the governing board
can elect 100% of the members if they choose to do so. On each matter
submitted to a vote of the shareholders, a shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share
held), then standing in his name on the books of the Fund. Shares of all
classes will vote together as a single class except when otherwise required by
law or as determined by the members of the Fund's governing board.
If the Fund is liquidated, the shareholders of the portfolio or any class
thereof are entitled to receive the net assets belonging to the portfolio, or
in the case of a class, belonging to the portfolio and allocable to that
class. The Fund will distribute is net assets to its shareholders in
proportion to the number of shares of the portfolio or class thereof held by
them and recorded on the books of the Fund. The liquidation of the portfolio
or any class thereof may be authorized at any time by vote of a majority of
the members of the governing board.
The governing board has authorized two classes of shares, Institutional and
Institutional Service. Both Institutional Class and Institutional Service
Class Shares represent interests in the same assets of the portfolio and,
except as discussed below, are identical in all respects. Unlike
Institutional Class Shares, Institutional Service Class Shares bear certain
expenses related to shareholder servicing and the distribution of such shares
and have exclusive voting rights with respect to matters relating to such
distribution expenditures. The two
<PAGE>
classes also have different exchange privileges. The net income attributable
to Institutional Service Class Shares and the dividends payable on
Institutional Service Class Shares will be reduced by the amount of the
shareholder servicing and distribution fees; accordingly, the net asset value
of the Institutional Service Class Shares will be reduced by such amount to
the extent the portfolio has undistributed net income.
The Fund will not hold annual meetings except when required to by the 1940 Act
or other applicable law. The Fund has undertaken that the governing board will
call a meeting of shareholders if such a meeting is requested in writing by
the holders of not less than 10% of the outstanding shares of the Fund. The
Fund will assist shareholder communications in such matters to the extent
required by the undertaking.
Dividends And Capital Gains Distributions
The Fund tries to distribute substantially all of the net investment income of
the portfolio and net realized capital gains so as to avoid income taxes on
its dividends and distributions and the imposition of the federal excise tax
on undistributed income and capital gains. However, the Fund cannot predict
the time or amount of any such dividends or distributions.
Distributions by the portfolio reduce its NAV. A distribution that reduces the
NAV of the portfolio below its cost basis is taxable as described in the
prospectus of the portfolio, although from an investment standpoint, it is a
return of capital. If you buy shares of the portfolio on or before the "record
date" -- the date that establishes which shareholders will receive an upcoming
distribution -- for a distribution, you will receive some of the money you
invested as a taxable distribution.
Unless the shareholder elects otherwise in writing, all dividend and capital
gains distributions are automatically received in additional shares of the
portfolio at net asset value (as of the business day following the record
date). This will remain in effect until the Fund is notified by the
shareholder in writing at least three days prior to the record date that
either the Income Option (income dividends in cash and capital gains
distributions in additional shares at net asset value) or the Cash Option
(both income dividends and capital gains distributions in cash) has been
elected. An account statement is sent to shareholders whenever an income
dividend or capital gains distribution is paid.
The portfolio will be treated as a separate entity (and hence as a separate
"regulated investment company") for federal tax purposes. The portfolio will
distribute its net capital gains to its investors, but will not offset (for
federal income tax purposes) such gains against any net capital losses of
another portfolio.
Purchase Redemption and Pricing of Shares
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
Service Agents may enter confirmed purchase orders on behalf of their
customers. If shares of the portfolio are purchased in this manner, the
Service Agent must receive your investment order before the close of trading
on the New York Stock Exchange and transmit it to UAMSSC before the close of
its business day to receive that day's share price. UAMSSC must receive proper
payment for the order by the time the portfolio is priced on the following
business day. Service Agents are responsible to their customers and the Fund
for timely transmission of all subscription and redemption requests,
investment information, documentation and money.
Purchases of shares of the portfolio will be made in full and fractional
shares of the portfolio calculated to three decimal places. Certificates for
fractional shares will not be issued. Certificates for whole shares will not
be issued except at the written request of the shareholder.
The Fund reserves the right in its sole discretion to reduce or waive the
minimum for initial and subsequent investment for certain fiduciary accounts
such as employee benefit plans or under circumstances where certain economies
can be achieved in sales of the portfolio's shares.
<PAGE>
IN-KIND PURCHASES
- --------------------------------------------------------------------------------
If accepted by the Fund, shareholders may purchase shares of the portfolio in
exchange for securities that are eligible for acquisition by the portfolio.
Securities to be exchanged that are accepted by the Fund will be valued as
described under "VALUATION OF SHARES" at the next determination of net asset
value after acceptance. Shares issued by the portfolio in exchange for
securities will be issued at net asset value determined as of the same time.
All dividends, interest, subscription, or other rights pertaining to such
securities shall become the property of the portfolio and must be delivered to
the Fund by the investor upon receipt from the issuer. Securities acquired
through an in-kind purchase will be acquired for investment and not for
immediate resale.
The Fund will not accept securities in exchange for shares of the portfolio
unless:
. At the time of exchange, such securities are eligible to be included in the
portfolio (current market quotations must be readily available for such
securities).
. The investor represents and agrees that all securities offered to be
exchanged are liquid securities and not subject to any restrictions upon
their sale by the portfolio under the Securities Act of 1933, or otherwise.
. The value of any such securities (except U.S. Government securities) being
exchanged together with other securities of the same issuer owned by the
portfolio will not exceed 5% of the net assets of the portfolio immediately
after the transaction.
. Investors who are subject to Federal taxation upon exchange may realize a
gain or loss for Federal income tax purposes depending upon the cost of
securities or local currency exchanged. Investors interested in such
exchanges should contact the Adviser.
REDEMPTION OF SHARES
- ------------------------------------------------------------------------------
When you redeem, your shares may be worth more or less than the price you paid
for them depending on the market value of the investments held by the
portfolio.
By Mail
Requests to redeem shares must include:
. Share certificates, if issued.
. A letter of instruction or an assignment specifying the number of shares or
dollar amount to be redeemed, signed by all registered owners of the shares
in the exact names in which they are registered.
.
Any required signature guarantees (see "SIGNATURE GUARANTEES"). Any other
necessary legal documents, if required, in the case of estates, trusts,
guardianships, custodianships, corporations, pension and profit sharing plans
and other organizations.
By Telephone
The following tasks cannot be accomplished by telephone:
Changing the name of the commercial bank or the account designated to receive
redemption proceeds (this can be accomplished only by a written request signed
by each shareholder, with each signature guaranteed).
Redemption of certificated shares by telephone.
The Fund and its Sub-Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and they may
be liable for any losses if they fail to do so. These procedures include
requiring the investor to provide certain personal identification at the time
an account is opened, as well as prior to effecting each transaction requested
by telephone. In addition, all telephone transaction requests will be recorded
and investors may be required to provide additional telecopied written
instructions of such transaction requests. The Fund or Sub-Transfer Agent may
be liable for any losses due to unauthorized or fraudulent telephone
instructions if the Fund or the Sub-Transfer Agent does not employ the
procedures described above. Neither the Fund nor the Sub-Transfer Agent will
be responsible for any loss, liability, cost or expense for following
instructions received by telephone that it reasonably believes to be genuine.
<PAGE>
Signature Guarantees
To protect your account, the Fund and its sub-transfer agent from fraud,
signature guarantees are required for certain redemptions. The purpose of
signature guarantees is to verify the identity of the person who has
authorized a redemption from your account
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations. A complete definition of eligible guarantor
institutions is available from the Fund's transfer agent. Broker-dealers
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution that participates in a signature guarantee program.
The signature guarantee must appear either (1) on the written request for
redemption, (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed, or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.
Other Redemption Information
Normally, the Fund will pay for all shares redeemed under proper procedures
within one business day of and no more than seven days after the receipt of
the request, or earlier if required under applicable law. The Fund may suspend
the right of redemption or postpone the date at times when both the NYSE and
Custodian Bank are closed, or under any emergency circumstances determined by
the SEC.
The Fund may suspend redemption privileges or postpone the date of payment
during any period that both the NYSE and custodian bank are closed, or trading
on the NYSE is restricted as determined by the Commission.
During any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for the
portfolio to dispose of securities owned by it, or to fairly determine the
value of its assets. For such other periods as the Commission may permit.
TRANSFER OF SHARES
- --------------------------------------------------------------------------------
Shareholders may transfer shares of the portfolio to another person by making
a written request to the Fund. Your request should clearly identify the
account and number of shares you wish to transfer. All registered owners
should sign the request and all stock certificates, if any, which are subject
to the transfer. The signature on the letter of request, the stock certificate
or any stock power must be guaranteed in the same manner as described under
"Signature Guarantees." As in the case of redemptions, the written request
must be received in good order before any transfer can be made.
VALUATION OF SHARES
- --------------------------------------------------------------------------------
The Fund does not price its shares on those days when the New York Stock
Exchange is closed, which are currently: Presidents' Day; Good Friday;
Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day;
New Year's Day and Dr. Martin Luther King, Jr. Day.
Debt Securities
Debt securities are valued according to the broadest and most representative
market, which will ordinarily be the over-the-counter market. Debt securities
may be valued based on prices provided by a pricing service when such prices
are believed to reflect the fair market value of such securities. Securities
purchased with remaining maturities of 60 days or less are valued at amortized
cost when the UAM Funds' boards determines that amortized cost reflects fair
value.
Wrapper Agreements
The value of Wrapper Agreements determined in good faith at fair value using
methods determined by the UAM Funds' boards. The fair value of a wrapper
agreement generally will be equal to the difference between the book
<PAGE>
value and the market value of the applicable covered assets after
consideration is given to the credit rating of the wrap provider and its
ability to pay amounts due under the wrapper agreement. If the board
determines that a wrap provider is unable to make such payments, the board may
assign a value to the wrapper agreement that is less than the difference
between the book value and the market value of the covered assets, which might
adversely affect the portfolio's ability to maintain a stable NAV.
Other Assets
The value of other assets and securities for which no quotations are readily
available (including illiquid and restricted securities) is determined in good
faith at fair value using methods determined by the UAM Funds' boards.
Performance Calculations
The portfolio measures performance by calculating yield and total return. Both
yield and total return figures are based on historical earnings and are not
intended to indicate future performance. Performance quotations by investment
companies are subject to rules adopted by the SEC, which require the use of
standardized performance quotations or, alternatively, that every non-
standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC.
Current yield and average annual compounded total return quotations used by
the Fund are based on the standardized methods of computing performance
mandated by the SEC. An explanation of the method used to compute or express
performance follows.
Performance is calculated separately for each class. Dividends paid by the
portfolio with respect to each class will be calculated in the same manner at
the same time on the same day and will be in the same amount, except that
service fees, distribution charges and any incremental transfer agency costs
relating to Service Class Shares will be borne exclusively by that class.
TOTAL RETURN
- -------------------------------------------------------------------------------
Total return is the change in value of an investment in the portfolio over a
given period, assuming reinvestment of any dividends and capital gains. A
cumulative or aggregate total return reflects actual performance over a stated
period of time. An average annual total return is a hypothetical rate of
return that, if achieved annually, would have produced the same cumulative
total return if performance had been constant over the entire period.
The average annual total return of the portfolio is determined by finding the
average annual compounded rates of return over 1, 5 and 10 year periods that
would equate an initial hypothetical $1,000 investment to its ending
redeemable value. The calculation assumes that all dividends and distributions
are reinvested when paid. The quotation assumes the amount was completely
redeemed at the end of each one, five and ten-year period and the deduction of
all applicable Fund expenses on an annual basis. Since Institutional Service
Class Shares bear additional service and distribution expenses, their average
annual total return will generally be lower than that of the Institutional
Class Shares.
These figures are calculated according to the following formula:
<TABLE>
<CAPTION>
P (1 + T)/n/ = ERV
<S> <C>
Where:
P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
</TABLE>
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year
periods (or fractional portion thereof).
<PAGE>
YIELD
- -------------------------------------------------------------------------------
Yield refers to the income generated by an investment in the portfolio over a
given period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all funds. As this
differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
The current yield is determined by dividing the net investment income per
share earned during a 30-day base period by the maximum offering price per
share on the last day of the period and annualizing the result. Expenses
accrued for the period include any fees charged to all shareholders during the
base period. Since Institutional Service Class Shares bear additional service
and distribution expenses, their yield will generally be lower than that of
the Institutional Class Shares.
Yield is obtained using the following formula:
Yield = 2(((a-b)/(c/d)+1)/6/-1)
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive income distributions
d = the maximum offering price per share on the last day of the period.
COMPARISONS
- -------------------------------------------------------------------------------
The portfolio's performance may be compared to data prepared by independent
services which monitor the performance of investment companies, data reported
in financial and industry publications, and various indices as further
described in the portfolio' s SAI. This information may also be included in
sales literature and advertising.
To help investors better evaluate how an investment in the portfolio of the
Fund might satisfy their investment objective, advertisements regarding the
Fund may discuss various measures of Fund performance as reported by various
financial publications. Advertisements may also compare performance (as
calculated above) to performance as reported by other investments, indices and
averages. Please see APPENDIX B for publications, indices and averages that
may be used.
In assessing such comparisons of performance, an investor should keep in mind
that the composition of the investments in the reported indices and averages
is not identical to the composition of investments in the portfolio, that the
averages are generally unmanaged, and that the items included in the
calculations of such averages may not be identical to the formula used by the
portfolio to calculate its performance. In addition, there can be no assurance
that the portfolio will continue this performance as compared to such other
averages.
TAXES
- -------------------------------------------------------------------------------
In order for the portfolio to continue to qualify for federal income tax
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended, at least 90% of its gross income for a taxable year must be
derived from qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or foreign
currencies, or other income derived with respect to its business of investing
in such securities or currencies.
The portfolio will distribute to shareholders annually any net capital gains
that have been recognized for federal income tax purposes. Shareholders will
be advised on the nature of the payments.
If for any taxable year a portfolio does not qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code, all of
the portfolio's taxable income would be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In this event,
a portfolio's distributions to shareholders would be taxable as ordinary
income to the extent of the current and accumulated earnings and profits of
the
<PAGE>
particular portfolio, and would be eligible for the dividends received
deduction in the case of corporate shareholders.
Dividends and interest received by each portfolio may give rise to withholding
and other taxes imposed by foreign countries. These taxes reduce each
portfolio's dividends but are included in the taxable income reported on your
tax statement if each portfolio qualifies for this tax treatment and elects to
pass it through to you. Consult a tax adviser for more information regarding
deductions and credits for foreign taxes.
<PAGE>
Appendix A: Description Of Securities And Ratings
MOODY'S INVESTORS SERVICE, INC.
- -------------------------------------------------------------------------------
Preferred Stock Ratings
aaa An issue which is rated "aaa" is considered to be a top-
quality preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment within
the universe of preferred stock.
aa An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a
reasonable assurance the earnings and asset protection will
remain relatively well maintained in the foreseeable
future.
a An issue which is rated "a" is considered to be an upper-
medium grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa" classification,
earnings and asset protection are, nevertheless, expected
to be maintained at adequate levels.
baa An issue which is rated "baa" is considered to be a medium-
grade preferred stock, neither highly protected nor poorly
secured. Earnings and asset protection appear adequate at
present but may be questionable over any great length of
time.
ba An issue which is rated "ba" is considered to have
speculative elements and its future cannot be considered
well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in
this class.
b An issue which is rated "b" generally lacks the
characteristics of a desirable investment. Assurance of
dividend payments and maintenance of other terms of the
issue over any long periods of time may be small.
caa An issue which is rated "caa" is likely to be in arrears on
dividend payments. This rating designation does not purport
to indicate the future status of payments.
ca An issue which is rated "ca" is speculative in a high
degree and is likely to be in arrears on dividends with
little likelihood of eventual payments.
c This is the lowest rated class of preferred or preference
stock. Issues so rated can thus be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Debt Ratings - Taxable Debt & Deposits Globally
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt-edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality
by all standards. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than
the Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment
sometime in the future.
<PAGE>
Baa Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-
assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of
danger with respect to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
Short-Term Prime Rating System - Taxable Debt & Deposits Globally
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1 Issuers rated Prime-1 (or supporting institution) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be
evidenced by many of the following characteristic s:
. High rates of return on funds employed.
. Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
. Broad leading market positions in well-established
industries.
. margins in earnings coverage of fixed financial charges and
high internal cash generation.
. Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Prime 3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligation. The effect of industry characteristics and
market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the
level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate
liquidity is maintained.
Not Prime Issuers rated Not Prime do not fall within any of the Prime
rating categories.
<PAGE>
STANDARD & POOR'S RATINGS SERVICES
- -------------------------------------------------------------------------------
Preferred Stock Ratings
AAA This is the highest rating that may be assigned by Standard
& Poor's to a preferred stock issue and indicates an
extremely strong capacity to pay the preferred stock
obligations.
AA A preferred stock issue rated AA also qualifies as a high-
quality, fixed-income security. The capacity to pay
preferred stock obligations is very strong, although not as
overwhelming as for issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB An issue rated BBB is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a
preferred stock in this category than for issues in the A
category.
BB, B, CCC Preferred stock rated BB, B, and CCC are regarded, on
balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB
indicates the lowest degree of speculation and CCC the
highest. While such issues will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CC The rating CC is reserved for a preferred stock issue that
is in arrears on dividends or sinking fund payments, but
that is currently paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the
issuer in default on debt instruments.
N.R. This indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or
that Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Plus (+) or To provide more detailed indications of preferred stock
quality, ratings from AA to CCC may be modified by
minus (-) the addition of a plus or minus sign to show relative
standing within the major rating categories.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following
considerations:
Likelihood of payment-capacity and willingness of the obligor to meet its
financial commitment on an obligation in accordance with the terms of the
obligation;
Nature of and provisions of the obligation;
Protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA An obligation rated AAA have the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its
financial commitment on the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated
obligations only in small degree. The obligor's capacity to
meet its financial commitment on the obligation is very
strong.
A An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher- rated categories.
However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a
weakened capacity of the obligator to meet its financial
commitment on the obligation.
Obligations rated BB, B, CCC , CC and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and
C the highest. While such obligations will likely have some quality
<PAGE>
and protective characteristics, these may be outweighed by large uncertainties
or major risk exposures to adverse conditions.
BB An obligation rated BB is less vulnerable to nonpayment
than other speculative issues. However, it faces major
ongoing uncertainties or exposures to adverse business,
financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial
commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the
capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the
obligation.
CCC An obligation rated CCC is currently vulnerable to non-
payment, and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet
its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its
financial commitment on the obligations.
CC An obligation rated CC is currently highly vulnerable to
nonpayment.
C The C rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has
been taken, but payments on this obligation are being
continued.
D An obligation rated D is in payment default. The D rating
category is used when payments on an obligation are not
made on the date due even if the applicable grace period
has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy
petition or the taking of a similar action if payments on
an obligation are jeopardized.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligation linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk-such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
Short-Term Issue Credit Ratings
Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. In the U.S., for example, that means
obligations with an original maturity of no more than 365 days - including
commercial paper. Short-term ratings are also used to indicate the
creditworthiness of an obligor with respect to put features on long-term
obligations. The result is a dual rating in which the short-term rating
addresses the put feature, in addition to the usual long-term rating. Medium-
term notes are assigned long-term ratings.
A-1 A short-term obligation rated A-1 is rated in the highest
category by Standard & Poor's. The obligor's capacity to
meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's
capacity to meet its financial commitment on these
obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than obligation in
higher rating categories. However, the obligor's capacity
to meet its financial commitment on the obligation is
satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate
protection parameters. However, adverse economic conditions
or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial
commitment on the obligation.
B A short-term obligation rated B is regarded as having
significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment
on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate
capacity to meet its financial commitment on the
obligation.
<PAGE>
C A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet
its financial commitment on the obligation.
D A short-term obligation rated D is in payment default. The
D rating category is used when payments on an obligation
are not made on the date due even if the applicable grace
period has not expired, unless Standard & Poors' believes
that such payments will be made during such grace period.
The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
DUFF & PHELPS CREDIT RATING CO.
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Long-Term Debt and Preferred Stock
AAA Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury
debt.
AA+/AA High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of
economic conditions.
A+/A/A- Protection factors are average but adequate. However, risk
factors are more variable in periods of greater economic
stress.
BBB+/BBB Below-average protection factors but still considered
sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BBB-
BB+/BB/BB- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial
protection factors fluctuate according to industry
conditions. Overall quality may move up or down frequently
within this category.
B+/B/B- Below investment grade and possessing risk that obligation
will not be net when due. Financial protection factors will
fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable
uncertainty exists as to timely payment of principal,
interest or preferred dividends. Protection factors are
narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments. Issuer failed to meet
scheduled principal and/or interest payments.
DP Preferred stock with dividend arrearages.
Short-Term Debt
High Grade
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety
is just below risk-free U.S. Treasury short-term
obligations.
D-1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
<PAGE>
Good Grade
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
Satisfactory Grade
D-3 Satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely
payment is expected.
Non-Investment Grade
D-4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a
high degree of variation.
Default
D-5 Issuer failed to meet scheduled principal and/or interest
payments.
FITCH IBCA RATINGS
- --------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade
AAA Highest credit quality. 'AAA' ratings denote the lowest
expectation of credit risk. They are assigned only in case
of exceptionally strong capacity for timely payment for
financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA Very high credit quality. 'AA' ratings denote a very low
expectation of credit risk. They indicate very strong
capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable
events.
A High credit quality. 'A' ratings denote a low expectation
of credit risk. The capacity for timely payment of
financial commitments is considered strong. This capacity
may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case
for higher ratings.
B Good credit quality. 'BBB' ratings indicate that there is
currently a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
Speculative Grade
BB Speculative. 'BB' ratings indicate that there is a
possibility of credit risk developing, particularly as the
result of adverse economic change over time; however,
business or financial alternatives may be available to
allow financial commitments to be met. Securities rated in
this category are not investment grade.
B Highly speculative. 'B' ratings indicate that significant
credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC,CC,C High default risk. Default is a real possibility.
Capacity for meeting financial commitments is solely
reliant upon sustained, favorable business or economic
developments. A 'CC' rating indicates that default of some
kind appears probable. 'C' ratings signal imminent
default.
<PAGE>
DDD,DD,D Default. Securities are not meeting current obligations
and are extremely speculative. 'DDD' designates the
highest potential for recovery of amounts outstanding on
any securities involved. For U.S. corporates, for example,
'DD' indicates expected recovery of 50% - 90% of such
outstandings, and 'D' the lowest recovery potential, i.e.
below 50%.
International Short-Term Credit Ratings
F1 Highest credit quality. Indicates the strongest capacity
for timely payment of financial commitments; may have an
added "+" to denote any exceptionally strong credit
feature.
F2 Good credit quality. A satisfactory capacity for timely
payment of financial commitments, but the margin of safety
is not as great as in the case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of
financial commitments is adequate; however, near-term
adverse changes could result in a reduction to non-
investment grade.
B Speculative. Minimal capacity for timely payment of
financial commitments, plus vulnerability to near-term
adverse changes in financial and economic conditions.
C High default risk. Default is a real possibility.
Capacity for meeting financial commitments is solely
reliant upon a sustained, favorable business and economic
environment.
D Default. Denotes actual or imminent payment default.
Notes
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the 'AAA' long-term rating
category, to categories below 'CCC', or to short-term ratings other than 'F1'.
'NR' indicates that Fitch IBCA does not rate the issuer or issue in question.
'Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
RatingAlert: Ratings are placed on RatingAlert to notify investors that there
is a reasonable probability of a rating change and the likely direction of
such change. These are designated as "Positive", indicating a potential
upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may
be raised, lowered or maintained. RatingAlert is typically resolved over a
relatively short period.
<PAGE>
Appendix B - Comparisons
CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. --
analyzes price, current yield, risk, total return and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
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.
Donoghue's Money Fund Average -- is an average of all major money market fund
yields, published weekly for 7 and 30-day yields.
Dow Jones Industrial Average - a price-weighted average of thirty blue-chip
stocks that are generally the leaders in their industry and are listed on the
New York Stock Exchange. It has been a widely followed indicator of the stock
market since October 1, 1928.
Dow Jones Industrial Average -- an unmanaged price weighted average of 30
blue-chip stocks.
Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times, Global
Investor, Investor's Daily, Lipper Analytical Services, Inc., Morningstar,
Inc., New York Times, Personal Investor, Wall Street Journal and Weisenberger
Investment Companies Service -- publications that rate fund performance over
specified time periods.
Historical data supplied by the research departments of First Boston
Corporation, J.P. Morgan & Co, Inc., Salomon Smith Barney, Merrill Lynch &
Co., Inc., Lehman Brothers, Inc. and Bloomberg L.P.
IBC's Money Fund Average/All Taxable - an average of all major money market
fund yields, published weekly for 7- and 30-day yields.
IFC Investable Index - an unmanaged index maintained by the International
Finance Corporation. This index consists of 890 companies in 25 emerging
equity markets, and is designed to measure more precisely the returns
portfolio managers might receive from investment in emerging markets equity
securities by focusing on companies and markets that are legally and
practically accessible to foreign investors.
Lehman Aggregate Bond Index - an unmanaged fixed income market value-weighted
index that combines the Lehman Government/Corporate Index and the Lehman
Mortgage-Backed Securities Index, and includes treasury issues, agency issues,
corporate bond issues and mortgage backed securities. It includes fixed rate
issuers of investment grade (BBB) or higher, with maturities of at least one
year and outstanding par values of at least $200 million for U.S. government
issues and $25 million for others.
Lehman Corporate Bond Index - an unmanaged indices of all publicly issues,
fixed-rate, nonconvertible investment grade domestic corporate debt. Also
included are yankee bonds, which are dollar-denominated SEC registered public,
noncovertible debt issued or guaranteed by foreign sovereign governments,
municipalities, or governmental agencies, or international agencies.
Lehman Government Bond Index -an unmanaged treasury bond index including all
public obligations of the U.S. Treasury, excluding flower bonds and foreign-
targeted issues, and the Agency Bond Index (all publicly issued debt of U.S.
government agencies and quasi-federal corporation, and corporate debt
guaranteed by the U.S. government). In addition to the aggregate index, sub-
indices cover intermediate and long term issues.
Lehman Government/Corporate Index -- an unmanaged fixed income market value-
weighted index that combines the Government and Corporate Bond Indices,
including U.S. government treasury securities, corporate and yankee bonds.
All issues are investment grade (BB) or higher, with maturities of at least
one year and outstanding par value of at least $100 million of r 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.
Lehman High Yield Bond Index - an unmanaged index of fixed rate, non-
investment grade debt. All bonds included in the index are dollar
denominated, noncovertible, have at least one year remaining to maturity and
an outstanding par value of at least $100 million.
<PAGE>
Lehman Intermediate Government/Corporate Index - an unmanaged fixed income
market value-weighted index that combines the Lehman Government Bond Index
(intermediate-term sub-index) and Lehman Corporate Bond Index.
Lipper 1-5 Year Short Investment Grade Debt Funds Average -- is an average of
100 funds that invest at least 65% of assets in investment grade debt issues
(BBB or higher) with dollar-weighted average maturities of 5 years or less.
Lipper Balanced Fund Index - an unmanaged index of open-end equity funds whose
primary objective is to conserve principal by maintaining at all time a
balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio
ranges around 60%/40%.
Lipper Equity Income Fund Index - an unmanaged index of equity funds which
seek relatively high current income and growth of income through investing 60%
or more of the portfolio in equities.
Lipper Equity Mid Cap Fund Index - an unmanaged index of funds which by
prospectus or portfolio practice invest primarily in companies with market
capitalizations less than $5 billion at the time of purchase.
Lipper Equity Small Cap Fund Index - an unmanaged index of funds by prospectus
or portfolio practice invest primarily in companies with market
capitalizations less than $1 billion at the time of purchase.
Lipper Growth Fund Index - an unmanaged index composed of the 30 largest funds
by asset size in this investment objective.
Lipper Mutual Fund Performance Analysis and Lipper -Fixed Income Fund
Performance Analysis -- measures total return and average current yield for
the mutual fund industry. Rank individual mutual fund performance over
specified time periods, assuming reinvestments of all distributions, exclusive
of any applicable sales charges.
Merrill Lynch 1-4.99 Year Corporate/Government Bond Index -- is an unmanaged
index composed of U.S. treasuries, agencies and corporates with maturities
from 1 to 4.99 years. Corporates are investment grade only (BBB or higher).
Morgan Stanley Capital International EAFE Index -- 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.
Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
yield, risk and total return for equity funds.
NASDAQ Composite Index -- is a market capitalization, price only, unmanaged
index that tracks the performance of domestic common stocks traded on the
regular NASDAQ market as well as national market System traded foreign common
stocks and ADRs..
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.
Russell 1000 Index - an unmanaged index composed of the 1000 largest stocks in
the Russell 3000 Index.
Russell 2000 Growth Index - contains those Russell 2000 securities with higher
price-to-book ratios and higher forecasted growth values.
Russell 2000 Index -- an unmanaged index composed of the 2,000 smallest stocks
in the Russell 3000 Index.
Russell 2000 Value Index - contains those Russell 2000 securities with a less-
than-average growth orientation. Securities in this index tend to exhibit
lower price-to-book and price-earnings ratios, higher dividend yields and
lower forecasted growth values than the growth universe.
Russell 2500 Growth Index - contains those Russell 2500 securities with a
greater-than-average growth orientation. Securities in this index tend to
exhibit higher price-to-book and price-earnings ratios, lower dividend yields
and higher forecasted growth values than the value universe.
Russell 2500 Index - an unmanaged index composed of the 2,5000 smallest stocks
in the Russell 3000.
<PAGE>
Russell 2500 Value Index - contains those Russell 2500 securities with a less-
than-average growth orientation. Securities in this index tend to exhibit
lower price-to-book and price-earnings ratios, higher dividend yields and
lower forecasted growth values then the Growth universe.
Russell 3000 Index - composed of the 3,000 largest U.S. publically traded
companies based on total market capitalization, which represents approximately
98% of the investable U.S. equity market.
Russell Mid-Cap Index -- is composed of the 800 smallest stocks in the Russell
1000 Index, with an average capitalization of $1.96 billion.
Salomon Smith Barney Global excluding U.S. Equity Index - an comprised of the
smallest stocks (less than $1 billion market capitalization) of the Extended
Market Index, of both developed and emerging markets.
Salomon Smith Barney One to Three Year Treasury Index - an unmanaged index
comprised of U.S. treasury notes and bonds with maturities one year or
greater, but less than three years.
Salomon Smith Barney Three-Month T-Bill Average -- the average for all
treasury bills for the previous three-month period.
Salomon Smith Barney Three-Month U.S. Treasury Bill Index - a return
equivalent yield average based on the last three 3-month Treasury bill issues.
Savings and Loan Historical Interest Rates -- as published by the U.S. Savings
and Loan League Fact Book.
Standard & Poors' 600 Small Cap Index - an unmanaged index comprised of 600
domestic stocks chosen for market size, liquidity, and industry group
representation. The index is comprised of stocks from the industrial,
utility, financial, and transportation sectors.
Standard & Poors' Midcap 400 Index -- consists of 400 domestic stocks chosen
for market size (medium market capitalization of approximately $700 million),
liquidity, and industry group representation. It is a market-value weighted
index with each stock affecting the index in proportion to its market value.
Standard & Poors' 500 Stock Index- an unmanaged index composed of 400
industrial stocks, 40 financial stocks, 40 utilities stocks and 20
transportation stocks.
Standard & Poors' Barra Value Index - is constructed by dividing the
securities in the S&P 500 Index according to price-to-book ratio. This index
contains the securities with the lower price-to-book ratios; the securities
with the higher price-to-book ratios are contained in the Standard & Poor's
Barra Growth Index.
Standard & Poors' Utilities Stock Price Index - a market capitalization
weighted index representing three utility groups and, with the three groups,
43 of the largest utility companies listed on the New York Stock Exchange,
including 23 electric power companies, 12 natural gas distributors and 8
telephone companies.
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.
U.S. Three-Month Treasury Bill Average - the average return for all treasury
bills for the previous three month period.
Value Line -- composed of over 1,600 stocks in the Value Line Investment
Survey.
Wilshire Real Estate Securities Index - a market capitalization weighted index
of publicly traded real estate securities, including real estate investment
trusts, real estate operating companies and partnerships. The index is used
by he institutional investment community as a broad measure of the performance
of public real estate equity for asset allocation and performance comparison.
Wilshire REIT Index - includes 112 real estate investment trusts (REITs) but
excludes seven real estate operating companies that are included in the
Wilshire Real Estate Securities Index..
Note: With respect to the comparative measures of performance for equity
securities described herein, comparisons of performance assume reinvestment of
dividends, except as otherwise stated.
<PAGE>
UAM FUNDS TRUST
EXHIBIT INDEX
Exhibit Description
E.2. Distribution Agreement between Registrant and UAM Fund Distributors,
Inc. dated as of March 31, 1999 (Advisor Class Shares)
E.4. Amendment to Distribution Agreement between Registrant and ACG Capital
Corporation dated as of March 31, 1999
I. Opinions and Consents of Counsel
<PAGE>
UAM FUNDS TRUST
DISTRIBUTION AGREEMENT
(ADVISOR CLASS SHARES)
THIS DISTRIBUTION AGREEMENT is made as of the 1st day of March, 1999, between
UAM Funds Trust, a Delaware business trust (the "Trust"), having its principal
place of business in Boston, Massachusetts on behalf of the Heitman Real Estate
Portfolio (the "Fund"), and UAM Fund Distributors, Inc., a Massachusetts
corporation (the "Distributor"), having its principal place of business in
Boston, Massachusetts.
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company and is
authorized (i) to issue shares of beneficial interest in separate series
("Series"), with the shares of each such series representing the interests in a
separate portfolio of securities and other assets, and (ii) to divide such
shares of beneficial interest of each such series into two or more classes;
WHEREAS, at the present time, the Fund is authorized to issue two classes of
shares designated as Heitman Real Estate Portfolio "Institutional Class" shares
and "Advisor Class" shares;
WHEREAS, the Trust wishes to employ the services of Distributor with respect to
accounts holding Advisor Class shares of the Fund which are opened after March
11, 1999; and
WHEREAS, the Distributor wishes to provide distribution services to the Trust
with respect to the Advisor Class of shares of the Fund as set forth below.
NOW, THEREFORE, in consideration of the mutual promises and undertakings herein
contained, the parties agree as follows:
1. SALE OF SHARES. The Trust grants to the Distributor the right to sell
shares of beneficial interest, no par value per share, of the Advisor Class of
the Fund (the "Advisor Class Shares" or the "Shares") during the term of this
Agreement and subject to the registration requirements of the Securities Act of
1933, as amended (the "1933 Act"), and of the laws governing the sale of
securities in various states (the "Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as principal, the
Advisor Class Shares authorized for issue and registered under the 1933 Act and
applicable Blue Sky Laws; and (ii) shall sell such Shares only in compliance
with the terms set forth in the Trust's currently effective registration
statement and any Plan of Distribution of the Trust or its Series as may be in
effect from time to time and any further limitations the Trustees of the Trust
may impose. Distributor may enter into selling agreements with selected dealers
and others for the sale of Advisor Class Shares and will act only on its own
behalf as principal in entering into such selling agreements.
2. SALE OF SHARES BY THE TRUST. The Trust reserves the right to issue Shares
in connection with (a) the merger or consolidation of the assets of, or
acquisition by the Trust through purchase or otherwise, with any other
investment company, trust or personal holding company; (b) a pro rata
<PAGE>
distribution directly to the holders of Shares in the nature of a stock dividend
or split-up; and (c) as otherwise may be provided in the then current
registration statement of the Trust.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply to issued
Advisor Class Shares, Advisor Class Shares held in its treasury in the event
that in the discretion of the Trust treasury Shares of such class shall be sold,
and Advisor Class Shares repurchased for resale.
4. PUBLIC OFFERING PRICE. Except as otherwise noted in the Trust's Prospectus
(the "Prospectus") or Statement of Additional Information (the "SAI") with
respect to Advisor Class Shares, as amended or supplemented from time to time,
all Advisor Class Shares sold to investors by the Distributor or the Trust will
be sold at the public offering price plus any applicable sales charges described
therein. The public offering price for all accepted subscriptions will be the
net asset value per share, determined in the manner described in the Trust's
then current Prospectus or SAI with respect to the applicable series. The Trust
shall in all cases receive the net asset value per share on all sales and the
Distributor shall be entitled to retain the applicable sales charges, subject to
any reallowance obligations of the Distributor as set forth in any selling
agreements with selected dealers and others for the sale of Advisor Class Shares
and/or as set forth in the Prospectus and/or SAI of the Trust with respect to
Advisor Class Shares.
5. SUSPENSION OF SALES. If and whenever the determination of net asset value
is suspended and until such suspension is terminated, no further orders for
Shares shall be processed by the Distributor except such unconditional orders
placed with the Distributor before it had knowledge of the suspension. In
addition, the Trust reserves the right to suspend sales and the Distributor's
authority to sell Shares if, in the judgment of the Trust, it is in the best
interests of the Trust to do so. Suspension will continue for such period as
may be determined by the Trust. In addition, the Trust and Distributor reserve
the right to reject any purchase order.
6. SOLICITATION OF SALES. In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for Shares of the Trust. This
shall not prevent the Distributor from entering into like arrangements
(including arrangements involving the payment of underwriting commissions) with
other issuers. Distributor agrees to use all reasonable efforts to ensure that
taxpayer identification numbers provided for holders of Shares of the Trust are
correct.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by the Trust
to give any information or to make any representations other than those
contained in the appropriate registration statements, Prospectuses or SAIs filed
with the Securities and Exchange Commission under the 1933 Act and applicable
Blue Sky Laws (as those registration statements, Prospectuses and SAIs may be
amended from time to time), or contained in shareholder reports or other
material that may be prepared by or on behalf of the Trust for the Distributor's
use. This shall not be construed to prevent the Distributor from preparing and
distributing, in compliance with applicable laws and regulations, sales
literature or other material as it may deem appropriate. Distributor will
furnish or cause to be furnished copies of such sales literature or other
material to
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<PAGE>
the President of the Trust or his designee and will provide him with
reasonable opportunity to comment on it. Distributor agrees to take appropriate
action to cease using such sales literature or other material to which the Trust
reasonably objects as promptly as practicable after receipt of the objection.
Distributor further agrees that in connection with the offer and sale of Shares,
Distributor shall comply with all applicable federal and state securities laws
(including, without limitation, the maintenance of effective broker-dealer
registrations as required) and shall comply with the requirements of the Rules
of Fair Practice of the National Association of Securities Dealers, Inc.
8. REGISTRATION OF SHARES. The Trust agrees that it will use its best efforts
to register Shares under the 1933 Act (subject to the necessary approval, if
any, of its shareholders) and to qualify and maintain the registration and
qualification of an appropriate number of shares under the securities laws of
such states so that there will be available for sale the number of Shares the
Distributor may reasonably be expected to sell. Distributor shall furnish such
information and other materials relating to its affairs and activities as shall
be required by the Trust in connection with such registration and qualification.
The Trust agrees that it will notify Distributor of each state where the Shares
are qualified or registered for sale, and the Distributor agrees that it will
not offer or sell Shares in any state where it has not been notified that the
offer or sale of Shares has been so qualified or registered. The Trust shall
furnish to the Distributor copies of all information, financial statements and
other papers which the Distributor may reasonably request for use in connection
with the distribution of Shares of each series of the Trust.
9. EXPENSES, COMPENSATION AND REIMBURSEMENT.
(a) The Trust shall pay all fees and expenses:
(i) in connection with the preparation, setting in type and filing of
any registration statement, Prospectus and SAI under the 1933
Act, and any amendments thereto, for the issue of its Shares;
(ii) in connection with the registration and qualification of Shares
for sale in the various states in which the Board of Trustees
(the "Trustees") of the Trust shall determine it advisable to
qualify such Shares for sale (including registering the Trust or
Series as a broker or dealer or any officer of the Trust as agent
or salesperson in any state);
(iii) of preparing, setting in type, printing and mailing any report or
other communication to holders of Shares of the Trust in their
capacity as such; and
(iv) of preparing, setting in type, printing and mailing Prospectuses,
SAIs, and any supplements thereto, sent to existing holders of
Shares.
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<PAGE>
(b) The Distributor shall pay costs of:
(i) printing and distributing Prospectuses, SAIs and reports
prepared for its use in connection with the offering of the
Shares for sale to the public;
(ii) any other literature used in connection with such offering;
(iii) advertising in connection with such offering including, but not
limited to the following: public relations services, sales
presentations, media charges, preparation, printing and mailing
of advertising and sales literature, data processing necessary
to distribution effort, printing and mailing of prospectuses;
and
(iv) any additional out-of-pocket expenses incurred in connection
with these costs.
(v) in addition to the services described above, Distributor will
provide services, including assistance in the production of
marketing and advertising materials for the sale of Shares of
the Trust and their review for compliance with applicable
regulatory requirements, entering into other agreements with
broker-dealers to sell Shares of the Trust and monitoring their
financial strength and contractual compliance, providing,
directly or through its affiliates certain investor support
services, personal service, and the maintenance of shareholder
accounts.
(c) In connection with the services to be provided by the Distributor
under this Agreement, in addition to any sales charges referred to in
Section 4 hereof, the Distributor may receive from the Trust as
compensation for services provided hereunder, subject to the terms and
conditions of the Trust's Plan of Distribution Pursuant to Rule 12b-1,
an amount with respect to Advisor Class Shares determined at an annual
rate of up to 0.25% of the average daily value of net assets
represented by such Shares, such amount to be paid in arrears at the
end of each calendar month.
10. INDEMNIFICATION.
(a) The Trust agrees to indemnify and hold harmless the Distributor and
each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including
the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees
incurred in connection therewith) arising out of or based upon:
(i) any violation of the Trust's representations or covenants herein
contained;
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<PAGE>
(ii) any allegation of any wrongful act of the Trust or any of its
representatives (other than the Distributor or any of its
employees or representatives or any other person for whose acts
the Distributor is responsible or is alleged to be responsible
(including any selected dealer or person through whom sales made
pursuant to an agreement with the Distributor));
(iii) any allegation of any person acquiring any Shares, based upon
the 1933 Act or any other statute or common law, that the
registration statements, Prospectuses, SAIs, or shareholder
reports of the Trust included an untrue statement of a material
fact or omitted to state a material fact required to be stated
or necessary in order to make the statements not misleading,
except to the extent the statement or omission was made in
reliance upon, and in conformity with, information furnished in
writing to the Trust by or on behalf of the Distributor; or
(iv) any allegation that any advertising material included an untrue
statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the
statements not misleading, to the extent that such statement or
omission was made in reliance upon, and in conformity with,
information furnished in writing to the Distributor by the
Trust.
In no case is:
(i) the indemnity of the Trust in favor of the Distributor or any
person indemnified to be deemed to protect the Distributor or
any person against any liability to the Trust or its security
holders to which the Distributor or such person would otherwise
be subject by reason of willful misfeasance, bad faith or
ordinary negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties
under this agreement; or
(ii) the Trust to be liable under its indemnity agreement contained
in this Section 10(a) with respect to any claim made against the
Distributor or any person indemnified unless the Distributor or
person, as the case may be, shall have notified the Trust in
writing of the claim within a reasonable time after the summons
or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor
or any such person or after the Distributor or such person shall
have received notice of service on any designated agent.
However, except to the extent the Trust is harmed thereby,
failure to notify the Trust of any claim shall not relieve the
Trust from any liability which it may have to the Distributor or
any person against whom such action is brought other than on
account of its indemnity agreement contained in this Section
10(a).
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<PAGE>
The Trust shall be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit
brought to enforce any claims, but if the Trust elects to assume the
defense, the defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor, or person or persons, defendant or
defendants in the suit. In the event the Trust elects to assume the
defense of any suit and retain counsel, the Distributor, officers or
directors or controlling person(s) or defendant(s) in the suit, shall
bear the fees and expenses of any additional counsel retained by,
them. If the trust does not elect to assume the defense of any suit,
it will reimburse the Distributor, officers or directors or
controlling person(s) or defendant)(s) in the suit, for the reasonable
fees and expenses of any counsel retained by them. The Trust agrees
to notify the Distributor promptly of the commencement of any
litigation or proceedings against it or any of its officers or
Trustees in connection with the issuance or sale of any of the Shares.
(c) The Distributor agrees to indemnify and hold harmless the Trust and
each of its Trustees and officers and each person, if any, who
controls the Trust within the meaning of Section 15 of the 1933 Act,
against any loss, liability, damages, claim or expense (including the
reasonable cost of investigating or defending any alleged loss,
liability, damages, claim or expense and reasonable counsel fees
incurred in connection therewith) arising out of or based upon:
(i) any violation of any of its representations or covenants herein
contained;
(ii) any allegation of any wrongful act of the Distributor or any of
its employees or representatives or any other person for whose
acts the Distributor is responsible or is alleged to be
responsible (including any selected dealer or person through
whom sales are made pursuant to an agreement with the
Distributor);
(iii) any allegation of any person acquiring any Shares, based on the
1933 Act or any other statute or common law, that the
registration statements, Prospectuses, SAIs or shareholder
reports included an untrue statement of a material fact or
omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading, to the
extent that such statement or omission was made in reliance
upon, and in conformity with, information furnished in writing
to the Trust by or on behalf of the Distributor; or
(iv) any allegation that any advertising material included an untrue
statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the
statements not misleading, except to the extent that such
statement or omission was made in reliance upon, and in
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<PAGE>
conformity with, information furnished in writing to the
Distributor by the Trust.
In no case is:
(i) the indemnity of the Distributor in favor of the Trust or any
person indemnified to be deemed to protect the Trust or any
person against any liability to which the Trust or such person
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties
under this Agreement;
(ii) the Distributor to be liable under its indemnity agreement
contained in this Section 10(b) with respect to any claim made
against the Trust or any person indemnified unless the Trust or
person, as the case may be, shall have notified the Distributor
in writing of the claim within a reasonable time after the
summons or other first written notification giving information of
the nature of the claim shall have been served upon the Trust or
any such person or after the Trust or such person shall have
received notice of service on any designated agent. However,
failure to notify the Distributor of any claim shall not relieve
the Distributor from any liability which it may have to the Trust
or any person against whom such action is brought other than on
account of its indemnity agreement contained in this Section
10(b).
The Distributor shall be entitled to participate, at its own expense,
in the defense, if it so elects, to assume the defense of any suit
brought to enforce any claims, but if the Distributor elects to assume
the defense, the defense shall be conducted by counsel chosen by it
and satisfactory to the Trust, to its officers and Trustees and to any
controlling person(s) or any defendant(s) in the suit. In the event
the Distributor elects to assume the defense of any suit and retain
counsel, the Trust or controlling person(s) or defendant(s) in the
suit shall bear the fees and expenses of any additional counsel
retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Trust, its officers or
Trustees, controlling person(s) or defendant(s) in the suit, for the
reasonable fees and expenses of any counsel retained by them. The
Distributor agrees to notify the Trust promptly of the commencement of
any litigation or proceedings against it in connection with the issue
and sale of any of the Shares.
(c) The indemnities granted by the parties in this Section 10 shall survive the
termination of this Agreement.
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<PAGE>
11. EFFECTIVENESS, TERMINATION, ETC.
(a) This Agreement shall become effective as of the date of:
(i) the date on which an amendment to the registration statement on
Form N-1A with respect to the Advisor Class Shares becomes
effective under the 1933 Act
(ii) the date on which such class commences offering its Shares to the
public,
(b) Unless terminated as provided in this section, the Agreement shall
continue in force for two (2) years from the date of its execution and
thereafter from year to year, provided continuance is approved at
least annually by either:
(i) the vote of a majority of the Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the
Trust, and
(ii) the vote of a majority of those Trustees of the Trust who are not
interested persons of the Trust and who are not parties to this
Agreement or interested persons of any party, cast in person at a
meeting called for the purpose of voting on the approval.
(c) This Agreement shall automatically terminate in the event of its
assignment. In addition to termination by failure to approve
continuance or by assignment, this Agreement may at any time be
terminated without the payment of any penalty by vote of a majority of
the Trustees of the Trust who are not interested persons of the Trust,
or by vote of a majority of the outstanding voting securities of the
Trust, on not more than sixty (60) days' written notice by the Trust.
This Agreement may be terminated by the Distributor upon not less than
sixty (60) days' prior written notice to the Trust.
As used in this Section 11, the terms "vote of a majority of the
outstanding voting securities," "assignment" and interested person" shall
have the respective meanings specified in the 1940 Act and the rules
enacted thereunder as now in effect or as hereafter amended.
12. INSURANCE. This Distributor shall maintain insurance coverage in such
amounts and in such forms as the Trust reasonably determines against any and all
liabilities which may arise in connection with the performance of the
Distributor's duties hereunder. Upon request, the Distributor shall provide to
the Trust evidence of such coverage.
13. NOTICE. Any notice under this Agreement shall be given in writing
addressed and hand delivered or sent by registered or certified mail, postage
prepaid, to the other party to this Agreement at its principal place of
business.
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<PAGE>
14. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
15. GOVERNING LAW. To the extent that state law has not been preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
16. LIMITATION OF LIABILITY. The Distributor acknowledges that it has received
notice of and accepts the limitations of liability set forth in the Trust's
Master Trust Agreement. The Distributor agrees that the Trust's obligations
hereunder shall be limited to the Trust and that the Distributor shall have
recourse solely against the assets of the Series with respect to which the
Trust's obligations hereunder relate and shall have no recourse against the
assets of any other Series or against any shareholder, Trustee, officer,
employee or agent of the Trust.
17. MISCELLANEOUS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect this
construction or effect. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
UAM FUNDS TRUST
By: /s/ Gary L. French
Name: Gary L. French
Title: Treasurer
UAM FUND DISTRIBUTORS, INC.
By: /s/ Michael E. DeFao
Name: Michael E. DeFao
Title: Vice President and
General Counsel
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<PAGE>
AMENDMENT TO UAM FUNDS TRUST DISTRIBUTION AGREEMENT (ADVISOR
CLASS SHARES) DATED JULY 1, 1998
WITNESSETH
WHEREAS, UAM Funds Trust (the "Trust") and ACG Capital Corporation ("ACG")
desire to amend the Distribution Agreement dated July 1, 1998, (the "Agreement")
as of March 31, 1999 to employ ACG as a limited co-distributor of Advisor Class
Shares of the Heitman Real Estate Portfolio (the "Fund") for all accounts opened
on or before March 31, 1999.
WHEREAS, For all new accounts opened after March 31, 1999, and for all
additional purchases to accounts opened on or before March 31, 1999 UAM Fund
Distributors, Inc. ("UAMFDI") will act as distributor to the Fund. UAMFDI has
entered into a Distribution Agreement with the Trust dated March 31, 1999.
WHEREAS, ACG wishes to act as a limited co-distributor of the Advisor Class
shares of the Fund as described above to provide certain administrative and
support services to those broker-dealer firms and their registered
representatives who have offered and sold shares of the Fund as of March 31,
1999.
NOW, THEREFORE, the Trust and ACG agree to amend Sections 1, 3 and 7 of the
Agreement in their entirety as set forth below.
1. SALE OF SHARES. The Trust hereby rescinds the right of ACG to sell
shares of beneficial interest of the Advisor Class of the Fund (the
"Advisor Class Shares" or the "Shares"). ACG will not enter into any
selling agreements with other dealers effective as of March 31, 1999.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply to issued
Advisor Class Shares, Advisor Class Shares held in its treasury in the
event that in the discretion of the Trust treasury Shares of such
class shall be sold, and Advisor Class Shares repurchased for resale.
In addition, this Agreement shall only apply to Advisor Class Shares
sold by ACG before March 31, 1999.
4. AUTHORIZED REPRESENTATIONS. ACG is not authorized by the Trust to give
any information or to make any representations other than those
contained in the appropriate registration statements, Prospectuses or
SAI filed with the Securities and Exchange Commission under the 1933
Act and applicable Blue Sky Laws (as those registration statements,
Prospectuses and SAI may be amended from time to time), or contained
in shareholder reports or other material that may be prepared by or on
behalf of the Trust for ACG's use. ACG shall not prepare or distribute
any sales literature or marketing materials and shall not be involved
in connection with the offer and sales of Shares of the Fund, which
shall be the sole responsibility of UAMFDI effective as of March 31,
1999. In its limited role as a
<PAGE>
co-Distributor as outlined above, ACG shall comply with all applicable
federal and state securities laws and shall comply with the
requirements of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. ACG is not, however, required to maintain
its registration as a broker-dealer in all 50 states.
All other provisions of the Agreement shall remain unchanged and in full force
and effect.
IN WITNESETH WHEREOF, the parties above have caused this amendment to be
executed by their duly authorized officer and shall be effective as of the 31st
day of March, 1999.
UAM FUNDS TRUST ACG CAPITAL CORPORATION
By: /s/ Michael E. DeFao By: /s/ Ronald D. Cordes
Name: Michael E. DeFao Name: Ronald D. Cordes
Title: Vice President and General Title: President
Counsel
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<PAGE>
DRINKER BIDDLE & REATH LLP
1345 Chestnut Street
Philadelphia, PA 19107-3496
(215) 988-2700
April 7, 1999
UAM Funds Trust
211 Congress Street
Fourth Floor
Boston, MA 02110
Re: UAM Funds Trust - Shares of Beneficial Interest
-----------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for UAM Funds Trust, a Delaware business
trust, ("UAM") in connection with the registration by UAM of shares of
beneficial interest without par value of its Dwight Capital Preservation
Portfolio (the "Portfolio"). The Declaration and Agreement of Trust of UAM
authorize the issuance of an unlimited number of shares of beneficial interest,
which are divided into multiple series and classes (each a "Class" and
collectively "Classes"). The shares of beneficial interest designated into each
such series are referred to herein as the "Shares." You have asked for our
opinion on certain matters relating to the Shares of the Portfolio.
We have reviewed UAM's Agreement and Declaration of Trust and By-laws,
resolutions of UAM's Board of Trustees ("Board"), certificates of public
officials and of UAM's officers and such other legal and factual matters as we
have deemed appropriate. We have also reviewed UAM's Registration Statement on
Form N-1A under the Securities Act of 1933 (the "Registration Statement"), as
amended through Post-Effective Amendment No. 29 thereto.
This opinion is based exclusively on the Delaware Business Trust Act
and the federal law of the United States of America.
We have assumed the following for purposes of this opinion:
1. The shares of beneficial interest have been issued in accordance
with the Agreement and Declaration of Trust and By-laws of UAM and resolutions
of UAM's Board relating to the creation, authorization and issuance of the
Shares.
2. Prior to the issuance of any future Shares, the Board (a) will
duly authorize the issuance of such future Shares, (b) will determine with
respect to each class of such future Shares the preferences, limitations and
relative rights applicable thereto and (c) if such future Shares are classified
into separate series, will duly take the action necessary to create such series
<PAGE>
and to determine the number of shares of such series and the relative
designations, preferences, limitations and relative rights thereof.
3. With respect to the future Shares, there will be compliance with
the terms, conditions and restrictions applicable to the issuance of such shares
that are set forth in (i) UAM's Agreement and Declaration of Trust and By-laws,
each as amended as of the date of such issuance, and (ii) the applicable future
series designations.
4. The Board will not change the preferences, limitations or
relative rights of any class or series of Shares after any shares of such class
or series have been issued.
Based upon the foregoing, we are of the opinion that the Shares of the
Portfolio will be, when issued in accordance with, and sold for the
consideration described in the Registration Statement, validly issued, fully
paid and non-assessable by UAM, and that the holders of the Portfolio's Shares
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the general
corporation law of the State of Delaware (except that we express no opinion as
to such holders who are also trustees of UAM).
We consent to the filing of this opinion with Post-Effective Amendment
No. 29 to the Registration Statement to be filed by UAM with the Securities and
Exchange Commission.
Very truly yours,
DRINKER BIDDLE AND REATH LLP
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