<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. 43 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 44 /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)
----------------------------------------
Gary L. French, Treasurer
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
One Logan Square
Philadelphia, PA 19103
It is proposed that this filing become effective (check appropriate box):
[X] Immediately upon filing pursuant to Paragraph (b)
[ ] on (date) pursuant to Paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (1)
[ ] on (date) pursuant to paragraph (a) (1)
[ ] 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
Supplement dated July 31, 2000, to the prospectus for FPA Crescent Portfolio
The Institutional Class prospectus for FPA Crescent Portfolio is included in
this Post-Effective Amendment No. 43.
The Advisor Class and Institutional Class prospectuses for Heitman Real Estate
Portfolio are contained in Post-Effective Amendment No. 42, filed on April 28,
2000.
The Institutional Class and the Institutional Service Class prospectuses for IRA
Capital Preservation Portfolio are contained in Post-Effective Amendment No. 41,
filed on February 28, 2000.
The prospectus for the PIC Twenty Portfolio is contained in Post-Effective
Amendment No. 39, which was filed on December 28, 1999.
The prospectuses for the following portfolios are contained in Post-Effective
Amendment No. 35 to the Registration Statement, dated August 9, 1999.
<PAGE>
[LOGO OF UAM FUNDS]
Supplement dated July 31, 2000, to the Prospectus of FPA Crescent Portfolio.
The adviser of the fund is an affiliate of United Asset Management
Corporation. On June 19, 2000, Old Mutual, plc and United Asset Management
Corporation announced an agreement for Old Mutual to acquire United Asset
Management. Old Mutual is a UK-based financial services group with
substantial asset management, insurance and banking businesses. The closing
of the transaction is expected to take place during the fourth quarter of
2000 and is subject to a number of conditions. As required by the Investment
Company Act of 1940, the fund's shareholders will be asked to approve a new
investment advisory agreement with the adviser, to take effect upon the
consummation of the transaction. The new agreement will be identical to the
current agreement in all respects except for its effective and termination
dates. The new agreement will have no effect on the contractual advisory fee
rate payable by the fund. No changes are currently planned which would
affect the services being provided to the fund.
[LOGO OF UAM FUNDS]
<PAGE>
UAM Funds
Funds for the Informed Investorsm
FPA Crescent Portfolio
Institutional Class Shares July 31, 2000
[LOGO OF UAM}
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
Table Of Contents
<TABLE>
<S> <C>
Fund Summary................................................................. 1
</TABLE>
<TABLE>
<S> <C>
What are the Fund's Objectives?............................................ 1
What are the Fund's Principal Investment Strategies?....................... 1
What are the Fund's Principal Risks?....................................... 2
How Has the Fund Performed?................................................ 4
What are the Fund's Fees and Expenses?..................................... 4
</TABLE>
<TABLE>
<S> <C>
Investing with the UAM Funds................................................. 6
</TABLE>
<TABLE>
<S> <C>
Buying Shares.............................................................. 6
Redeeming Shares........................................................... 7
Exchanging Shares.......................................................... 9
Transaction Policies....................................................... 9
</TABLE>
<TABLE>
<S> <C>
Account Policies............................................................ 11
</TABLE>
<TABLE>
<S> <C>
Small Accounts............................................................. 11
Distributions.............................................................. 11
Federal Taxes.............................................................. 11
</TABLE>
<TABLE>
<S> <C>
Additional Information About the Fund....................................... 14
</TABLE>
<TABLE>
<S> <C>
Other Investment Practices and Strategies.................................. 14
Investment Management...................................................... 15
Shareholder Servicing Arrangements......................................... 16
</TABLE>
<TABLE>
<S> <C>
Financial Highlights........................................................ 17
</TABLE>
<PAGE>
Fund Summary
WHAT ARE THE FUND'S OBJECTIVES?
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The fund seeks to provide, through a combination of income and capital ap-
preciation, a total return consistent with reasonable investment risk. The
fund may not change its investment objective without shareholder approval.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
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The fund actively invests in both the equity and debt securities of a com-
pany because the adviser believes that this combination of securities
broadens the universe of opportunities for the fund, offers additional di-
versification and helps to lower volatility. Typically, the fund invests
50% to 70% of its total assets in equity securities and the balance in
debt securities, cash and cash equivalents.
Equity securities represent an ownership interest, or the right to acquire
an ownership interest, in an issuer. Different types of equity securities
provide different voting and dividend rights and priority in case of the
bankruptcy of the issuer. Equity securities include common stocks, pre-
ferred stocks, convertible securities, rights and warrants.
A debt security is an interest bearing security that corporations and gov-
ernments 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). The fund may invest in debt securities issued by
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), municipal notes and bonds,
commercial paper and certificates of deposit.
The adviser selects equity securities by looking for large and small com-
panies that have excellent future prospects but are undervalued by the se-
curities markets. The adviser believes that these opportunities often
arise when companies are out-of-favor or undiscovered by most of Wall
Street. The adviser searches for companies that also offer earnings
growth, opportunity for price/earnings multiple expansion and the best
combination of such quality criteria as strong market share, good manage-
ment, high barriers to entry and high return on capital.
Using fundamental security analysis, the adviser may look for investments
that trade at a substantial discount to the adviser's determination
1
<PAGE>
of the company's value (absolute value) rather than those that might ap-
pear inexpensive based on a discount to their peer groups or the market
average (relative value). The adviser attempts to determine a company's
absolute value using fundamental security analysis, which it believes pro-
vides a thorough view of its financial and business characteristics. As a
part of its process, the adviser:
. Reviews stock prices or industry group under-performance, insider pur-
chases, management changes and corporate spin-offs.
. Communicates directly with company management, suppliers, and custom-
ers.
. Defines the company's future potential, financial strength and compet-
itive position.
The adviser invests in debt securities to provide the fund with a reliable
and recurring stream of income, while preserving its capital. The fund
generally invests in investment-grade securities but may also invest up to
30% of its total assets in debt securities rated below investment grade
("high yield or junk bonds").
The adviser selects debt securities by using an approach that is similar
to the approach it uses to select equity securities and by trying to fore-
cast for current interest rate trends. Usually, the adviser employs a de-
fensive interest rate strategy, which means it tries to keep the average
maturity of the fund to 10 years or less by investing at different points
along the yield curve. The adviser also continually considers yield
spreads and other underlying factors such as credit quality, investor per-
ception and liquidity to determine which sectors offer the best investment
value.
WHAT ARE THE FUND'S PRINCIPAL RISKS?
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As with all mutual funds, at any time, your investment in the fund may be
worth more or less than the price that you originally paid for it. There
is also a possibility that the fund will not achieve its goal. This could
happen because its strategy failed to produce the intended results or be-
cause the adviser did not implement its strategy properly. The fund's
shares are not bank deposits and are not guaranteed, endorsed or insured
by any financial institution, government authority or the FDIC. You may
lose money by investing in the fund.
As with all equity funds the value of the fund's shares and the total re-
turn on your investment may experience sudden, unpredictable drops in
value or long periods of decline in value. This may occur because of fac-
tors that affect the securities markets generally, such as adverse changes
in economic conditions, the general outlook for corporate earnings, inter-
2
<PAGE>
est rates or investor sentiment. These circumstances may lead to long pe-
riods of poor performance, such as during a "bear market." Equity securi-
ties may also lose value because of factors affecting an entire industry
or sector, such as increases in production costs, or factors directly re-
lated to a specific company, such as decisions made by its management.
These risks are greater for small and medium sized companies, which tend
to be more vulnerable to adverse developments than larger companies.
As with most funds that invest in debt securities, changes in interest
rates are one of the most important factors that could affect the value of
your investment. Rising interest rates tend to cause the prices of debt
securities (especially those with longer maturities) and the fund's share
price to fall. Rising interest rates may also cause investors to pay off
mortgage-backed and asset-backed securities later than anticipated forcing
the fund to keep its money invested at lower rates. Falling interest
rates, however, generally cause investors to pay off mortgage-backed and
asset-backed securities earlier than expected, forcing the fund to rein-
vest the money at a lower interest rate.
The credit rating or financial condition of an issuer may also affect the
value of a debt security. Generally, the lower the quality rating of a se-
curity, the greater the risk that the issuer will fail to pay interest
fully and return principal in a timely manner. If an issuer defaults or
becomes unable to honor its financial obligations, the security may lose
some or all of its value. The issuer of an investment-grade security is
more likely to pay interest and repay principal than an issuer of a lower
rated bond. Adverse economic conditions or changing circumstances, howev-
er, may weaken the capacity of the issuer to pay interest and repay prin-
cipal.
Debt securities rated below investment-grade (commonly referred to as
"junk bonds") are highly speculative securities that are usually issued by
smaller, less credit worthy and/or highly leveraged (indebted) companies.
Compared with investment-grade bonds, junk bonds carry a greater degree of
risk and are less likely to make payments of interest and principal. Mar-
ket developments and the financial and business conditions of the corpora-
tion issuing these securities influences their price and liquidity more
than changes in interest rates, when compared to investment-grade debt se-
curities. Insufficient liquidity in the junk bond market may make it more
difficult to dispose of junk bonds and may cause the fund to experience
sudden and substantial price declines. A lack of reliable, objective data
or market quotations may make it more difficult to value junk bonds accu-
rately.
3
<PAGE>
HOW HAS THE FUND PERFORMED?
--------------------------------------------------------------------------------
The following information illustrates some of the risks of investing in
the fund. The bar chart shows how performance of the fund has varied from
year to year. The average annual return table compares the average annual
returns of the fund to those of broad-based securities market indices. Re-
turns are based on past results and are not an indication of future per-
formance.
Calendar Year Returns
[CHART]
YEAR FUND RETURN
---- -----------
1994 4.25%
1995 26.04%
1996 22.88%
1997 21.95%
1998 2.79%
1999 -6.28%
During the periods shown in the chart for the fund, the highest return for
a quarter was 9.14% (quarter ending 09/30/97) and the lowest return for a
quarter was -12.02% (quarter ending 09/30/98). For the period from January
1, 2000, through June 30, 2000, the fund returned 4.35%.
Average Annual Returns For Periods Ended December 31, 1999
<TABLE>
<CAPTION>
Since
1 Year 5 Years 6/2/93*
------------------------------------------------------------------------
<S> <C> <C> <C>
FPA Crescent Portfolio -6.28% 12.72% 11.77%
------------------------------------------------------------------------
Russell 2500 Index 24.14% 19.43% 15.92%
------------------------------------------------------------------------
Lehman Brothers Government/Corporate Bond Index -2.15% 7.60% 5.98%
------------------------------------------------------------------------
Balanced Benchmark+ 13.27% 14.98% 12.18%
</TABLE>
* Beginning of operations. Index comparisons begin on May 31, 1993.
+ Balanced Benchmark is a combined index of which 60% reflects the Russell
2500 Index and, 40% the Lehman Brothers Government/Corporate Bond Index.
WHAT ARE THE FUND'S FEES AND EXPENSES?
--------------------------------------------------------------------------------
Shareholder Transaction Fees (fees paid directly from your investment)
The fund is a no-load investment, which means there are no fees or charges
to buy or sell its shares, to reinvest dividends or to exchange into other
UAM Funds.
4
<PAGE>
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
The fund does have annual operating expenses and as a shareholder you pay
them indirectly. This table describes the fees and expenses that you may
pay if you buy and hold shares of the fund.
<TABLE>
<S> <C>
Management Fees 1.00%
--------------------------------------------
Other Expenses 0.49%
--------------------------------------------
Total Annual Fund Operating Expenses 1.49%
</TABLE>
Example
This example can help you to compare the cost of investing in the fund to
the cost of investing in other mutual funds. The example assumes you in-
vest $10,000 in the fund 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, that you reinvested all
of your dividends and distributions 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$152 $471 $813 $1,779
</TABLE>
5
<PAGE>
Investing with the UAM Funds
BUYING SHARES
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By Mail
You can open an account with the fund by sending a check or money order
and your account application to the UAM Funds. You should make your check
or money order payable to the "UAM Funds." The UAM Funds do not accept
third-party checks. You can add to an existing account by sending a check
and, if possible, the "Invest by Mail" stub that accompanied your state-
ment to the UAM Funds. Be sure your check identifies clearly your name,
your account number and the fund name.
Regular Mail Address
UAM Funds
PO Box 219081
Kansas City, MO 64121
Express Mail Address
UAM Funds
210 West 10th Street
Kansas City, MO 64105
By Wire
To open an account by wire, first call 1-877-826-5465 for an account num-
ber and wire control number. Next, send your completed account application
to the UAM Funds. Finally, wire your money using the wiring instructions
set forth below. To add to an existing account by wire, call 1-877-826-
5465 to get a wire control number and wire your money to the UAM Funds.
Wiring Instructions
United Missouri Bank
ABA # 101000695
UAM Funds
DDA Acct. # 9870964163
Ref: fund name/account number/
account name/wire control number
By Automatic Investment Plan (Via Automated Clearing House or ACH)
You may not open an account via ACH. However, once you have established an
account, you can set up an automatic investment plan by mailing a com-
pleted application to the 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.
6
<PAGE>
Minimum Investments
You can open an account with the fund with a minimum initial investment of
$2500 ($500 for individual retirement accounts (IRAs) and $250 for Spousal
IRAs). You can buy additional shares for as little as $100.
Fund Codes
The fund's reference information, which is listed below, will be helpful
to you when you contact the UAM Funds to purchase or exchange shares,
check daily net asset value per share (NAV) or get additional information.
<TABLE>
<CAPTION>
Trading
Symbol CUSIP Fund Code
--------------------------------------------------------------------------------------------------
<S> <C> <C>
FPACX 902556869 647
</TABLE>
Rights Reserved by the UAM Funds
At any time and without notice, the UAM Funds may:
. Stop offering shares;
. Reject any purchase order; or
. Bar an investor engaged in a pattern of excessive trading from buying
shares. (Excessive trading can hurt performance by disrupting management
and by increasing expenses.)
REDEEMING SHARES
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By Mail
Send a letter to the UAM Funds specifying:
. The fund name;
. The account number;
. The dollar amount or number of shares you wish to redeem;
. The account name(s); and
. The address.
All registered share owner(s) in the exact name(s) and any special capac-
ity in which they are registered must sign the letter.
Certain shareholders may need to include additional documents to redeem
shares. Please see the Statement of Additional Information (SAI) if you
need more information.
Regular Mail Address
UAM Funds
PO Box 219081
Kansas City, MO 64121
7
<PAGE>
By Telephone
You may redeem shares over the phone by calling 1-877-826-5465. To partic-
ipate in this service and to receive your redemptions by wire, you must
complete the appropriate sections of the account application and mail it
to the UAM Funds.
Online
You can redeem shares on the Internet at www.uam.com. For login informa-
tion, including your personal identification number (PIN), please call 1-
877-826-5465.
By Systematic Withdrawal Plan (Via ACH)
If your account balance is at least $10,000, you may transfer as little as
$100 per month from your UAM Funds account to another financial institu-
tion.
To participate in this service, you must complete the appropriate sections
of the account application and mail it to the UAM Funds.
Payment of Redemption Proceeds
Redemption proceeds can be mailed to your account address, sent to your
bank by ACH transfer or wired to your bank account (provided that your
bank information is already on file). The UAM Funds will pay for all
shares redeemed within seven days after they receive a redemption request
in proper form.
The UAM Funds may require that a bank or member firm of a national securi-
ties exchange guarantee signatures. A notary public cannot guarantee a
signature. Signature guarantees are for the protection of shareholders.
Before they grant a redemption request, the UAM Funds may require a share-
holder to furnish additional legal documents to insure proper authoriza-
tion.
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 the purchase date. You may avoid these delays by paying for
shares with a certified check, bank check or money order.
Rights Reserved by the UAM Funds
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 sus-
pend your right to redeem if:
. Trading on the New York Stock Exchange is restricted; or
. The Securities and Exchange Commission allows the UAM Funds to delay
redemptions.
8
<PAGE>
EXCHANGING SHARES
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At no charge, you may exchange shares of one UAM Fund for shares of the
same class of any other UAM Fund by writing to or calling the UAM Funds.
You can also exchange shares of the UAM Funds on the Internet at
www.uam.com. For login information, including your personal identification
number (PIN), please call 1-877-826-5465. Before exchanging your shares,
please read the prospectus of the UAM Fund for which you want to exchange.
You may obtain any UAM Fund prospectus by calling 1-877-826-5465. You may
only exchange shares between accounts with identical registrations (i.e.,
the same names and addresses).
Rights Reserved by the UAM Funds
The UAM Funds may:
. Modify or cancel the exchange program at any time on 60 days' written
notice to shareholders;
. Reject any request for an exchange; or
. Limit or cancel a shareholder's exchange privilege, especially when an
investor is engaged in a pattern of excessive trading.
TRANSACTION POLICIES
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Calculating Your Share Price
You may buy, sell or exchange shares of a UAM Fund on each day the New
York Stock Exchange is open at a price equal to its NAV next computed af-
ter it receives and accepts your order. NAVs are calculated as of the
close of trading on the New York Stock Exchange (generally 4:00 p.m. East-
ern Time). Therefore, to receive the NAV on any given day, the UAM Funds
must accept your order before the close of trading on the New York Stock
Exchange that day. Otherwise, you will receive the NAV that is calculated
at the close of trading on the following business day.
Since securities that are traded on foreign exchanges may trade on days
when the New York Stock Exchange is closed, the value of a UAM Fund may
change on days when you are unable to purchase or redeem shares.
The UAM Funds calculate their NAVs by adding the total value of their as-
sets, subtracting their liabilities and then dividing the result by the
number of shares outstanding. The UAM Funds use current market prices to
value their investments. However, the UAM Funds may value investments at
fair value when market prices are not readily available or when events oc-
cur that make established valuation methods (such as stock ex-
9
<PAGE>
change closing prices) unreliable. The UAM Funds will determine an invest-
ment's fair value according to methods established by the Board. The UAM
Funds value debt securities that are purchased with remaining maturities
of 60 days or less at amortized cost, which approximates market value. The
UAM Funds may use a pricing service to value some of their assets, such as
debt securities or foreign securities.
Buying or Selling Shares through a Financial Intermediary
You may buy or sell shares of the UAM Funds through a financial intermedi-
ary (such as a financial planner or adviser). Generally, to buy or sell
shares at the NAV of any given day your financial intermediary must re-
ceive your order before the close of trading on the New York Stock Ex-
change that day. Your financial intermediary is responsible for transmit-
ting all purchase and redemption requests, investment information, docu-
mentation and money to the UAM Funds on time. Your financial intermediary
may charge additional transaction fees for its services.
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 business day. If your financial intermediary fails
to do so, it may be responsible for any resulting fees or losses.
In-Kind Transactions
Under certain conditions and at the UAM Funds' discretion, you may pay for
shares of a UAM Fund with securities instead of cash. In addition, the UAM
Funds may pay all or part of your redemption proceeds with securities in-
stead of cash.
Telephone Transactions
The UAM Funds will employ reasonable procedures to confirm that instruc-
tions communicated by telephone are genuine. The UAM Funds will not be re-
sponsible for any loss, liability, cost or expense for following instruc-
tions received by telephone reasonably believed to be genuine.
10
<PAGE>
Account Policies
SMALL ACCOUNTS
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The UAM Funds may redeem your shares without your permission if the value
of your account falls below 50% of the required minimum initial
investment. This provision does not apply:
. To retirement accounts and certain other accounts; or
. 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 fund distributes its net investment income in June and
December. In addition, the fund usually distributes its net capital gains
in June, but may also have a supplemental distribution in December.
The UAM Funds will automatically reinvest dividends and distributions in
additional shares of the fund, unless you elect on your account applica-
tion to receive them in cash.
FEDERAL TAXES
-------------------------------------------------------------------------------
The following is a summary of the federal income tax consequences of in-
vesting in the fund. This summary does not apply to shares held in an in-
dividual retirement account or other tax-qualified plan, which are not
subject to current tax. Transactions relating to shares held in such ac-
counts may, however, be taxable at some time in the future. You should al-
ways consult your tax advisor for specific guidance regarding the tax ef-
fect of your investment in the UAM Funds.
Taxes on Distributions Distributions of the fund will generally be taxable
to shareholders as ordinary income or capital gains. You will be subject
to income tax on these distributions regardless of whether they are paid
in cash or reinvested in additional shares. The amount of tax you may pay
on a distribution will be based on the amount of time the fund held its
investments, not how long you held your shares. Dividends and distribu-
tions of short-term capital gains (capital gains relating to securities
held for twelve months or less) are generally taxable at the same rate as
ordinary income. Distributions of long-term capital gains (capital gains
relating to securities held for more than twelve months) are gener-
11
<PAGE>
ally taxable as long-term capital gains. 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 con-
stitutes a return of your investment. This is known as "buying a dividend"
and should be avoided.
The fund's dividends that are paid to its corporate shareholders and are
attributable to qualifying dividends the fund receives from U. S. corpora-
tions may be eligible for the corporate dividends-received deduction, sub-
ject to certain holding period requirements and financing limitations.
If the fund invests in foreign securities, it may be subject to foreign
withholding taxes with respect to dividends or interest the fund received
from sources in foreign countries. The fund may elect to treat some of
those taxes as a distribution to shareholders, which would allow share-
holders to offset some of their U.S. federal income tax.
Taxes on Exchanges and Redemptions When you exchange or redeem shares in
the fund, you may recognize a capital gain or loss for federal tax purpos-
es. This gain or loss will be based on the difference between the cost of
your shares (tax basis) and the amount you receive for them. To aid in
computing your tax basis, you should keep your account statements for the
periods during which you held shares.
Generally, your gain or loss will be long-term or short-term depending on
whether your holding period exceeds 12 months. However, any loss you real-
ize on shares held for six months or less will be treated as a long-term
capital loss to the extent of any long-term capital gain distributions you
received on the shares.
Backup Withholding By law, the fund must withhold 31% of your distribu-
tions and redemption proceeds if you fail (i) to provide complete, correct
taxpayer information, (ii) to properly include on your return payments of
taxable interest or dividends, or (iii) to certify to the fund that you
are not subject to back-up withholding when required to do so or that you
are an "exempt recipient."
12
<PAGE>
State and Local Taxes
You may also have to pay state and local taxes on distributions and re-
demptions. However, state taxes may not apply to portions of distributions
that are attributable to interest on federal securities. As mentioned
above, you should always consult your tax advisor for specific guidance
regarding the tax effect of your investment in the fund.
13
<PAGE>
Additional Information About the Fund
OTHER INVESTMENT PRACTICES AND STRATEGIES
-------------------------------------------------------------------------------
In addition to its principal investment strategies, the fund may use the
investment strategies described below. The fund may also employ investment
practices that this prospectus does not describe, such as repurchase
agreements, when-issued and forward commitment transactions, lending of
securities, borrowing and other techniques. For more information concern-
ing any of the fund's investment practices and its risks, you should read
the SAI.
Derivatives
The fund may invest in forward foreign currency exchange contracts,
futures and options to protect its investments against changes resulting
from market conditions (a practice called "hedging"), to reduce transac-
tion costs or to manage cash flows. Forward foreign currency exchange con-
tracts, futures and options are called derivatives because their value is
based on an underlying asset or economic factor. Derivatives are often
more volatile than other investments and may magnify the fund's gains or
losses. There are various factors that affect the fund's ability to
achieve its objectives with derivatives. Successful use of a derivative
depends on the degree to which prices of the underlying assets correlate
with price movements in the derivatives the fund buys or sells. The fund
could be negatively affected if the change in market value of its securi-
ties fails to correlate perfectly with the values of the derivatives it
purchased or sold.
Foreign Securities
The fund may invest up to 20% of its assets in foreign securities, includ-
ing securities of companies located outside of the United States, American
Depositary Receipts, European Depositary Receipts and other similar global
instruments. When the fund invests in foreign securities, it will be sub-
ject to risks not typically associated with domestic securities. Foreign
investments, especially those of companies in emerging markets, can be
riskier and more volatile than investments in the United States. Adverse
political and economic developments or changes in the value of foreign
currency can make it harder for the fund to sell its securities and could
reduce the value of your shares. Differences in tax and accounting stan-
dards and difficulties in obtaining information about foreign companies
can negatively affect investment decisions. Unlike more established mar-
kets, emerging markets may have governments that are less stable, markets
that are less liquid and economies that are less developed.
14
<PAGE>
Short-Term Investing
At times, the adviser may decide to invest up to 100% of the fund's assets
in a variety of high-quality, short-term debt securities, such as U.S.
government securities. The adviser may invest in these types of securities
for temporary defensive purposes, to earn a return on uninvested assets or
to meet redemptions. The adviser may temporarily adopt a defensive posi-
tion to reduce changes in the value of the shares of the fund that may re-
sult from adverse market, economic, political or other developments. When
the adviser pursues a temporary defensive strategy, the fund may not
profit from favorable developments that it would have otherwise profited
from if it were pursuing its normal strategies. Likewise, these strategies
may prevent the fund from achieving its stated objectives.
INVESTMENT MANAGEMENT
-------------------------------------------------------------------------------
Investment Adviser
First Pacific Advisors, Inc., a Massachusetts corporation located at 11400
West Olympic Boulevard, Suite 1200, Los Angeles, California 90064, is the
fund's investment adviser. The adviser manages and supervises the invest-
ment of the fund's assets on a discretionary basis. The adviser, an affil-
iate of United Asset Management Corporation, has been in the investment
advisory business since 1954. Currently, the adviser provides investment
management services for seven investment companies, including one closed-
end investment company, and a variety of institutional accounts.
During its most recent fiscal year, the fund paid 1.00% of its average net
assets in advisory fees to the adviser.
Portfolio Manager
Mr. Steven Romick is primarily responsible for the day-to-day management
of the fund. Mr. Romick has fourteen years of experience in the investment
management business. He has been a Senior Vice President of the adviser
since 1996. From 1990-1996, Mr. Romick was Chairman of Crescent Manage-
ment, an investment advisory firm he founded. Crescent Management served
as the fund's adviser until the firm was merged with the current adviser.
15
<PAGE>
SHAREHOLDER SERVICING ARRANGEMENTS
-------------------------------------------------------------------------------
Brokers, dealers, banks, trust companies and other financial representa-
tives may receive compensation from the fund or its service providers for
providing a variety of services. This section briefly describes how the
financial representatives may get paid.
For providing certain services to their clients, financial representatives
may be paid a fee based on the assets of the fund that are attributable to
the financial representative. These services may include record keeping,
transaction processing for shareholders' accounts and certain shareholder
services not currently offered to shareholders that deal directly with the
fund. In addition, your financial representatives may charge you other ac-
count fees for buying or redeeming shares of the fund or for servicing
your account. Your financial representative should provide you with a
schedule of its fees and services.
The fund may pay all or part of the fees paid to financial representa-
tives. Periodically, the funds' board reviews these arrangements to ensure
that the fees paid are appropriate to the services performed. The fund
does not pay these service fees on shares purchased directly. In addition,
the adviser and its affiliates may, at their own expense, pay financial
representatives for these services.
The adviser and its affiliates may, at their own expense, pay financial
representatives for distribution and marketing services performed with re-
spect to the fund. The adviser may pay its affiliated companies for dis-
tribution and marketing services performed with respect to the fund.
16
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the fi-
nancial performance of the fund for the past five years. Certain informa-
tion contained in the table reflects the financial results for a single
share. The total returns in the table represent the rate that an investor
would have earned on an investment in the fund assuming all dividends and
distributions were reinvested. PricewaterhouseCoopers LLP has audited this
information. The financial statements and the unqualified opinion of
PricewaterhouseCoopers LLP are included in the annual report of the fund,
which is available upon request by calling the UAM Funds at 1-877-826-
5465.
<TABLE>
<CAPTION>
Years Ended March 31, 2000* 1999* 1998* 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $14.67 $16.23 $13.46 $12.67 $11.23
-----------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income 0.32 0.56 0.55 0.31 0.40
Net Realized and
Unrealized Gain (Loss) (1.49) (1.32) 2.88 2.16 2.29
-----------------------------------------------------------------------------
Total From Investment
Operations (1.17) (0.76) 3.43 2.47 2.69
-----------------------------------------------------------------------------
Distributions:
Net Investment Income (0.35) (0.51) (0.40) (0.34) (0.37)
Net Realized Gain (0.64) (0.29) (0.26) (1.34) (0.88)
-----------------------------------------------------------------------------
Total Distributions (0.99) (0.80) (0.66) (1.68) (1.25)
-----------------------------------------------------------------------------
Net Asset Value, End of
Period $12.51 $14.67 $16.23 $13.46 $12.67
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Total Return (8.54)% (4.71)% 25.96% 20.61% 24.71%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Ratios and Supplemental
Data
Net Assets, End of Period
(Thousands) $55,096 $173,613 $247,833 $65,619 $22,025
Ratio of Expenses to
Average Net Assets 1.49% 1.42% 1.45% 1.60% 1.59%
Ratio of Net Investment
Income to Average Net
Assets 2.26% 3.67% 3.62% 2.77% 3.35%
Portfolio Turnover Rate 10% 36% 18% 45% 100%
</TABLE>
* Per share amounts are based on average outstanding shares.
17
<PAGE>
FPA Crescent Portfolio
Investors who want more information about the fund should read the fund's
annual/semi-annual reports and the fund's Statement of Additional Informa-
tion. The annual/semi-annual reports of the fund provide additional infor-
mation about its investments. In the annual report, you will also find a
discussion of the market conditions and investment strategies that signif-
icantly affected the performance of the fund during the last fiscal year.
The Statement of Additional Information contains additional detailed in-
formation about the fund and is incorporated by reference into (legally
part of) this prospectus.
Investors can receive free copies of the SAI, shareholder reports and
other information about the UAM Funds and can make shareholder inquiries
by writing to or calling:
UAM Funds
PO Box 219081
Kansas City, MO 64121
(Toll free) 1-877-UAM-LINK (826-5465)
www.uam.com
You can review and copy information about the fund (including the
Statement of Additional Information) at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. You can get
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-202-942-8090. Reports and other
information about the fund are available on the EDGAR Database on the
Securities and Exchange Commission's Internet site at http://www.sec.gov.
You may obtain copies of this information, after paying a duplicating fee,
by electronic request at the following E-mail address: [email protected],
or by writing the Securities and Exchange Commission's Public Reference
Section, Washington, D.C. 20549-0102.
Investment Company Act of 1940 file number: 811-8544.
[LOGO OF UAM]
<PAGE>
PART B
UAM FUNDS TRUST
The statement of additional information for FPA Crescent Portfolio is included
in this Post-Effective Amendment No. 43.
The statement of additional information for Heitman Real Estate Portfolio is
contained in Post-Effective Amendment No. 42 to this Registration Statement,
filed on April 28, 2000.
The statement of additional information for IRA Capital Preservation Portfolio
is contained in Post-Effective Amendment No. 41 to this Registration Statement,
filed on February 28, 2000.
The statement of additional information for PIC Twenty Portfolio is contained in
Post Effective Amendment No. 39 to this Registration Statement, filed on
December 28, 1999.
The statements of additional information for the following portfolios are
contained in Post-Effective Amendment No. 35 to the Registration Statement,
filed August 9, 1999:
. BHM&S Total Return Bond Portfolio
. Cambiar Opportunity Portfolio
. Chicago Asset Management Intermediate Bond Portfolio
. Chicago Asset Management Value/Contrarian Portfolio
. Clipper Focus Portfolio
. Hanson Equity Portfolio
. Thompson, Siegel & Walmsley
. MJI International Equity Portfolio
. Pell Rudman Mid-Cap Growth Portfolio
. TJ Core Equity Portfolio
<PAGE>
UAM Funds Trust
PO Box 219081
Kansas City, MO 64121
(Toll free) 1-877-UAM-LINK (826-5465)
FPA Crescent Portfolio
Institutional Class
Statement of Additional Information
July 31, 2000
This statement of additional information is not a prospectus. However, you
should read it in conjunction with the prospectus of the Fund dated July 31,
2000. You may obtain the Fund's prospectus by contacting the UAM Funds at the
address listed above.
The audited financial statements of the Fund and the related report of
PricewaterhouseCoopers LLP, independent accountants of the Fund, are
incorporated herein by reference in the section called "Financial Statements."
No other portions of the annual report are incorporated by reference.
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
<S> <C>
Description of Permitted Investments...................................... 1
What Investment Strategies May the Fund Use?............................. 1
Debt Securities.......................................................... 1
Derivatives.............................................................. 8
Equity Securities........................................................ 15
Foreign Securities....................................................... 18
Investment Companies..................................................... 21
Repurchase Agreements.................................................... 21
Restricted Securities.................................................... 22
Securities Lending....................................................... 22
Short Sales.............................................................. 22
When Issued Transactions................................................. 23
Investment Policies of the Fund........................................... 24
Fundamental Investment Policies.......................................... 24
Non-Fundamental Policies................................................. 25
Management of the Company................................................. 25
Principal Shareholders.................................................... 27
Investment Advisory and Other Services.................................... 28
Investment Adviser....................................................... 28
Distributor.............................................................. 30
Shareholder Servicing arrangements....................................... 30
Administrative Services.................................................. 30
Custodian................................................................ 32
Independent Accountants.................................................. 32
Code of Ethics........................................................... 32
Brokerage Allocation and Other Practices.................................. 32
Selection of Brokers..................................................... 32
Simultaneous Transactions................................................ 32
Brokerage Commissions.................................................... 33
Capital Stock and Other Securities........................................ 33
Purchase, Redemption and Pricing of Shares................................ 35
Net Asset Value Per Share................................................ 35
Purchase of Shares....................................................... 36
Redemption of Shares..................................................... 36
Exchange Privilege....................................................... 38
Transfer Of Shares....................................................... 38
Performance Calculations.................................................. 38
Total Return............................................................. 39
Yield.................................................................... 39
Comparisons.............................................................. 40
Financial Statements...................................................... 40
Glossary.................................................................. 40
Bond Ratings.............................................................. 41
Moody's Investors Service, Inc........................................... 41
Standard & Poor's Ratings Services....................................... 43
Duff & Phelps Credit Rating Co........................................... 46
Fitch IBCA Ratings....................................................... 47
Comparative Benchmarks.................................................... 48
</TABLE>
<PAGE>
Description of Permitted Investments
WHAT INVESTMENT STRATEGIES MAY THE FUND USE?
--------------------------------------------------------------------------------
The Fund currently intends to use the securities and investment strategies
listed below in seeking its objectives; however, it may at any time invest in
any of the investment strategies described in this SAI. This SAI describes
each of these investments/strategies and their risks. The Fund may not notify
shareholders before employing new strategies, unless it expects such
strategies to become principal strategies. The investments that are
italicized are principal strategies and you can find more information on these
techniques in the prospectus of the Fund. You can find more information
concerning the limits on the ability of the Fund to use these investments in
"What Are the Investment Strategies of the Fund?"
. Equity securities (50% to 70% of its total assets).
. Debt Securities (30% to 50%).
. Debt Securities-- Below-investment grade (up to 30% of its total assets).
. Foreign securities (up to 20% of its total assets).
. Futures.
. Forward currency exchange contracts (for hedging purposes only).
. Options.
. Short sales.
. Investment company securities.
. Repurchase agreements.
. Restricted securities.
. Securities lending.
. When-issued securities.
DEBT SECURITIES
--------------------------------------------------------------------------------
Corporations and governments use debt securities 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.
Types of Debt Securities
U.S. Government Securities
U.S. government securities are securities that the U.S. Treasury has issued
(treasury securities) and securities that a federal agency or a government-
sponsored entity has issued (agency securities). Treasury securities include
treasury bills, which have initial maturities of less than one year, treasury
notes, which have initial maturities of one to ten years and treasury bonds,
which have initial maturities of at least ten years and certain types of
mortgage-backed securities that are described under "Mortgage-Backed
Securities" and "Other Asset-Backed Securities." This SAI discusses mortgage-
backed treasury and agency securities in detail in "Mortgage-Backed
Securities" and "Other Asset-Backed Securities."
1
<PAGE>
The full faith and credit of the U.S. government supports treasury securities.
Unlike treasury securities, the full faith and credit of the U.S. government
generally does not back agency securities. Agency securities are typically
supported in one of three ways:
. By the right of the issuer to borrow from the U.S. Treasury;
. By the discretionary authority of the U.S. government to buy the
obligations of the agency; or
. By the credit of the sponsoring agency.
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 Fund.
Corporate Bonds
Corporations issue bonds and notes to raise money for working capital or for
capital expenditures such as plant construction, equipment purchases and
expansion. In return for the money loaned to the corporation by investors,
the corporation promises to pay investors interest, and repay the principal
amount of the bond or note.
Mortgage-Backed 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. Unlike most debt securities, which pay
interest periodically and repay principal at maturity or on specified call
dates, mortgage-backed securities make monthly payments that consist of both
interest and principal payments. 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. Since homeowners usually have the option of paying either part or
all of the loan balance before maturity, the effective maturity of a mortgage-
backed security is often shorter than is stated.
Governmental entities, private insurers and the mortgage poolers may insure or
guarantee the timely payment of interest and principal of these pools through
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance and letters of credit. 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 is the principal governmental guarantor of mortgage-related securities.
GNMA is a wholly owned corporation of the U.S. government and it falls within
the Department of Housing and Urban Development. Securities issued by GNMA are
considered the equivalent of treasury securities and are backed by the full
faith and credit of the U.S. government. GNMA 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 the Fund's shares. To buy GNMA securities, the Fund may have to pay a
premium over the maturity value of the underlying mortgages, which the Fund
may lose if prepayment occurs.
2
<PAGE>
Federal National Mortgage Association (FNMA)
FNMA is a government-sponsored corporation owned entirely by private
stockholders. FNMA is regulated by the Secretary of Housing and Urban
development. FNMA purchases conventional mortgages from a list of approved
sellers and service providers, including state and federally-chartered savings
and loan associations, mutual savings banks, commercial banks and credit
unions and mortgage bankers. Securities issued by FNMA are agency securities,
which means FNMA, but not the U.S. government, guarantees their timely payment
of principal and interest.
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. 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 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.
Risks of Mortgage-Backed Securities
Yield characteristics of mortgage-backed securities differ from those of
traditional debt securities in a variety of ways. For example, payments of
interest and principal are more frequent (usually monthly) and their interest
rates are sometimes adjustable. In addition, a variety of economic,
geographic, social and other factors, such as the sale of the underlying
property, refinancing or foreclosure, can cause investors to repay the loans
underlying a mortgage-backed security sooner than expected. If the prepayment
rates increase, the Fund may have to reinvest its principal at a rate of
interest that is lower than the rate on existing mortgage-backed securities.
Other Asset-Backed Securities
These securities are interests in pools of a broad range of assets other than
mortgages, such as automobile loans, computer leases and credit card
receivables. Like mortgage-backed securities, these securities are pass-
through. 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 related asset-backed securities. Due
to the quantity of vehicles involved and requirements under state laws, asset-
backed securities backed by automobile receivables may not have a proper
security interest in all of the obligations backing such receivables.
3
<PAGE>
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.
The Fund 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.
Collateralized Mortgage Obligations (CMOs)
CMOs are hybrids between mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, CMOs typically pay interest monthly and have a
more focused range of principal payment dates than pass-through securities.
While whole mortgage loans may collateralize CMOs, 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.
Short-Term Investments
To earn a return on uninvested assets, meet anticipated redemptions, or for
temporary defensive purposes, the Fund may invest a portion of its assets in
the short-term securities listed below, U.S. government securities and
investment-grade corporate debt securities. Unless otherwise specified, a
short-term debt security has a maturity of one year or less.
Bank Obligations
The Fund 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
Fund 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 Fund may only purchase time deposits maturing from two business days
through seven calendar days.
4
<PAGE>
Certificates of Deposit
Certificates of deposit are negotiable certificates issued against money
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 a short-term obligation with a maturity ranging from 1 to
270 days issued by banks, corporations and other borrowers. Such investments
are unsecured and usually discounted. The Fund 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 "Bond Ratings" for a description of
commercial paper ratings.
Stripped Mortgage-Backed Securities
Stripped mortgage-backed securities are derivative multiple-class mortgage-
backed securities. Stripped mortgage-backed securities usually have two
classes that receive different proportions of interest and principal
distributions on a pool of mortgage assets. Typically, one class will receive
some of the interest and most of the principal, while the other class will
receive most of the interest and the remaining principal. In extreme cases,
one class will receive all of the interest ("interest only" or "IO" class)
while the other class will receive the entire principal 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. See
"FOREIGN SECURITIES".
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. The Fund's investments in pay-in-kind, delayed and zero coupon bonds
may require it to sell certain of its assets to generate sufficient cash to
satisfy certain income distribution requirements.
These securities may include 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
5
<PAGE>
sold separately or grouped with other coupons with like maturity dates and
sold bundled in such form. The underlying 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 U. S. 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," the Fund can record its beneficial ownership of the coupon or
corpus directly in the book-entry record-keeping system.
Terms to Understand
Maturity
Every debt security has a stated maturity date when the issuer must repay the
amount it borrowed (principal) from investors. Some debt securities, however,
are callable, meaning the issuer can repay the principal earlier, on or after
specified dates (call dates). Debt securities are most likely to be called
when interest rates are falling because the issuer can refinance at a lower
rate, similar to a homeowner refinancing a mortgage. The effective maturity
of a debt security is usually its nearest call date.
Mutual funds that invest in debt securities have no real maturity. Instead,
they calculate their weighted average maturity. This number is an average of
the effective or anticipated maturity of each debt security held by the mutual
fnud, with the maturity of each security weighted by the percentage of the
assets of the mutual fund it represents.
Duration
Duration is a calculation that seeks to measure the price sensitivity of a
debt security, or of a mutual fund that invests in debt securities, to changes
in interest rates. It measures sensitivity more accurately than maturity
because it takes into account the time value of cash flows generated over the
life of a debt security. Future interest payments and principal payments are
discounted to reflect their present value and then are multiplied by the
number of years they will be received to produce a value expressed in years --
the duration. Effective duration takes into account call features and sinking
fund prepayments that may shorten the life of a debt security.
An effective duration of 4 years, for example, would suggest that for each 1%
reduction in interest rates at all maturity levels, the price of a security is
estimated to increase by 4%. An increase in rates by the same magnitude is
estimated to reduce the price of the security by 4%. By knowing the yield and
the effective duration of a debt security, one can estimate total return based
on an expectation of how much interest rates, in general, will change. While
serving as a good estimator of prospective returns, effective duration is an
imperfect measure.
Factors Affecting the Value of Debt Securities
The total return of a debt instrument is composed of two elements: the
percentage change in the security's price and interest income earned. The
yield to maturity of a debt security estimates its total return only if the
price of the debt security remains unchanged during the holding period and
coupon interest is reinvested at the same yield to maturity. The total return
of a debt instrument, therefore, will be determined not only by how much
interest is earned, but also by how much the price of the security and
interest rates change.
Interest Rates
The price 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).
6
<PAGE>
Prepayment Risk
This risk effects mainly mortgage-backed securities. Unlike other debt
securities, falling interest rates can hurt mortgage-backed securities, which
may cause your share price to fall. Lower rates motivate people to pay off
mortgage-backed and asset-backed securities earlier than expected. The Fund
may then have to reinvest the proceeds from such prepayments at lower interest
rates, which can reduce its yield. The unexpected timing of mortgage and
asset-backed prepayments caused by the variations in interest rates may also
shorten or lengthen the average maturity of the Fund. If left unattended,
drifts in the average maturity of the Fund can have the unintended effect of
increasing or reducing its effective duration, which may adversely affect its
expected performance.
Extension Risk
The other side of prepayment risk occurs when interest rates are rising.
Rising interest rates can cause the Fund's average maturity to lengthen
unexpectedly due to a drop in mortgage prepayments. This would increase the
sensitivity of the Fund to rising rates and its potential for price declines.
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.
Credit Rating
Coupon interest is offered to investors of debt securities as compensation for
assuming risk, although short-term Treasury securities, such as 3-month
treasury bills, are considered "risk free." Corporate securities offer higher
yields than Treasury securities because their payment of interest and complete
repayment of principal is less certain. 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 a higher "risk premium" in the form of higher interest rates
above comparable Treasury securities.
Changes in investor confidence regarding the certainty of interest and
principal payments of a corporate debt security will result in an adjustment
to this "risk premium." If an issuer's outstanding debt carries a fixed
coupon, adjustments to the risk premium must occur in the price, which affects
the yield to maturity of the bond. If an issuer defaults or becomes unable to
honor its financial obligations, the bond may lose some or all of its value.
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. The adviser may retain securities that are downgraded, if
it believes that keeping those securities is warranted.
Debt securities rated below investment-grade (junk bonds) are highly
speculative securities that are usually issued by smaller, less credit worthy
and/or highly leveraged (indebted) companies. A corporation may issue a junk
bond because of a corporate restructuring or other similar event. Compared
with investment-grade bonds, junk bonds carry a greater degree of risk and are
less likely to make payments of interest and principal. Market developments
and the financial and business condition of the corporation issuing these
securities influences their price and liquidity more than changes in interest
rates, when compared to investment-grade debt securities. Insufficient
liquidity in the junk bond market may make it more difficult to dispose of
junk bonds and may cause the Fund to experience sudden and substantial price
declines. A lack of reliable, objective data or market quotations may make it
more difficult to value junk bonds accurately.
Rating agencies are organizations that assign ratings to securities based
primarily on the rating agency's assessment of the issuer's financial
strength. The Fund currently use ratings compiled by Moody's Investor
Services ("Moody's"), Standard and Poor's Ratings Services ("S&P"), Duff &
Phelps Rating Co. and Fitch IBCA. Credit ratings are only an agency's opinion,
not an absolute standard of quality, and they do not reflect an evaluation of
market risk. The section "Bond Ratings" contains further information
concerning the ratings of certain rating agencies and their significance.
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The adviser may use ratings produced by ratings agencies as guidelines to
determine the rating of a security at the time the Fund 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. The Fund is not obligated to dispose of
securities whose issuers subsequently are in default or which are downgraded
below the above-stated ratings. The Fund may invest in securities of any
rating.
DERIVATIVES
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Derivatives are financial instruments whose value is based on an underlying
asset, such as a stock or a bond, an underlying economic factor, such as an
interest rate or a market benchmark, such as an index. Unless, otherwise
stated in the Fund's prospectus, the Fund can use derivatives to gain exposure
to various markets in a cost efficient manner, to reduce transaction costs or
to remain fully invested. The Fund may also invest in derivatives to protect
it from broad fluctuations in market prices, interest rates or foreign
currency exchange rates (a practice known as "hedging"). When hedging is
successful, the Fund will have offset any depreciation in the value of its
assets by the appreciation in the value of the derivative position. Although
techniques other than the sale and purchase of derivatives could be used to
control the exposure of the Fund to market fluctuations, the use of
derivatives may be a more effective means of hedging this exposure.
Types of Derivatives
Futures
A futures contract is an agreement between two parties whereby one party sells
and the other party agrees to buy a specified amount of a financial instrument
at an agreed upon price and time. The financial instrument underlying the
contract may be a stock, stock index, bond, bond index, interest rate, foreign
exchange rate or other similar instrument. Agreeing to buy the underlying
financial information is called buying a futures contract or taking a long
position in the contract. Likewise, agreeing to sell the underlying financial
instrument is called selling a futures contract or taking a short position in
the contract.
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.
Unlike other securities, the parties to a futures contract do not have to pay
for or deliver the underlying financial instrument until some future date (the
delivery date). Contract markets require both the purchaser and seller to
deposit "initial margin" with a futures broker, known as a futures commission
merchant, or custodian bank 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. This
process is known as "marking to the market."
Although the actual terms of a futures contract calls for the actual delivery
of and payment for the underlying security, in many cases the parties may
close the contract early by taking an opposite position in an identical
contract. If the sale price upon closing out the contract is less than the
original purchase price, the person closing out the contract will realize a
loss. If the sale price upon closing out the contract is more than the
original purchase price, the person closing out the contract will realize a
gain. The opposite is also true. If the purchase price upon closing out the
contract is more than the original sale price, the person closing out the
contract will realize a loss. If the purchase price upon closing out the
contract is less than the original sale price, the person closing out the
contract will realize a gain.
A Fund may incur commission expenses when it opens or closes a futures
position.
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Options
An option is a contract between two parties for the purchase and sale of a
financial instrument for a specified price (known as the "strike price" or
"exercise price") at any time during the option period. Unlike a futures
contract, an option grants a right (not an obligation) to buy or sell a
financial instrument. Generally, a seller of an option can grant a buyer two
kinds of rights: a "call" (the right to buy the security) or a "put" (the
right to sell the security). Options have various types of underlying
instruments, including specific securities, indices of securities prices,
foreign currencies, interest rates and futures contracts. Options may be
traded on an exchange (exchange-traded-options) or may be customized
agreements between the parties (over-the-counter or "OTC options"). Like
futures, a financial intermediary, known as a clearing corporation,
financially backs exchange-traded options. However, OTC options have no such
intermediary and are subject to the risk that the counter-party will not
fulfill its obligations under the contract.
Purchasing Put and Call Options
When the Fund 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
Fund pays the current market price for the option (known as the "option
premium"). The Fund 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
Fund 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 Fund obtains the
right to purchase, rather than sell, the underlying instrument at the option's
strike price. The Fund would normally purchase call options in anticipation of
an increase in the market value of securities it owns or wants to buy. The
Fund 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 Fund 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 Fund 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 Fund
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 Fund 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 Fund 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 Fund 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 Fund would hope to profit by
closing out the put option at a lower price. If security prices fall, the Fund
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 Fund 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 Fund 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 Fund would expect the option to expire
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and the premium it received to offset the decline of the security's value.
However, the Fund 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 Fund is permitted only to write covered options. The Fund can cover a
call option by owning:
. The underlying security (or securities convertible into the underlying
security without additional consideration), index, interest rate, foreign
currency or futures contract;
. A call option on the same security or index with the same or lesser
exercise price;
. A call option on the same security or index with a greater exercise price
and segregating cash or liquid securities in an amount equal to the
difference between the exercise prices;
. Cash or liquid securities equal to at least the market value of the
optioned securities, interest rate, foreign currency or futures contract;
or
. In the case of an index, the Fund of securities that corresponds to the
index.
The Fund can cover a put option by:
. 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 and segregating
cash or liquid securities in an amount equal to the difference between the
exercise prices; or
. 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 Fund may purchase put and call options on futures contracts instead of
selling or buying futures contracts. The Fund 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 Fund 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.
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The Fund 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 Fund would retain the option premium, which would offset, in part, any
decline in the value of its assets.
The writing of a put option on a futures contract is similar to the purchase
of the futures contracts, except that, if the market price declines, the Fund
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 Fund.
Combined Positions
The Fund 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 Fund 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 Fund 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.
Forward Foreign Currency Exchange Contracts
A forward foreign currency contract involves an obligation to purchase or sell
a specific amount of currency at a future date or date range at a specific
price. In the case of a cancelable forward contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified fee.
Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. Unlike futures contracts, forward
contracts:
. Do not have standard maturity dates or amounts (i.e., the parties to the
contract may fix the maturity date and the amount).
. Are traded in the inter-bank markets conducted directly between currency
traders (usually large commercial banks) and their customers, as opposed to
futures contracts which are traded only on exchanges regulated by the CFTC.
. Do not require an initial margin deposit.
. May be closed by entering into a closing transaction with the currency
trader who is a party to the original forward contract, as opposed to a
commodities exchange.
Foreign Currency Hedging Strategies
A "settlement hedge" or "transaction hedge" is designed to protect the Fund
against an adverse change in foreign currency values between the date a
security is purchased or sold and the date on which payment is made or
received. Entering into a forward contract for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction for
a fixed amount of U.S. dollars "locks in" the U.S. dollar price of the
security. The Fund may also use forward contracts to purchase or sell a
foreign currency when it anticipates purchasing or selling securities
denominated in foreign currency, even if it has not yet selected the specific
investments.
The Fund may use forward contracts to hedge against a decline in the value of
existing investments denominated in foreign currency. Such a hedge, sometimes
referred to as a "position hedge," would tend to offset both positive and
negative currency fluctuations, but would not offset changes in security
values caused by other factors. The Fund could also hedge the position by
selling another currency expected to perform similarly to the currency in
which the Fund's investment is denominated. This type of hedge, sometimes
referred to as a "proxy hedge," could offer advantages in terms of cost,
yield, or efficiency, but generally would not hedge currency exposure as
effectively as a direct hedge into U.S. dollars. Proxy hedges may result in
losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.
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Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities that the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange that one can achieve at some
future point in time. Additionally, these techniques tend to minimize the
risk of loss due to a decline in the value of the hedged currency and to limit
any potential gain that might result from the increase in value of such
currency.
The Fund may enter into forward contracts to shift its investment exposure
from one currency into another. Such transactions may call for the delivery of
one foreign currency in exchange for another foreign currency, including
currencies in which its securities are not then denominated. This may include
shifting exposure from U.S. dollars to a foreign currency, or from one foreign
currency to another foreign currency. This type of strategy, sometimes known
as a "cross-hedge," will tend to reduce or eliminate exposure to the currency
that is sold, and increase exposure to the currency that is purchased. Cross-
hedges protect against losses resulting from a decline in the hedged currency,
but will cause the Fund to assume the risk of fluctuations in the value of the
currency it purchases. Cross hedging transactions also involve the risk of
imperfect correlation between changes in the values of the currencies
involved.
It is difficult to forecast with precision the market value of certain assets
at the expiration or maturity of a forward or futures contract. Accordingly,
the Fund may have to purchase additional foreign currency on the spot market
if the market value of a security it is hedging is less than the amount of
foreign currency it is obligated to deliver. Conversely, the Fund may have to
sell on the spot market some of the foreign currency it received upon the sale
of a security if the market value of such security exceeds the amount of
foreign currency it is obligated to deliver.
Swaps, Caps, Collars and Floors
Swap Agreements
A swap is a financial instrument that typically involves the exchange of cash
flows between two parties on specified dates (settlement dates), where the
cash flows are based on agreed-upon prices, rates, indices, etc. The nominal
amount on which the cash flows are calculated is called the notional amount.
Swaps are individually negotiated and structured to include exposure to a
variety of different types of investments or market factors, such as interest
rates, foreign currency rates, mortgage securities, corporate borrowing rates,
security prices or inflation rates.
Swap agreements may increase or decrease the overall volatility of the
investments of the Fund and its share price. The performance of swap
agreements may be affected by a change in the specific interest rate,
currency, or other factors that determine the amounts of payments due to and
from the Fund. If a swap agreement calls for payments by the Fund, the Fund
must be prepared to make such payments when due. In addition, if the counter-
party's creditworthiness declined, the value of a swap agreement would be
likely to decline, potentially resulting in losses.
Generally, swap agreements have a fixed maturity date that will be agreed upon
by the parties. The agreement can be terminated before the maturity date only
under limited circumstances, such as default by one of the parties or
insolvency, among others, and can be transferred by a party only with the
prior written consent of the other party. The Fund may be able to eliminate
its exposure under a swap agreement either by assignment or by other
disposition, or by entering into an offsetting swap agreement with the same
party or a similarly creditworthy party. If the counter-party is unable to
meet its obligations under the contract, declares bankruptcy, defaults or
becomes insolvent, the Fund may not be able to recover the money it expected
to receive under the contract.
A swap agreement can be a form of leverage, which can magnify a Fund's gains
or losses. In order to reduce the risk associated with leveraging, a Fund
will cover its current obligations under swap agreements according to
guidelines established by the SEC. If the Fund enters into a swap agreement on
a net basis, it will segregate assets with a daily value at least equal to the
excess, if any, of the Fund's accrued obligations under the swap agreement
over the accrued amount the Fund is entitled to receive under the agreement.
If the Fund enters into a swap agreement on other than a net basis, it will
segregate assets with a value equal to the full amount of the Fund's accrued
obligations under the agreement.
Equity Swaps -- In a typical equity index swap, one party agrees to pay
another party the return on a stock, stock index or basket of stocks in return
for a specified interest rate. By entering into an equity index swap, for
example, the index
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receiver can gain exposure to stocks making up the index of securities without
actually purchasing those stocks. Equity index swaps involve not only the risk
associated with investment in the securities represented in the index, but
also the risk that the performance of such securities, including dividends,
will not exceed the return on the interest rate that the Fund will be
committed to pay.
Interest Rate Swaps -- Interest rate swaps are financial instruments that
involve the exchange on one type of interest rate for another type of interest
rate cash flow on specified dates in the future. Some of the different types
of interest rate swaps are "fixed-for floating rate swaps," "termed basis
swaps" and "index amortizing swaps." Fixed-for floating rate swap involve the
exchange of fixed interest rate cash flows for floating rate cash flows.
Termed basis swaps entail cash flows to both parties based on floating
interest rates, where the interest rate indices are different. Index
amortizing swaps are typically fixed-for floating swaps where the notional
amount changes if certain conditions are met.
Like a traditional investment in a debt security, a Fund could lose money by
investing in an interest rate swap if interest rates change adversely. For
example, if the Fund enters into a swap where it agrees to exchange a floating
rate of interest for a fixed rate of interest, the Fund may have to pay more
money than it receives. Similarly, if the Fund enters into a swap where it
agrees to exchange a fixed rate of interest for a floating rate of interest,
the Fund may receive less money than it has agreed to pay.
Currency Swaps -- A currency swap is an agreement between two parties in which
one party agrees to make interest rate payments in one currency and the other
promises to make interest rate payments in another currency. A Fund may enter
into a currency swap when it has one currency and desires a different
currency. Typically the interest rates that determine the currency swap
payments are fixed, although occasionally one or both parties may pay a
floating rate of interest. Unlike an interest rate swap, however, the
principal amounts are exchanged at the beginning of the contract and returned
at the end of the contract. Changes in foreign exchange rates and changes in
interest rates, as described above may negatively affect currency swaps.
Caps, Collars and Floors
Caps and floors have an effect similar to buying or writing options. In a
typical cap or floor agreement, one party agrees to make payments only under
specified circumstances, usually in return for payment of a fee by the other
party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level. The seller of an interest rate floor is obligated to make
payments to the extent that a specified interest rate falls below an agreed-
upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
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 Fund than if it had not entered into any
derivatives transactions. Derivatives may magnify the Fund'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
Fund holds or intends to acquire should offset any losses incurred with a
derivative. Purchasing derivatives for purposes other than hedging could
expose the Fund to greater risks.
Correlation of Prices
The Fund'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 Fund 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 assets the Fund it is trying to
hedge. However, if the Fund's prediction of interest and currency
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rates, market value, volatility or other economic factors is incorrect, the
Fund may lose money, or may not make as much money as it expected.
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; and
. 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 Fund. A currency hedge, for example, should protect a
yen-denominated security from a decline in the yen, but will not protect the
Fund against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of the Fund'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 Fund's investments precisely over time.
Lack of Liquidity
Before a futures contract or option is exercised or expires, the Fund can
terminate it only by entering into a closing purchase or sale transaction.
Moreover, a Fund may close out a futures contract only on the exchange the
contract was initially traded. Although a Fund intends to purchase options
and futures only where there appears to be an active market, there is no
guarantee that such a liquid market will exist. If there is no secondary
market for the contract, or the market is illiquid, the Fund may not be able
to close out its position. In an illiquid market, the Fund may:
. Have to sell securities to meet its daily margin requirements at a time
when it is disadvantageous to do so;
. Have to purchase or sell the instrument underlying the contract;
. Not be able to hedge its investments; and
. Not be able realize profits or limit 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:
. An exchange may suspend or limit trading in a particular derivative
instrument, an entire category of derivatives or all derivatives, which
sometimes occurs because of increased market volatility;
. Unusual or unforeseen circumstances may interrupt normal operations of an
exchange;
. The facilities of the exchange may not be adequate to handle current
trading volume;
. Equipment failures, government intervention, insolvency of a brokerage firm
or clearing house or other occurrences may disrupt normal trading activity;
or
. Investors may lose interest in a particular derivative or category of
derivatives.
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Management Risk
If the adviser incorrectly predicts stock market and interest rate trends, the
Fund may lose money by investing in derivatives. For example, if the Fund 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
Fund could be required to sell the security upon exercise at a price below the
current market price. Similarly, if the Fund 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 Fund could be required to
purchase the security upon exercise at a price higher than the current market
price.
Volatility and Leverage
The prices of derivatives are volatile (i.e., they may change rapidly,
substantially and unpredictably) and are influenced by a variety of factors,
including:
. Actual and anticipated changes in interest rates;
. Fiscal and monetary policies; and
. National and international political events.
Most exchanges limit the amount by which the price of a derivative can change
during a single trading day. Daily trading limits establish the maximum
amount that the price of a derivative may vary from the settlement price of
that derivative at the end of trading on the previous day. Once the price of
a derivative reaches this value, a Fund may not trade that derivative at a
price beyond that limit. The daily limit governs only price movements during
a given day and does not limit potential gains or losses. Derivative prices
have occasionally moved to the daily limit for several consecutive trading
days, preventing prompt liquidation of the derivative.
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 Fund and it may
lose more than it originally invested in the derivative.
If the price of a futures contract changes adversely, the Fund may have to
sell securities at a time when it is disadvantageous to do so to meet its
minimum daily margin requirement. The Fund may lose its margin deposits if a
broker-dealer with whom it has an open futures contract or related option
becomes insolvent or declares bankruptcy.
EQUITY SECURITIES
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Types of Equity Securities
Common Stocks
Common stocks represent units of ownership in a company. Common stocks
usually carry voting rights and earn dividends. Unlike preferred stocks,
which are described below, dividends on common stocks are not fixed but are
declared at the discretion of the company's Board of directors.
Preferred Stocks
Preferred stocks are also units of ownership in a company. Preferred stocks
normally have preference over common stock in the payment of dividends and the
liquidation of the company. However, in all other respects, preferred stocks
are subordinated to the liabilities of the issuer. Unlike common stocks,
preferred stocks are generally not entitled to vote on corporate matters.
Types of preferred stocks include adjustable-rate preferred stock, fixed
dividend preferred stock, perpetual preferred stock, and sinking fund
preferred stock. Generally, the market values of preferred stock with a fixed
dividend rate and no conversion element varies inversely with interest rates
and perceived credit risk.
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Convertible Securities
Convertible securities are securities that may be exchanged for, converted
into, or exercised to acquire a predetermined number of shares of the issuer's
common stock at a Fund's option during a specified time period (such as
convertible preferred stocks, convertible debentures and warrants). A
convertible security is generally a fixed income security that is senior to
common stock in an issuer's capital structure, but is usually subordinated to
similar non-convertible securities. In exchange for the conversion feature,
many corporations will pay a lower rate of interest on convertible securities
than debt securities of the same corporation. In general, the market value of
a convertible security is at least the higher of its "investment value" (i.e.,
its value as a fixed income security) or its "conversion value" (i.e., its
value upon conversion into its underlying common stock).
Convertible securities are subject to the same risks as similar securities
without the convertible feature. The price of a convertible security is more
volatile during times of steady interest rates than other types of debt
securities. In addition, they are also influenced by the market value of the
security's underlying common stock. The price of a convertible security tends
to increase as the market value of the underlying stock rises, whereas it
tends to decrease as the market value of the underlying common stock declines.
A synthetic convertible security is a combination investment in which a Fund
purchases both (i) high-grade cash equivalents or a high grade debt obligation
of an issuer or U.S. Government securities and (ii) call options or warrants
on the common stock of the same or different issuer with some or all of the
anticipated interest income from the associated debt obligation that is earned
over the holding period of the option or warrant.
While providing a fixed income stream (generally higher in yield than the
income derivable from common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the convertible
security's underlying common stock. A synthetic convertible position has
similar investment characteristics, but may differ with respect to credit
quality, time to maturity, trading characteristics, and other factors. Because
a Fund will create synthetic convertible positions only out of high grade
fixed income securities, the credit rating associated with a Fund's synthetic
convertible investments is generally expected to be higher than that of the
average convertible security, many of which are rated below high grade.
However, because the options used to create synthetic convertible positions
will generally have expirations between one month and three years of the time
of purchase, the maturity of these positions will generally be shorter than
average for convertible securities. Since the option component of a
convertible security or synthetic convertible position is a wasting asset (in
the sense of losing "time value" as maturity approaches), a synthetic
convertible position may lose such value more rapidly than a convertible
security of longer maturity; however, the gain in option value due to
appreciation of the underlying stock may exceed such time value loss, the
market price of the option component generally reflects these differences in
maturities, and the Adviser and applicable sub-adviser take such differences
into account when evaluating such positions. When a synthetic convertible
position "matures" because of the expiration of the associated option, a Fund
may extend the maturity by investing in a new option with longer maturity on
the common stock of the same or different issuer. If a Fund does not so extend
the maturity of a position, it may continue to hold the associated fixed
income security.
Rights and Warrants
A right is a privilege granted to existing shareholders of a corporation to
subscribe to shares of a new issue of common stock before it is issued.
Rights normally have a short life, usually two to four weeks, are freely
transferable and entitle the holder to buy the new common stock at a lower
price than the public offering price. Warrants are securities that are
usually issued together with a debt security or preferred stock and that give
the holder the right to buy proportionate amount of common stock at a
specified price. Warrants are freely transferable and are traded on major
exchanges. Unlike rights, warrants normally have a life that is measured in
years and entitles the holder to buy common stock of a company at a price that
is usually higher than the market price at the time the warrant is issued.
Corporations often issue warrants to make the accompanying debt security more
attractive.
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An investment in warrants and rights may entail greater risks than certain
other types of investments. Generally, rights and warrants do not carry the
right to receive dividends or exercise voting rights with respect to the
underlying securities, and they do not represent any rights in the assets of
the issuer. In addition, their value does not necessarily change with the
value of the underlying securities, and they cease to have value if they are
not exercised on or before their expiration date. Investing in rights and
warrants increases the potential profit or loss to be realized from the
investment as compared with investing the same amount in the underlying
securities.
Risks of Investing in Equity Securities
General Risks of Investing in Stocks
While investing in stocks allows investors to participate in the benefits of
owning a company, such investors must accept the risks of ownership. Unlike
bondholders, who have preference to a company's earnings and cash flow,
preferred stockholders, followed by common stockholders in order of priority,
are entitled only to the residual amount after a company meets its other
obligations. For this reason, the value of a company's stock will usually
react more strongly to actual or perceived changes in the company's financial
condition or prospects than its debt obligations. Stockholders of a company
that fares poorly can lose money.
Stock markets tend to move in cycles with short or extended periods of rising
and falling stock prices. The value of a company's stock may fall because of:
. Factors that directly relate to that company, such as decisions made by its
management or lower demand for the company's products or services;
. Factors affecting an entire industry, such as increases in production
costs; and
. Changes in financial market conditions that are relatively unrelated to the
company or its industry, such as changes in interest rates, currency
exchange rates or inflation rates.
Because preferred stock is generally junior to debt securities and other
obligations of the issuer, deterioration in the credit quality of the issuer
will cause greater changes in the value of a preferred stock than in a more
senior debt security with similar stated yield characteristics.
Small and Medium-Sized Companies
Investors in small and medium-sized companies typically take on greater risk
and price volatility than they would by investing in larger, more established
companies. This increased risk may be due to the greater business risks of
their small or medium size, limited markets and financial resources, narrow
product lines and frequent lack of management depth. The securities of small
and medium companies are often traded in the over-the-counter market and might
not be traded in volumes typical of securities traded on a national securities
exchange. Thus, the securities of small and medium capitalization companies
are likely to be less liquid, and subject to more abrupt or erratic market
movements, than securities of larger, more established companies.
Technology Companies
Stocks of technology companies have tended to be subject to greater volatility
than securities of companies that are not dependent upon or associated with
technological issues. Technology companies operate in various industries.
Since these industries frequently share common characteristics, an event or
issue affecting one industry may significantly influence other, related
industries. For example, technology companies may be strongly affected by
worldwide scientific or technological developments and their products and
services may be subject to governmental regulation or adversely affected by
governmental policies.
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FOREIGN SECURITIES
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Types of Foreign Securities
Foreign securities are debt and equity securities that are traded in markets
outside of the United States. The markets in which these securities are
located can be developed or emerging. People can invest in foreign securities
in a number of ways:
. They can invest directly in foreign securities denominated in a foreign
currency;
. They can invest in American Depositary Receipts, European Depositary
Receipts and other similar global instruments; and
. They can invest in investment funds.
American Depositary Receipts (ADRs)
American Depositary Receipts (ADRs) are certificates evidencing ownership of
shares of a foreign issuer. These certificates are issued by depository banks
and generally trade on an established market in the United States or
elsewhere. A custodian bank or similar financial institution in the issuer's
home country holds the underlying shares in trust. The depository bank may not
have physical custody of the underlying securities at all times and may charge
fees for various services, including forwarding dividends and interest and
corporate actions. ADRs are alternatives to directly purchasing the underlying
foreign securities in their national markets and currencies. However, ADRs
continue to be subject to many of the risks associated with investing directly
in foreign securities. EDRs are similar to ADRs, except that they are
typically issued by European Banks or trust companies.
Emerging Markets
An "emerging country" is generally a country that the International Bank for
Reconstruction and Development (World Bank) and the International Finance
Corporation would consider to be an emerging or developing country. Typically,
emerging markets are in countries that are in the process of
industrialization, with lower gross national products (GNP) than more
developed countries. There are currently over 130 countries that the
international financial community generally considers to be emerging or
developing countries, approximately 40 of which currently have stock markets.
These countries generally include every nation in the world except the United
States, Canada, Japan, Australia, New Zealand and most nations located in
Western Europe.
Investment Funds
Some emerging countries currently prohibit direct foreign investment in the
securities of their companies. Certain emerging countries, however, permit
indirect foreign investment in the securities of companies listed and traded
on their stock exchanges through investment funds that they have specifically
authorized. Investments in these investment funds are subject to the
provisions of the 1940 Act. Shareholders of a UAM Fund that invests in such
investment funds will bear not only their proportionate share of the expenses
of the UAM Fund (including operating expenses and the fees of the adviser),
but also will indirectly bear similar expenses of the underlying investment
funds. In addition, these investment funds may trade at a premium over their
net asset value.
Risks of Foreign Securities
Foreign securities, foreign currencies, and securities issued by U.S. entities
with substantial foreign operations may involve significant risks in addition
to the risks inherent in U.S. investments.
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Political and Economic Factors
Local political, economic, regulatory, or social instability, military action
or unrest, or adverse diplomatic developments may affect the value of foreign
investments. Listed below are some of the more important political and
economic factors that could negatively affect an investment in foreign
securities:
. The economies of foreign countries may differ from the economy of the
United States in such areas as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency, budget deficits
and national debt;
. Foreign governments sometimes participate to a significant degree, through
ownership interests or regulation, in their respective economies. Actions
by these governments could significantly influence the market prices of
securities and payment of dividends;
. The economies of many foreign countries are dependent on international
trade and their trading partners and they could be severely affected if
their trading partners were to enact protective trade barriers and economic
conditions;
. The internal policies of a particular foreign country may be less stable
than in the United States. Other countries face significant external
political risks, such as possible claims of sovereignty by other countries
or tense and sometimes hostile border clashes; and
. A foreign government may act adversely to the interests of U.S. investors,
including expropriation or nationalization of assets, confiscatory taxation
and other restrictions on U.S. investment. A country may restrict or
control foreign investments in its securities markets. These restrictions
could limit the Fund's ability to invest in a particular country or make it
very expensive for the Fund to invest in that country. Some countries
require prior governmental approval, limit the types or amount of
securities or companies in which a foreigner can invest. Other countries
may restrict the ability of foreign investors to repatriate their
investment income and capital gains.
Information and Supervision
There is generally less publicly available information about foreign companies
than companies based in the United States. For example, there are often no
reports and ratings published about foreign companies comparable to the ones
written about United States companies. Foreign companies are typically not
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to United States
companies. The lack of comparable information makes investment decisions
concerning foreign companies more difficult and less reliable than domestic
companies.
Stock Exchange and Market Risk
The adviser anticipates that in most cases an exchange or over-the-counter
(OTC) market located outside of the United States will be the best available
market for foreign securities. Foreign stock markets, while growing in volume
and sophistication, are generally not as developed as the markets in the
United States. Foreign stocks markets tend to differ from those in the United
States in a number of ways:
. They are generally more volatile and not as developed or efficient as than
those in the United States;
. They have substantially less volume;
. Their securities tend to be less liquid and to experience rapid and erratic
price movements;
. Commissions on foreign stocks are generally higher and subject to set
minimum rates, as opposed to negotiated rates;
. Foreign security trading, settlement and custodial practices are often less
developed than those in U.S. markets; and
. They may have different settlement practices, which may cause delays and
increase the potential for failed settlements.
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<PAGE>
Foreign Currency Risk
While the UAM Funds denominate their net asset value in United States dollars,
the securities of foreign companies are frequently denominated in foreign
currencies. Thus, a change in the value of a foreign currency against the
United States dollar will result in a corresponding change in value of
securities denominated in that currency. Some of the factors that may impair
the investments denominated in a foreign currency are:
. It may be expensive to convert foreign currencies into United States
dollars and vice versa;
. Complex political and economic factors may significantly affect the values
of various currencies, including United States dollars, and their exchange
rates;
. Government intervention may increase risks involved in purchasing or
selling foreign currency options, forward contracts and futures contracts,
since exchange rates may not be free to fluctuate in response to other
market forces;
. There may be no systematic reporting of last sale information for foreign
currencies or regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis;
. Available quotation information is generally representative of very large
round-lot transactions in the inter-bank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1 million)
where rates may be less favorable; and
. The inter-bank market in foreign currencies is a global, around-the-clock
market. To the extent that a market is closed while the markets for the
underlying currencies remain open, certain markets may not always reflect
significant price and rate movements.
Taxes
Certain foreign governments levy withholding taxes on dividend and interest
income. Although in some countries it is possible for the Fund to recover a
portion of these taxes, the portion that cannot be recovered will reduce the
income the Fund receives from its investments. The Fund does not expect such
foreign withholding taxes to have a significant impact on performance.
Emerging Markets
Investing in emerging markets may magnify the risks of foreign investing.
Security prices in emerging markets can be significantly more volatile than
those in more developed markets, reflecting the greater uncertainties of
investing in less established markets and economies. In particular, countries
with emerging markets may:
. Have relatively unstable governments;
. Present greater risks of nationalization of businesses, restrictions on
foreign ownership and prohibitions on the repatriation of assets;
. Offer less protection of property rights than more developed countries; and
. Have economies that are based on only a few industries, may be highly
vulnerable to changes in local or global trade conditions, and may suffer
from extreme and volatile debt burdens or inflation rates.
Local securities markets may trade a small number of securities and may be
unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of holdings difficult or impossible at times.
The Euro
The single currency for the European Economic and Monetary Union ("EMU"), the
Euro, is scheduled to replace the national currencies for participating member
countries over a period that began on January 1, 1999 and ends in July 2002.
At the end of that period, use of the Euro will be compulsory and countries in
the EMU will no longer maintain
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separate currencies in any form. Until then, however, each country and issuers
within each country are free to choose whether to use the Euro.
On January 1, 1999, existing national currencies became denominations of the
Euro at fixed rates according to practices prescribed by the European Monetary
Institute and the Euro became available as a book-entry currency. On or about
that date, member states began conducting financial market transactions in
Euros and redenominating many investments, currency balances and transfer
mechanisms into Euros. The Fund also anticipates pricing, trading, settling
and valuing investments whose nominal values remain in their existing domestic
currencies in Euros. Accordingly, the Fund expects the conversion to the Euro
to impact investments in countries that adopt the Euro in all aspects of the
investment process, including trading, foreign exchange, payments,
settlements, cash accounts, custody and accounting. Some of the uncertainties
surrounding the conversion to the Euro include:
. Will the payment and operational systems of banks and other financial
institutions be ready by the scheduled launch date?
. Will the conversion to the Euro have legal consequences on outstanding
financial contracts that refer to existing currencies rather than Euro?
. How will existing currencies be exchanged into Euro?
. Will suitable clearing and settlement payment systems for the new currency
be created?
INVESTMENT COMPANIES
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The Fund may buy and sell shares of other investment companies. Such
investment companies may pay management and other fees that are similar to the
fees currently paid by the Fund. Like other shareholders, the Fund would pay
its proportionate share of those fees. Consequently, shareholders of the Fund
would pay not only the management fees of the Fund, but also the management
fees of the investment company in which the Fund invests. The Fund may invest
up to 10% of its total assets in the securities of other investment companies,
but may not invest more than 5% of its total assets in the securities of any
one investment company or acquire more than 3% of the outstanding securities
of any one investment company.
The SEC has granted an order that allows the Fund to invest the greater of 5%
of its total assets or $2.5 million in the UAM DSI Money Market Fund, provided
that the investment is:
. For cash management purposes;
. Consistent with the Fund's investment policies and restrictions; and
. The adviser to the investing Fund waives any fees it earns on the assets of
the Fund that are invested in the UAM DSI Money Market Fund. The Fund will
bear expenses of the UAM DSI Money Market Fund on the same basis as all of
its other shareholders.
REPURCHASE AGREEMENTS
--------------------------------------------------------------------------------
In a repurchase agreement, an investor agrees to buy a security (underlying
security) from a securities dealer or bank that is a member of the Federal
Reserve System (counter-party). At the time, the counter-party agrees to
repurchase the underlying security for the same price, plus interest.
Repurchase agreements are generally for a relatively short period (usually not
more than 7 days). The Fund normally uses repurchase agreements to earn
income on assets that are not invested.
When the Fund enters into a repurchase agreement it will:
. Pay for the underlying securities only upon physically receiving them or
upon evidence of their receipt in book-entry form; and
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. Require the counter party to add to the collateral whenever the price of
the repurchase agreement rises above the value of the underlying security
(i.e., it will require the borrower to "mark 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 Fund's right to sell the
security may be restricted. In addition, the value of the security might
decline before the Fund can sell it and the Fund might incur expenses in
enforcing its rights.
RESTRICTED SECURITIES
--------------------------------------------------------------------------------
The Fund 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 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 Fund's
investment limitations. The price realized from the sales of these securities
could be more or less than those originally paid by the Fund or less than what
may be considered the fair value of such securities.
SECURITIES LENDING
--------------------------------------------------------------------------------
The Fund may lend a portion of its total assets to broker- dealers or other
financial institutions. It may then reinvest the collateral it receives in
short-term securities and money market funds. When the Fund lends its
securities, it will follow the following guidelines:
. The borrower must provide collateral at least equal to the market value of
the securities loaned;
. The collateral must consist of cash, an irrevocable letter of credit issued
by a domestic U.S. bank or securities issued or guaranteed by the U. S.
government;
. The borrower must add to the collateral whenever the price of the
securities loaned rises (i.e., the borrower "marks to the market" on a
daily basis);
. It must be able to terminate the loan at any time;
. It must receive reasonable interest on the loan (which may include the Fund
investing any cash collateral in interest bearing short-term investments);
and
. It must determine that the borrower is an acceptable credit risk.
These risks are similar to the ones involved with repurchase agreements. When
the Fund lends securities, there is a risk that the borrower will become
financially unable to honor its contractual obligations. If this happens, the
Fund could:
. Lose its rights in the collateral and not be able to retrieve the
securities it lent to the borrower; and
. Experience delays in recovering its securities.
SHORT SALES
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Description of Short Sales
Selling a security short involves an investor sale of a security it does not
own. To sell a security short an investor must borrow the security from
someone else to deliver to the buyer. The investor then replaces the security
it borrowed by purchasing it at the market price at or before the time of
replacement. Until it replaces the security, the investor repays the person
that lent it the security for any interest or dividends that may have accrued
during the period of the loan.
Investors typically sell securities short to:
. Take advantage of an anticipated decline in prices.
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. Protect a profit in a security it already owns.
A Fund can lose money if the price of the security it sold short increases
between the date of the short sale and the date on which a Fund replaces the
borrowed security. Likewise, a Fund can profit if the price of the security
declines between those dates.
To borrow the security, the Fund also may be required to pay a premium, which
would increase the cost of the security sold. A Fund will incur transaction
costs in effecting short sales. A Fund's gains and losses will be decreased or
increased, as the case may be, by the amount of the premium, dividends,
interest, or expenses a Fund may be required to pay in connection with a short
sale.
The broker will retain the net proceeds of the short sale, to the extent
necessary to meet margin requirements, until the short position is closed out.
Short Sales Against the Box
In addition, a Fund may engage in short sales "against the box". In a short
sale against the box, a Fund agrees to sell at a future date a security that
it either currently owns or has the right to acquire at no extra cost. A Fund
will incur transaction costs to open, maintain and close short sales against
the box.
Restrictions on Short Sales
A Fund will not short sell a security if:
. After giving effect to such short sale, the total market value of all
securities sold short would exceed 25% of the value of a Fund net assets.
. The market value of the securities of any single issuer that have been sold
short by a Fund would exceed the two percent (2%) of the value of a Fund's
net assets.
. Such securities would constitute more than two percent (2%) of any class of
the issuer's securities.
Whenever a Fund sells a security short, its custodian segregates an amount of
cash or liquid securities equal to the difference between (a) the market value
of the securities sold short at the time they were sold short and (b) any cash
or U.S. Government securities a Fund is required to deposit with the broker in
connection with the short sale (not including the proceeds from the short
sale). The segregated assets are marked to market daily in an attempt to
ensure that the amount deposited in the segregated account plus the amount
deposited with the broker is at least equal to the market value of the
securities at the time they were sold short.
WHEN ISSUED 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 Fund 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 deliver securities
until a later date. Typically, no income accrues on securities the Fund has
committed to purchase before the securities are delivered, although the Fund
may earn income on securities it has in a segregated account. The Fund 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 Fund uses when-issued, delayed-delivery and forward delivery transactions
to secure what it considers an advantageous price and yield at the time of
purchase. When the Fund 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 Fund may miss the
opportunity to obtain the security at a favorable price or yield.
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When purchasing a security on a when-issued, delayed delivery, or forward
delivery basis, the Fund 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 Fund does not pay for the security until the delivery date, these
risks are in addition to the risks associated with its other investments.
The Fund will segregate cash and liquid securities equal in value to
commitments for the when-issued, delayed-delivery or forward delivery
transaction. The Fund will segregate additional liquid assets daily so that
the value of such assets is equal to the amount of its commitments.
Investment Policies of the Fund
The Fund will determine investment limitation percentages (with the exception
of a limitation relating to borrowing) immediately after and as a result of
its acquisition of such security or other asset. Accordingly, the Fund will
not consider changes in values, net assets or other circumstances when
determining whether the investment complies with its investment limitations.
FUNDAMENTAL INVESTMENT POLICIES
--------------------------------------------------------------------------------
The following investment limitations are fundamental, which means the Fund
cannot change them without approval by the vote of a majority of the
outstanding voting securities of the Fund, as defined by the 1940 Act. The
Fund will not:
. Make loans to others, except (i) through the purchase of debt securities in
accordance with its investment objective and policies, and (ii) to the
extent the entry into a repurchase agreement is deemed to be a loan.
. (i) borrow money, except as stated in the prospectuses and this SAI (any
such borrowing will be made only if immediately thereafter there is an
asset coverage of at least 300% of all borrowings); (ii) mortgage, pledge
or hypothecate any of its assets except in connection with any such
borrowings.
. Purchase securities on margin, participate on a joint or joint and several
basis in any securities trading account, or underwrite securities (does not
preclude the fund from obtaining such short-term credit as may be necessary
for the clearance of purchases and sales of its securities).
. Purchase or sell commodities or commodity contracts (other than futures
transactions for the purposes and under the conditions described in the
prospectuses and in this SAI).
. Invest more than 25% of the market value of its assets in the securities of
companies engaged in any one industry (does not apply to investment in the
securities of the U.S. government, its agencies or instrumentalities).
. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (i) making any
permitted borrowings, mortgages or pledges, or (ii) entering into options,
futures or repurchase transactions.
. Purchase the securities of any issuer, if as a result more than 5% of the
total assets of the Fund would be invested in the securities of that
issuer, other than obligations of the U.S. government, its agencies or
instrumentalities, provided that up to 25% of the value of the fund's
assets may be invested without regard to this limitation.
. Purchase or sell real estate; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts.
. With respect to 75% of its assets, own more than 5% of the securities of
any single issuer (other than investments issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities).
. With respect to 75% of its assets, own more than 10% of the outstanding
voting securities of any one issuer.
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The Fund may not borrow except from banks for temporary or emergency purposes
and in connection with short sales of securities. In these situations, the
fund will limit borrowings to no more than 33 1/3% of the Fund's assets, and
the Fund may not purchase additional securities when borrowings exceed 5% of
its total assets.
These investment restrictions do not prohibit the Fund from engaging in short
sales of securities as described in the prospectuses or in Part II of this SAI
under "Description of Permitted Investments."
NON-FUNDAMENTAL POLICIES
--------------------------------------------------------------------------------
The following limitations are non-fundamental, which means the Fund may change
them without shareholder approval. The Fund will not:
. Hold more than 10% of any class of securities of an issuer (taking all
common stock issues of an issuer as a single class, all preferred stock
issues as a single class, and all debt issues as a single class).
. Hold more than 10% of the outstanding voting securities of an issuer.
. Invest more than 10% of its total assets in the securities of other
investment companies.
. Invest more than 5% of its total assets in the securities of any one
investment company.
. Acquire more than 3% of the voting securities of any other investment
company.
. Invest more than an aggregate of 15% of its net assets in securities that
are subject to legal or contractual restrictions on resale (restricted
securities) or securities for which there are no readily available markets
(illiquid securities).
Management of the Company
The Board manages the business of the Company. The Board elects officers to
manage the day-to-day operations of the Company and to execute policies the
Board has formulated. The Company pays each Independent Board Member a $150
quarterly retainer fee per active portfolio and a $2,000 meeting fee. In
addition, the Company reimburses each independent Board member 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 portfolios of the UAM Funds Complex. The
Company does not pay Interested Board members.
BOARD MEMBERS
--------------------------------------------------------------------------------
The following table lists the Board members and officers of the Company and
provides information regarding their present positions, date of birth,
address, principal occupations during the past five years, aggregate
compensation received from the Company and total compensation received from
the UAM Funds Complex. The UAM Funds Complex is currently comprised of 49
portfolios. Those people with an asterisk (*) beside their name are
"interested persons" of the Company as that term is defined in the 1940 Act.
Mr. English does have an investment advisory relationship with Investment
Counselors of Maryland, an investment adviser to one of the portfolios in the
UAM Funds Complex. However, the Company does not believe that the
relationship is a material business relationship, and, therefore, does not
consider him to be an interested Board member. If these circumstances change,
the Board will determine whether any action is required to change the
composition of the Board.
25
<PAGE>
<TABLE>
<CAPTION>
Total
Compensation
Aggregate From UAM
Compensation Funds
Name, Address, Principal Occupations During the from Company as Complex as
Date of Birth Past 5 years of 3/31/00 of 3/31/00
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John T. Bennett, Jr. Mr. Bennett is President of Squam Investment $9,380 $38,950
RR2 Box 700 Management Company, Inc. and Great Island Investment
Center Harbor, NH Company, Inc. (investment management). From 1988 to
03226 1993, Mr. Bennett was President of Bennett Management
1/26/29 Company. Mr. Bennett serves on the Board of each
Company in the UAM Funds Complex.
----------------------------------------------------------------------------------------------------------------------------
Nancy J. Dunn Ms. Dunn has been Financial Officer of World Wildlife $9,380 $38,950
1250 24/th/ St., NW Fund (nonprofit), since January 1999. From 1991 to
Washington, DC 20037 1999, Ms. Dunn was Vice President for Finance and
8/14/51 Administration and Treasurer of Radcliffe College
(Education). Ms. Dunn serves on the Board of each
Company in the UAM Funds Complex.
----------------------------------------------------------------------------------------------------------------------------
William A. Humenuk Mr. Humenuk has been Senior Vice President $9,380 $38,950
7620 Lincoln Drive Administration, General Counsel and Secretary of Lone
Philadelphia, PA 19118 Star Industries Inc. (cement and ready-mix concrete)
4/21/42 since March 2000. From June 1998 to March 2000 he
was Executive Vice President and Chief Administrative
Officer of Philip Services Corp. (ferrous scrap
processing, brokerage and industrial outsourcing
services). Mr. Humenuk was a Partner in the
Philadelphia office of the law firm Dechert Price &
Rhoads from July 1976 to June 1998. He was also
formerly a Director of Hofler Corp. Mr. Humenuk
serves on the Board of each Company in the UAM Funds
Complex.
----------------------------------------------------------------------------------------------------------------------------
Philip D. English Mr. English is President and Chief Executive Officer $9,380 $38,950
16 West Madison Street of Broventure Company, Inc., a company engaged in the
Baltimore, MD 21201 investment management business. He is also Chairman
8/5/48 of the Board of Chektec Corporation (Drugs) and Cyber
Scientific, Inc. Mr. English serves on the Board of
each Company in the UAM Funds Complex.
----------------------------------------------------------------------------------------------------------------------------
Norton H. Reamer* Chairman, Chief Executive Officer and a Director of 0 0
One International Place United Asset Management Corporation (financial
Boston, MA 02110 services); Director, Partner or Trustee of each of
3/21/35 the Investment Companies of the Eaton Vance Group of
Mutual Funds (mutual funds).
</TABLE>
OFFICERS
--------------------------------------------------------------------------------
The following table lists the officers of the Company and provides
information regarding their present positions, date of birth, address and
their principal occupations during the past five years. The Company's
officers are paid by UAM, its affiliates or SEI, but not by the Company.
26
<PAGE>
<TABLE>
<CAPTION>
Name, Address, Position
Date of Birth with Company Principal Occupations During the Past 5 years
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Norton H. Reamer* Board You can find Mr. Reamer's biography in the table above.
One International Place Member;
Boston, MA 02110 President
3/21/35 and Chairman
--------------------------------------------------------------------------------------------------------------------------------
William H. Park Vice Executive Vice President and Chief Financial Officer of United Asset
One International Place President Management Corporation (financial services).
Boston, MA 02110
9/19/47
--------------------------------------------------------------------------------------------------------------------------------
Gary L. French Treasurer President of UAMFSI (financial services) and UAMFDI (broker dealer); Treasurer
211 Congress Street of the Fidelity Group of Mutual Funds from 1991 to 1995 (mutual funds); held
Boston, MA 02110 various other offices with Fidelity Investments (financial services) from
7/4/51 November 1990 to March 1995.
--------------------------------------------------------------------------------------------------------------------------------
Linda T. Gibson Secretary General Counsel and Managing Director of UAM Investment Services, Inc.
211 Congress Street (financial services); Senior Vice President and General Counsel of UAMFSI
Boston, MA 02110 (financial services) and UAMFDI (broker-dealer); Senior Vice President and
7/31/65 Secretary of Signature Financial Group, Inc. (financial services) and
affiliated broker-dealers from 1991 to 2000; Director and Secretary of
Signature Financial Group Europe, Ltd. (financial services) from 1995 to 2000;
Secretary of the Citigroup Family of Mutual Funds (mutual funds) from 1996 to
2000; Secretary of the 59 Wall Street Family of Mutual Funds (mutual funds)
from 1996 to 2000.
--------------------------------------------------------------------------------------------------------------------------------
Martin J. Wolin Assistant Vice President and Associate General Counsel of UAMFSI (financial services)
211 Congress Street Secretary since February 1998; Assistant General Counsel of First Union Corporation
Boston, MA 02110 (financial services) from 1995 to 1998; Attorney with Signature Financial
9/15/67 Group, Inc. (financial services) from 1994 to 1995.
--------------------------------------------------------------------------------------------------------------------------------
Theresa DelVeccio Assistant Secretary of UAMFSI (financial services) since February 1998; Secretary and
211 Congress Street Secretary Compliance Officer of UAMFDI (broker-dealer) since February 2000; Assistant
Boston, MA 02110 Vice President of Scudder Kemper Investments (financial services) from May
12/23/63 1992 to February 1998.
--------------------------------------------------------------------------------------------------------------------------------
Robert R. Flaherty Assistant Vice President of UAMFSI (financial services); Manager of Fund Administration
211 Congress Street Treasurer and Compliance of Chase Global Fund Services Company from 1995 to 1996; Senior
Boston, MA 02110 Manager of Deloitte & Touche LLP (accounting firm) from 1985 to 1995.
9/18/63
--------------------------------------------------------------------------------------------------------------------------------
Robert J. DellaCroce Assistant Director, Mutual Fund Operations - SEI Investments (financial services) since
SEI Investments Treasurer June 1994; Senior Manager at Arthur Andersen (accounting firm) prior to 1994.
One Freedom Valley Rd.
Oaks, PA 19456
12/17/63
</TABLE>
Principal Shareholders
As of June 30, 2000, the following persons or organizations held of record
or beneficially 5% or more of the shares of the Fund:
27
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Shareholder Class of Portfolio Percentage of Shares Owned
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Charles Schwab & Co., Inc. Institutional Class 32.74%
Reinvest Account
Attn Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
---------------------------------------------------------------------------------------------------------
David I. Sofro Trustee Institutional Class 9.88%
U/A 00/00/90
FBO Trust
2307 Blanchard Drive
Glenndale, CA 91208-1912
---------------------------------------------------------------------------------------------------------
NFSC FEBO Institutional Class 7.12%
Thomas A. Jermoluk TTEE
Thomas A. Jermoluk Trust
U/A 3/24/98
52 Monte Vista Ave.
Atherton, CA 94027-5431
FPA Multi-Advisors Fund LP Institutional Class 6.30%
C/O First Pacific Advisors, Inc.
11400 W. Olympic Blvd., Suite 1200
Los Angeles, CA 90064-1568
</TABLE>
Any shareholder listed above as owning 25% or more of the outstanding shares
of a portfolio may be presumed to "control" (as that term is defined in the
1940 Act) the portfolio. Shareholders controlling the portfolio could have the
ability to vote a majority of the shares of the portfolio on any matter
requiring the approval of shareholders of the portfolio. As of June 30, 2000,
the directors and officers of the Company owned less than 1% of the
outstanding shares of the Fund.
Investment Advisory and Other Services
INVESTMENT ADVISER
-------------------------------------------------------------------------------
First Pacific Advisors, Inc., a Massachusetts corporation located at 11400
West Olympic Boulevard, Suite 1200, Los Angeles, California 90064, is the
Fund's investment adviser. The adviser manages and supervises the investment
of the Fund's assets on a discretionary basis. The adviser has been in the
investment advisory business since 1954. Currently, the adviser provides
investment management services for seven investment companies, including one
closed-end investment company, and a variety of institutional accounts.
The adviser is a subsidiary of UAM. UAM is a holding company incorporated in
Delaware in December 1980 for the purpose of acquiring and owning firms
engaged primarily in institutional investment management. Since its first
acquisition in August 1983, UAM has acquired or organized more than 50 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
portfolios of the UAM Funds Complex.
28
<PAGE>
What is the Investment Philosophy and Style of the Adviser?
Equity Securities
The adviser uses a contrarian investment style, which often leads to investing
in "what other people do not wish to own." The adviser searches for common
stocks, preferred stocks, warrants and convertible securities that reflect low
price/earnings ratios (P/Es) and trade at discounts to private market value.
The adviser deems the following to be important in its stock selection
process: high return on capital; solid balance sheet; meaningful cash flow;
active share repurchase program; insider buying; strong management, seeking to
add shareholder value; and projected earnings growth exceeding the stock
market average. In the adviser's view, the stock market prices securities
efficiently in the long term, rewarding companies which successfully grow
their own earnings and penalizing those which do not. The investment
philosophy is based on the conviction that the market valuation of securities
is often inefficient in the short-term. The adviser feels that hasty short-
term decisions could cause a particular security, industry group or the entire
market to become underpriced or overpriced in the short- term, thereby
creating an excellent opportunity to either buy or sell.
The adviser's intensive research process includes looking for ideas by
reviewing stock price or industry group under performance, insider purchasers,
management changes and corporate spin-offs. Fundamental analysis is the
foundation of the Adviser's investment approach.
Debt Securities
Through fixed income investments, the adviser seeks a reliable and recurring
stream of income for the portfolio, while preserving its capital. The adviser
attempts to identify the current interest rate trends and invests funds
accordingly. Usually, a defensive strategy is employed, with investments made
at different points along the yield curve in an attempt to keep the average
maturity of fixed income investments less than or equal to ten years.
The adviser considers yield spread relationships and their underlying factors
such as credit quality, investor perception and liquidity on a continuous
basis to determine which sector offers the best investment value. When
combined with equity securities, the ownership of fixed income securities not
only can broaden the universe of opportunities, but also can offer additional
diversification and can help lower portfolio volatility.
Who Are Some Representative Institutional Clients Of The Adviser?
As of the date of this SAI, the adviser's representative institutional clients
included: General Electric Investment Corporation; Federated Department
Stores, Inc.; Fox Entertainment Group, Inc.; Xerox Corporation; Southern Farm
Bureau Life Insurance Company; Commonwealth of Pennsylvania Public School
Employees Retirement System; and The Lannan Foundation.
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.
Investment Advisory Agreement
This section summarizes some of the important provisions of the Investment
Advisory Agreement. The Company has filed the Investment Advisory Agreement
with the SEC as part of its registration statement on Form N-1A.
Service Performed by Adviser
The adviser:
. Manages the investment and reinvestment of the Fund's assets;
. Continuously reviews, supervises and administers the investment program of
the Fund; and
29
<PAGE>
. Determines what portion of the Fund's assets will be invested in securities
and what portion will consist of cash.
Limitation of Liability
In the absence of (1) willful misfeasance, bad faith, or gross negligence on
the part of the adviser in the performance of its obligations and duties under
the Investment Advisory Agreement, (2) reckless disregard by the adviser of
its obligations and duties under the Investment 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 Investment Advisory Agreement.
Continuing an Investment Advisory Agreement
The Investment Advisory Agreement continues in effect for periods of one year
so long as such continuance is specifically approved at least annually:
. By a majority of those Board Members who are not parties to the Investment
Advisory Agreement or interested persons of any such party; and
. By a majority of the Board Members or by a majority of the shareholders of
the Fund.
Terminating an Investment Advisory Agreement
The Company may terminate an Investment Advisory Agreement at any time,
without the payment of any penalty if:
. A majority of the Fund's shareholders vote to do so or a majority of Board
Members vote to do so; and
. It gives the adviser 60 days' written notice.
The adviser may terminate the Investment Advisory Agreement at any time,
without the payment of any penalty, upon 90 days' written notice to the
Company.
An Investment Advisory Agreement will automatically and immediately terminate
if it is assigned.
Advisory Fees
For its services, the Fund pays its adviser a fee calculated at an annual rate
of 1.00% of its average daily net assets. For the last three fiscal years, the
Fund paid the following in advisory fees to the adviser:
Fiscal Year End Investment Advisory Fees Paid
===============================================================================
3/31/00 $1,202,114
-------------------------------------------------------------------------------
3/31/99 $2,511,930
-------------------------------------------------------------------------------
3/31/98 $1,489,678
DISTRIBUTOR
-------------------------------------------------------------------------------
UAMFDI serves as the distributor for each portfolio of the Company. The
Company 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, an affiliate of UAM, is located at 211 Congress
Street, Boston, Massachusetts 02110. UAMFDI receives no compensation for its
services as distributor of the Institutional Class Shares.
SHAREHOLDER SERVICING ARRANGEMENTS
-------------------------------------------------------------------------------
UAM and each 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 Company or a Fund. The
32
<PAGE>
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 Fund.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
Administrator
Pursuant to a Fund Administration Agreement with the Company, 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 Company. UAMFSI, an affiliate of UAM, has
its principal office at 211 Congress Street, Boston, Massachusetts 02110.
UAMFSI bears all expenses incurred in connection with the performance of its
services under the Fund Administration Agreement. UAMFSI may, at its own
expense, employ other people to assist it in performing its duties under the
Fund Administration Agreement. Such people may be officers and employees who
are employed by both UAMFSI and the Company. UAMFSI will pay such people for
such employment. The Company will not incur any obligations with respect to
such people. Other expenses incurred in the operation of the Company will be
borne by the Company or other parties, including:
. Taxes, interest, brokerage fees and commissions;
. Salaries and fees of officers and Board Members 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 each portfolio of the Company;
. Printing and production costs of shareholders' reports and corporate
meetings;
. Cost and expenses of Company stationery and forms;
. Costs of special telephone and data lines and devices;
. Trade association dues and expenses; and
. Any extraordinary expenses and other customary expenses.
The Fund Administration Agreement continues in effect from year to year if the
Board specifically approves such continuance every year. The Board or UAMFSI
may terminate the Fund Administration Agreement, without penalty, on not less
than ninety (90) days' written notice. The Fund Administration Agreement
automatically terminates upon its assignment by UAMFSI without the prior
written consent of the Company.
31
<PAGE>
Administration and Transfer Agency Fees
The Fund pays a four-part fee to UAMFSI as follows:
1. An annual fee to UAMFSI for administration services calculated as
follows:
. $19,500 for the first operational class; plus
. $3,750 for each additional class; plus
. 0.063% of the aggregate net assets of the Fund.
2. An annual fee to UAMFSI for sub-administration and other services,
which UAMFSI pays to SEI, calculated as follows:
. Not more than $35,000 for the first operational class; plus
. $5,000 for each additional operational class; plus
. 0.03% of their pro rata share of the combined assets of the UAM
Funds Complex.
3. An annual fee to UAMFSI for transfer agent and dividend-disbursing
service, which UAMFSI pays to DST Systems, Inc. calculated as follows:
. $10,500 for the first operational class; and
. $10,500 for each additional class.
4. An annual fee to UAMFSI, which UAMFSI pays to UAMSSC for its services
as sub-shareholder-servicing agent, calculated as follows:
. $7,500 for the first operational class; and
. $2,500 for each additional class.
For the last three fiscal years the Fund paid the following in
administration fees:
Fiscal Year End Total Administration Fee
----------------------------------------------------------------------
3/31/00 $313,722
----------------------------------------------------------------------
3/31/99 $466,286
----------------------------------------------------------------------
3/31/98 $241,380
* Effective March 1, 1998, UAMFSI became the Fund's administrator. Prior to to
the Fund. March 1, 1998, another firm provided administrative services
CUSTODIAN
--------------------------------------------------------------------------------
The Chase Manhattan Bank, 3 Chase MetroTech Center, Brooklyn, New York 11245,
provides for the custody of the Fund's assets pursuant to the terms of a
custodian agreement with the Company.
INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as independent accountant for each portfolio of the Company.
CODE OF ETHICS
--------------------------------------------------------------------------------
The Company, its distributor and its investment advisers have adopted a code
of ethics under Rule 17j-1 of the 1940 Act that permits personnel subject to
their particular code of ethics to invest in securities, including securities
that may be purchased or held by the Fund.
32
<PAGE>
Brokerage Allocation and Other Practices
SELECTION OF BROKERS
--------------------------------------------------------------------------------
The Investment Advisory Agreement authorizes the adviser to select the brokers
or dealers that will execute the purchases and sales of investment securities
for the Fund. The Investment Advisory Agreement also directs the adviser to
use its best efforts to obtain the best execution with respect to all
transactions for the Fund. The adviser may select brokers based on research,
statistical and pricing services they provide to the adviser. 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 Investment Advisory
Agreement. In so doing, the Fund 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. During the Fund's fiscal year ended
March 31, 2000, the Fund paid $244,356 in brokerage commissions of which
$199,729 was paid for research on transactions totaling $58,288,874. These
amounts paid do not represent soft dollar commissions.
It is not the practice of the Company to allocate brokerage or effect
principal transactions with dealers based on sales of shares that a broker-
dealer firm makes. However, the Company may place trades with qualified
broker-dealers who recommend the Company or who act as agents in the purchase
of Company shares for their clients.
SIMULTANEOUS TRANSACTIONS
--------------------------------------------------------------------------------
The adviser makes investment decisions for the Fund 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 Fund, in a fair and reasonable manner. Although there
is no specified formula for allocating such transactions, the Fund's Board
periodically reviews the various allocation methods used by the adviser.
BROKERAGE COMMISSIONS
--------------------------------------------------------------------------------
Equity Securities
Generally, equity securities are bought and sold through brokerage
transactions for which commissions are payable. Purchases from underwriters
will include the underwriting commission or concession, and purchases from
dealers serving as market makers will include a dealer's mark-up or reflect a
dealer's mark-down.
Debt Securities
Debt securities are usually bought and sold directly from the issuer or an
underwriter or market maker for the securities. Generally, the 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 Fund executes transactions in the
over-the-counter market, it will deal with primary market makers unless prices
that are more favorable are otherwise obtainable.
Commissions Paid
For the last three fiscal years, the Fund paid the brokerage commissions set
forth below. Significant differences are due to increases or decreases in the
Fund's net assets.
Fiscal Year End Brokerage Commissions
--------------------------------------------------------------------------------
3/31/00 $244,356
--------------------------------------------------------------------------------
3/31/99 $237,093
--------------------------------------------------------------------------------
3/31/98 $213,179
33
<PAGE>
Capital Stock and Other Securities
The Company
The Company was organized under the name "The Regis Fund II" as a Delaware
business trust on May 18, 1994. On October 31, 1995, the Company changed its
name to "UAM Funds Trust." The Company's principal executive office is
located at 211 Congress Street, Boston, MA 02110; however, shareholders
should direct all correspondence to the address listed on the cover of this
SAI. The Company is an open-end, management investment company and the Fund
is diversified. This means that with respect to 75% of its total assets, the
Fund may not invest more than 5% of its total assets in the securities of any
one issuer (other than U. S. government securities).
Description of Shares and Voting Rights
The Company's Agreement and Declaration of Trust permits the Company to issue
an unlimited number of shares of beneficial interest, without par value. The
Board has the power to designate one or more series (portfolios) or classes of
shares of beneficial interest without shareholder approval.
Description of Shares
When issued and paid for, the shares of each series and class of the Company
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 the Company have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Board
members can elect 100% of the Board 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 a portfolio. Shares of all
classes will vote together as a single class except when otherwise required by
law or as determined by the Board.
If the Company is liquidated, the shareholders of each portfolio or any class
thereof are entitled to receive the net assets belonging to that portfolio, or
in the case of a class, belonging to that portfolio and allocatable to that
class. The Company will distribute is net assets to its shareholders in
proportion to the number of shares of that portfolio or class thereof held by
them and recorded on the books of the portfolio. A majority of the Board may
authorize the liquidation of any portfolio or class at any time.
The Company will not hold annual meetings except when required to by the 1940
Act or other applicable law.
Class Differences
The Board has authorized three classes of shares, Institutional, Institutional
Service and Advisor. Not all of the portfolios issue all of the classes. The
three classes represent interests in the same assets of a portfolio and,
except as discussed below, are identical in all respects.
. Institutional Shares do not bear any expenses for shareholder servicing and
the distribution of such shares pursuant to a distribution plan or other
12b-1 plan;
. Institutional Service 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;
and
. Advisor 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. Advisor
Shares also charge a sales load on purchases.
. Each class of shares has different exchange privileges.
34
<PAGE>
Distribution and shareholder servicing fees reduce a class's:
. Net income;
. Dividends; and
. NAV to the extent the portfolio has undistributed net income.
Dividend and Distribution Options
There are three ways for shareholders to receive dividends and capital gains:
. Income dividends and capital gains distributions are reinvested in
additional shares at net asset value;
. Income dividends are paid in cash and capital gains distributions are
reinvested in additional shares at NAV; and
. Income dividends and capital gains distributions are paid in cash.
Unless the shareholder elects otherwise in writing, all dividends and
distributions will automatically be reinvested in additional shares of the
Fund at NAV (as of the business day following the record date). Shareholders
may change their dividend and distributions option by writing to the Fund at
least three days before the record date for income dividend or capital gain
distribution.
Each portfolio sends account statements to shareholders whenever it pays an
income dividend or capital gains distribution.
Federal Taxes
The Fund intends to qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code, and to distribute out its income to
shareholders each year so that it generally will be relieved of federal income
and excise taxes. If the Fund were to fail to make sufficient distributions in
a year, it would be subject to corporate income taxes and/or excise taxes. In
addition, if the shortfall were large enough, the Fund could be disqualified
as a regulated investment company. If the Fund were to fail to so qualify: (1)
it would be taxed at regular corporate rates without any deduction for
distributions to shareholder; and (2) its shareholders would be taxed as if
they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction. Moreover, if the Fund were to
fail to make sufficient distributions in a year, the Fund would be subject to
corporate income taxes and/or excise taxes in respect of the shortfall or, if
the shortfall is large enough, the Fund could be disqualified as a regulated
investment company.
A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to distribute with respect to each calendar year at least 98% of
their ordinary taxable income for the calendar year and capital gain net
income (excess of capital gains over capital losses) for the one year period
ending October 31 of such calendar year and 100% of any such amounts that were
not distributed in the prior year. The Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
Dividends declared in October, November or December of any year that are
payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by the Fund on December
31 of such year if such dividends are actually paid during January of the
following year.
At March 31, 2000, the Fund had a capital loss carryover of approximately
$215,846 for federal income tax purposes that will expire on March 31, 2008.
In addition, at March 31, 2000, the Fund had elected to defer $7,437,992 of
post October capital losses for income tax purposes. These losses will be
available to offset realized capital gains for the fiscal year ended March 31,
2001.
35
<PAGE>
Purchase, Redemption and Pricing of Shares
NET ASSET VALUE PER SHARE
--------------------------------------------------------------------------------
Calculating NAV
The purchase and redemption price of the shares of the Fund is equal to its
NAV. The Fund calculates its NAV by subtracting its liabilities from its
total assets and dividing the result by the total number of shares
outstanding. For purposes of this calculation:
. Liabilities include accrued expenses, dividends payable and other
liabilities; and
. Total assets include the market value of the securities held by the Fund,
plus cash and other assets plus income accrued but not yet received.
The Fund normally calculates its NAV as of the close of trading on the NYSE
every day the NYSE is open for trading. The NYSE usually closes at 4:00 p.m.
The NYSE is closed on the following days: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
How the Company Values it Assets
Equity Securities
Equity securities listed on a securities exchange for which market quotations
are readily available are valued at the last quoted sale price of the day.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Unlisted equity securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued neither exceeding the asked prices nor less than
the bid prices. Quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. The converted value is based upon the
bid price of the foreign currency against the U.S. dollar quoted by any major
bank or by a broker.
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 Board determines that amortized cost reflects fair value.
Other Assets
The value of other assets and securities for which no quotations are readily
available (including restricted securities) is determined in good faith at
fair value using methods determined by the Board.
PURCHASE OF SHARES
--------------------------------------------------------------------------------
Service Agents may enter confirmed purchase orders on behalf of their
customers. To do so, the Service Agent must receive your investment order
before the close of trading on the NYSE and must transmit it to the Fund
before the close of its business day to receive that day's share price. The
Fund must receive proper payment for the order by the time the Fund calculates
its NAV on the following business day. Service Agents are responsible to their
customers and the Company for timely transmission of all subscription and
redemption requests, investment information, documentation and money.
36
<PAGE>
Shareholders can buy full and fractional (calculated to three decimal places)
shares of a Fund. The Company will not issue certificates for fractional
shares and will only issue certificates for whole shares upon the written
request of a shareholder.
The Company may 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
Fund's shares.
In-Kind Purchases
At its discretion, the Company may permit shareholders to purchase shares of
the Fund with securities, instead of cash. If the Company allows a
shareholder to make an in-kind purchase, it will value such securities
according to the policies described under "How the Company Values it Assets"
at the next determination of net asset value after acceptance. The Company
will issue shares of the Fund at the NAV of the Fund determined as of the same
time.
The Company will only acquire securities through an in-kind purchase for
investment and not for immediate resale. The Company will only accept in-kind
purchases if the transaction meets the following conditions:
. The securities are eligible investments for the Fund;
. The securities have readily available market quotations;
. The investor represents and agrees that the securities are liquid and that
there are no restrictions on their resale imposed by the 1933 Act or
otherwise;
. All dividends, interest, subscription, or other rights pertaining to such
securities become the property of the Fund and are delivered to the Fund by
the investor upon receipt from the issuer; and
. Immediately after the transaction is complete, the value of all securities
of the same issuer held by the Fund cannot exceed 5% of its net assets.
This condition does not apply to U.S. government securities.
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 Fund's investments.
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 the shareholder wishes to redeem signed by all registered
owners of the shares in the exact names in which they are registered;
. Any required signature guarantees (see "Signature Guarantees"); and
. Any other necessary legal documents for estates, trusts, guardianships,
custodianships, corporations, pension and profit sharing plans and other
organizations.
By Telephone
Shareholders may not do the following by telephone:
37
<PAGE>
. Change the name of the commercial bank or the account designated to receive
redemption proceeds. To change an account in this manner, you must submit a
written request signed by each shareholder, with each signature guaranteed.
. Redeem shares represented by a certificate.
The Company and UAMSSC 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 and before 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 Company or UAMSSC may be liable for any losses due
to unauthorized or fraudulent telephone instructions if the Company or UAMSSC
does not employ the procedures described above. Neither the Company nor UAMSSC
will be responsible for any loss, liability, cost or expense for following
instructions received by telephone that it reasonably believes to be genuine.
Redemptions-In-Kind
If the Board determines that it would be detrimental to the best interests of
remaining shareholders of the Fund to make payment wholly or partly in cash,
the Fund may pay redemption proceeds in whole or in part by a distribution in-
kind of liquid securities held by the Fund in lieu of cash in conformity with
applicable rules of the SEC. Investors may incur brokerage charges on the sale
of securities received in payment of redemptions.
The Company has made an election with the SEC to pay in cash all redemptions
requested by any shareholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of such period. Such commitment is irrevocable without the prior
approval of the SEC. Redemptions in excess of the above limits may be paid in
whole or in part, in investment securities or in cash, as the Board may deem
advisable; however, payment will be made wholly in cash unless the Board
believes that economic or market conditions exist which would make such a
practice detrimental to the best interests of the Fund. If the Fund pays
redemption proceeds with securities instead of cash, it will value such
securities as set forth under "How the Company Values its Assets." A
redeeming shareholder would normally incur brokerage expenses if these
securities were converted to cash.
Signature Guarantees
The Company requires signature guarantees for certain types of documents,
including:
. Written requests for redemption;
. Separate instruments for assignment ("stock power"), which should specify
the total number of shares to be redeemed; and
. On all stock certificates tendered for redemption.
The purpose of signature guarantees is to verify the identity of the person
who has authorized a redemption from your account and to protect your account,
the Company and its sub-transfer agent from fraud.
The Company requires signature guarantees for the following redemptions:
. Redemptions where the proceeds are to be sent to someone other than the
registered shareowner(s);
. Redemptions where the proceeds are to be sent to someplace other than the
registered address; or
. Share transfer requests.
The Company will accept signature guarantees from any eligible guarantor
institution, as defined by the Securities Exchange Act of 1934 that
participates in a signature guarantee program. Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. You can get a complete definition of eligible guarantor
institutions by calling 1-877-826-5465.
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<PAGE>
Broker-dealers guaranteeing signatures must be a member of a clearing
corporation or maintain net capital of at least $100,000. Credit unions must
be authorized to issue signature guarantees.
Other Redemption Information
Normally, the Fund will pay for all shares redeemed under proper procedures
within seven days after it received your request. However, the Fund will pay
your redemption proceeds earlier as applicable law so requires.
The Company may suspend redemption privileges or postpone the date of payment:
. When the NYSE and custodian bank are closed;
. When trading on the NYSE is restricted;
. 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
Fund to dispose of securities owned by it, or to fairly determine the value
of its assets; or
. For such other periods as the Commission may permit.
EXCHANGE PRIVILEGE
--------------------------------------------------------------------------------
The exchange privilege is only available with respect to UAM Funds that are
qualified for sale in the shareholder's state of residence. Exchanges are
based on the respective net asset values of the shares involved. The
Institutional Class and Institutional Service Class shares of UAM Funds do not
charge a sales commission or charge of any kind for exchanges.
Neither the Company nor any of its service providers will be responsible for
the authenticity of the exchange instructions received by telephone. The
Board may restrict the exchange privilege at any time. Such instructions may
include limiting the amount or frequency of exchanges and may be for the
purpose of assuring such exchanges do not disadvantage other mutual funds in
the UAM Funds Complex and its shareholders.
TRANSFER OF SHARES
--------------------------------------------------------------------------------
Shareholders may transfer shares of the Fund 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.
Performance Calculations
The Fund measures its performance by calculating its yield and total return.
Yield and total return figures are based on historical earnings and are not
intended to indicate future performance. The Fund calculates its current yield
and average annual total return information according to the methods required
by the SEC.
TOTAL RETURN
--------------------------------------------------------------------------------
Total return is the change in value of an investment in the Fund 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. 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 Fund's average annual total return is calculated by finding the average
annual compounded rates of return over one, five and ten-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
39
<PAGE>
was completely redeemed at the end of each one, five and ten-year period and
the deduction of all applicable expenses on an annual basis. Since Adviser
Class Shares and 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.
Total return is calculated according to the following formula:
P (1 + T)/n/ = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods at the end of the 1, 5
or 10 year periods (or fractional portion thereof).
The table lists the Fund's average annual returns for the one-year period and
the five-year period ended March 31, 2000 and the period from the Fund's
inception date through March 31, 2000.
One Year Five Years Since Inception Inception Date
------------------------------------------------------------------------------
-8.54% 10.55% 10.75% 6/2/93
YIELD
--------------------------------------------------------------------------------
Yield refers to the income generated by an investment in the Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all mutual 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 Adviser Class Shares and 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)/(cd)+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 Fund'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 this SAI. This information may also be included in sales
literature and advertising.
To help investors better evaluate how an investment in the Fund might satisfy
their investment objective, advertisements regarding the Company or the Fund
may discuss various measures of performance as reported by various financial
40
<PAGE>
publications. Advertisements may also compare performance (as calculated
above) to performance as reported by other investments, indices and averages.
Please see "Comparative Benchmarks" 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 Fund;
. That the indices and averages are generally unmanaged;
. That the items included in the calculations of such averages may not be
identical to the formula used by the Fund to calculate its performance; and
. That shareholders cannot invest directly in such indices or averages.
In addition, there can be no assurance that the Fund will continue this
performance as compared to such other averages.
Financial Statements
The following documents are included in the Fund's March 31, 2000 Annual
Report:
. Financial statements for the fiscal year ended March 31, 2000;
. Financial highlights for the respective periods presented; and
. The report of PricewaterhouseCoopers LLP.
Each of the above-referenced documents is incorporated by reference into this
SAI. However, no other parts of the Fund's Annual Report is incorporated by
reference herein. Shareholders may get copies of the Fund's Annual Report
free of charge by calling the UAM Funds at the telephone number appearing on
the front page of this SAI.
Glossary
All terms that this SAI does not otherwise define, have the same meaning in
the SAI as they do in the prospectus of the Fund.
1933 Act means the Securities Act of 1933, as amended.
1934 Act means the Securities Exchange Act of 1934, as amended.
1940 Act means the Investment Company Act of 1940, as amended.
Adviser means the investment adviser of the Fund.
Board Member refers to a single member of the Company's Board.
Board refers to the Company's Board of Trustees as a group.
Company refers to UAM Funds Trust.
Independent Board Member refers Board Members that are not Interested Board
Members.
Interested Board Member refers to an "interested person" (as defined by the
1940 Act) of the Company. A Board Member may by an interested person of the
Company because they are affiliated with one of the Company's investment
advisers, United Asset Management Corporation or the Company's principal
underwriter.
NAV is the net asset value per share of the Fund.
NYSE is the New York Stock Exchange. Also known as "The Exchange" or "The Big
Board."
Fund refers to the FPA Crescent Portfolio, which is a series of the Company.
41
<PAGE>
SEC is the Securities and Exchange Commission. The SEC is the federal agency
that administers most of the federal securities laws in the United States. In
particular, the SEC administers the 1933 Act, the 1940 Act and the 1934 Act.
SEI is SEI Investments Mutual Funds Services, the Company's sub-administrator.
UAM Funds Complex includes UAM Funds, Inc., UAM Funds Trust, UAM Funds Inc. II
and all of their portfolios.
UAM is United Asset Management Corporation.
UAMFDI is UAM Fund Distributors, Inc., the Company's principal underwriter.
UAMFSI is UAM Fund Services, Inc., the Company's Administrator
UAMSSC is UAM Fund Shareholder Servicing Center, Inc., the Company's
sub-shareholder-servicing agent.
Bond Ratings
MOODY'S INVESTORS SERVICE, INC.
--------------------------------------------------------------------------------
Preferred Stock Ratings
<TABLE>
<S> <C>
aaa An issue that 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
stocks.
aa An issue that 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 that 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 that 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 that 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 that 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 period of time may be
small.
caa An issue that 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 that 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.
plus (+) or Moody's applies numerical modifiers 1, 2, and 3 in each rating classification: the modifier 1
minus (-) 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.
</TABLE>
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<PAGE>
Debt Ratings - Taxable Debt & Deposits Globally
<TABLE>
<S> <C>
Aaa Bonds that 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 that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that make the long-term
risks appear somewhat larger than the Aaa securities.
A Bonds that are rated A possess many favorable investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds that 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 that 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 that 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 that are rated Ca represent obligations that 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.
Con. (...) (This rating applies only to U.S. Tax-Exempt Municipals) Bonds for which the security depends upon
the completion of some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in
operating experience, (c) rentals that begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
</TABLE>
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.
43
<PAGE>
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
<TABLE>
<S> <C>
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 characteristics:
. Leading market positions in well-established industries.
. Conservative capitalization structure with moderate reliance on debt and ample asset protection.
. Broad 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.
</TABLE>
STANDARD & POOR'S RATINGS SERVICES
--------------------------------------------------------------------------------
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on the following
considerations:
1. 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;
2. Nature of and provisions of the obligation;
3. 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.
The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior
obligations are typically rated lower than senior obligations, to
reflect the lower priority in bankruptcy, as noted above. Accordingly,
in the case of junior debt, the rating may not conform exactly with the
category definition.
<TABLE>
<S> <C>
AAA An obligation rated 'AAA' has 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.
</TABLE>
44
<PAGE>
<TABLE>
<S> <C>
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 obligor to
meet its financial commitment on the obligation.
</TABLE>
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 and protective characteristics, these may be outweighed by large
uncertainties or major risk exposures to adverse conditions.
<TABLE>
<S> <C>
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 A subordinated debt or preferred stock obligation rated 'C' is CURRENTLY HIGHLY VULNERABLE to
non-payment. The 'C' rating may be used to cover a situation where a bankruptcy petition has been
filed or similar action taken, but payments on this obligation are being continued. A 'C' will also
be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is
currently paying.
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.
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.
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 obligation as a matter of policy.
Debt obligations of issues outside the United States and its territories are rated on the same basis
as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor
and do not take into account currency exchange and related uncertainties.
</TABLE>
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.
45
<PAGE>
SHORT-TERM ISSUE CREDIT RATINGS
<TABLE>
<S> <C>
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 obligations 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.
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.
</TABLE>
LOCAL CURRENCY AND FOREIGN CURRENCY RISKS
Country risks considerations are a standard part of Standard & Poor's
analysis for credit ratings on any issuer or issue. Currency of repayment
is a key factor in this analysis. An obligor's capacity to repay foreign
currency obligations may be lower than its capacity to repay obligations in
its local currency due to the sovereign government's own relatively lower
capacity to repay external versus domestic debt. These sovereign risk
considerations are incorporated in the debt ratings assigned to specific
issues. Foreign currency issuer ratings are also distinguished from local
currency issuer ratings to identity those instances where sovereign risks
make them different for the same issuer.
DUFF & PHELPS CREDIT RATING CO.
--------------------------------------------------------------------------------
Long-Term Debt and Preferred Stock
<TABLE>
<S> <C>
AAA Highest credit quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA+/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/BBB- Below-average protection factors but still considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.
</TABLE>
46
<PAGE>
<TABLE>
<S> <C>
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 met 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.
DP Preferred stock with dividend arrearages.
</TABLE>
Short-Term Debt
High Grade
<TABLE>
<S> <C>
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.
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.
</TABLE>
47
<PAGE>
FITCH IBCA RATINGS
--------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade
<TABLE>
<S> <C>
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 of 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.
BBB 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.
DDD, DD, D Default. The ratings of obligations in this category are based on their prospects for achieving
partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery
values are highly speculative and cannot be estimated with any precision, the following serve as
general guidelines. "DDD" obligations have the highest potential for recovery, around 90%-100% of
outstanding amounts and accrued interest. "D" indicates potential recoveries in the range of
50%-90%, and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their obligations. Entities rated
"DDD" have the highest prospect for resumption of performance or continued operation with or without
a formal reorganization process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a higher portion of
their outstanding obligations, while entities rated "D" have a poor prospect for repaying all
obligations.
</TABLE>
48
<PAGE>
International Short-Term Credit Ratings
<TABLE>
<S> <C>
F1 Highest credit quality. Indicates the Best 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. Uncertain 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 that is
highly uncertain and solely reliant upon a sustained, favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
</TABLE>
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.
Rating Alert: 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.
Comparative Benchmarks
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.
Financial publications: Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Barron's, Consumer's Digest, Financial Times,
Global Investor, Investor's Daily, Lipper, Inc., Morningstar, Inc., The New
York Times, Personal Investor, The 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.
49
<PAGE>
IBC's Money Fund Average/All Taxable Index - an average of all major money
market fund yields, published weekly for 7- and 30-day yields.
IFC Investable Composite Index - an unmanaged market capitalization-weighted
index maintained by the International Finance Corporation. This index
consists of over 890 companies in 26 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 Brothers Indices:
------------------------
Lehman Brothers 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 issues of investment grade (BBB) or higher, with maturities of at
least one year and outstanding par values of at least $150 million.
Lehman Brothers Credit Bond Index - an unmanaged index of all publicly issued,
fixed-rate, nonconvertible investment grade domestic corporate debt. Also
included are yankee bonds, which are dollar-denominated SEC registered public,
nonconvertible debt issued or guaranteed by foreign sovereign governments,
municipalities, or governmental agencies, or international agencies.
Lehman Brothers 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 corporations, and corporate
debt guaranteed by the U.S. government). In addition to the aggregate index,
sub-indices cover intermediate and long term issues.
Lehman Brothers Government/Corporate Bond 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 (BBB) or higher, with maturities of
at least one year and outstanding par value of at least $150 million. 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 Brothers High Yield Bond Index - an unmanaged index of fixed rate, non-
investment grade debt. All bonds included in the index are dollar
denominated, nonconvertible, have at least one year remaining to maturity and
an outstanding par value of at least $100 million.
Lehman Brothers Intermediate Government/Corporate Index - an unmanaged fixed
income, market value-weighted index that combines the Lehman Brothers
Government Bond Index (intermediate-term sub-index) and Lehman Corporate Bond
Index (intermediate-term sub-index).
Lehman Brothers Mortgage-Backed Securities Index - an unmanaged index of all
fixed-rate securities backed by mortgage pools of Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and
Federal National Mortgage Association (FNMA).
Lipper, Inc./Lipper Indices/Lipper Averages
-------------------------------------------
The Lipper Indices are equally weighted indices for typically the 30 largest
mutual funds within their respective portfolio investment objectives. The
indices are currently grouped in six categories: U.S. Diversified Equity with
12 indices; Equity with 27 indices, Taxable Fixed-Income with 20 indices, Tax-
Exempt Fixed-Income with 28 indices, Closed-End Funds with 16 indices, and
Variable Annuity Funds with 18 indices.
In September, 1999, Lipper, Inc. introduced its new portfolio-based mutual
fund classification method in which peer comparisons are based upon
characteristics of the specific stocks in the underlying funds, rather than
upon a broader investment objective stated in a prospectus. Certain of
Lipper, Inc.'s classifications for general equity funds' investment objectives
were changed while other equity objectives remain unchanged. Changing
investment objectives include Capital Appreciation Funds, Growth Funds, Mid-
Cap Funds, Small-Cap Funds, Micro-Cap Funds, Growth & Income Funds, and Equity
Income Funds. Unchanged investment objectives include Sector Equity Funds,
World Equity Funds, Mixed Equity Funds, and certain other funds including all
Fixed Income Funds and S&P(R) Index Funds.
50
<PAGE>
Criteria for the Lipper Indices are: 1) component funds are largest in group;
2) number of component funds remains the same (30); 3) component funds are
defined annually; 4) can be linked historically; and 5) are used as a
benchmark for fund performance.
Criteria for the Lipper Averages are: 1) includes all funds in the group in
existence for the period; 2) number of component funds always changes; 3)
universes are dynamic due to revisions for new funds, mergers, liquidations,
etc.; and 4) will be inaccurate if historical averages are linked.
Certain Lipper, Inc. indices/averages used by the UAM Funds may include, but
are not limited to, the following:
Lipper Short-Intermediate 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 one to five
years or less. (Taxable Fixed-Income category)
Lipper Balanced Fund Index - an unmanaged index of open-end equity funds whose
primary objective is to conserve principal by maintaining at all times a
balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio
ranges around 60%/40%. (Equity category)
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. (Equity category)
Lipper Equity Mid Cap Fund Index - an unmanaged index of funds that by
prospectus or portfolio practice invest primarily in companies with market
capitalizations less than $5 billion at the time of purchase. (Equity
category)
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. (Equity
category)
Lipper Growth Fund Index - an unmanaged index composed of the 30 largest funds
by asset size which invest in companies with long-term earnings expected to
grow significantly faster than the earnings of the stocks represented in the
major unmanaged stock indices. (Equity category)
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).
Merrill Lynch 1-3 Year Treasury Index - an unmanaged index composed of U.S.
treasury securities with maturities from 1 to 3 years.
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.
Nikkei Stock Average - a price weighted index of 225 selected leading stocks
listed on the First Section of the Tokyo Stock Exchange.
New York Stock Exchange composite or component indices -- capitalization-
weighted unmanaged indices of all industrial, utilities, transportation and
finance stocks listed on the New York Stock Exchange.
Russell U.S. Equity Indices:
----------------------------
Russell 3000(R) Index - measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents approximately
98% of the investable U.S. equity market.
51
<PAGE>
Russell 1000(R) Index - an unmanaged index which measures the performance of
the 1,000 largest companies in the Russell 3000 Index, which represents
approximately 92% of the total market capitalization of the Russell 3000
Index.
Russell 2000(R) Index -- an unmanaged index which measures the performance of
the 2,000 smallest companies in the Russell 3000 Index, which represents
approximately 8% of the total market capitalization of the Russell 3000 Index.
Russell Top 200(TM) Index - measures the performance of the 200 largest
companies in the Russell 1000 Index, which represents approximately 74% of the
total market capitalization of the Russell 1000 Index.
Russell Mid-Cap(TM) Index -- measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represents approximately 26% of the
total market capitalization of the Russell 1000 Index.
Russell 2500(TM) Index - an unmanaged index which measures the performance of
the 2,500 smallest companies in the Russell 3000 Index, which represents
approximately 17% of the total market capitalization of the Russell 3000
Index.
Russell 3000(R) Growth Index - measures the performance of those Russell 3000
Index companies with higher price-to-book ratios and higher forecasted growth
values. The stocks in this index are also members of either the Russell 1000
Growth or the Russell 2000 Growth indices.
Russell 3000(R) Value Index - measures the performance of those Russell 3000
Index companies with lower price-to-book ratios and lower forecasted growth
values. The stocks in this index are also members of either the Russell 1000
Value or the Russell 2000 Value indices.
Russell 1000(R) Growth Index - measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth
values.
Russell 1000(R) Value Index - measures the performance of those Russell 1000
with lower price-to-book ratios and lower forecasted growth values.
Russell 2000(R) Growth Index - measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth
values.
Russell 2000(R) Value Index - measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
Russell Top 200(TM) Growth Index - measures the performance of those Russell
Top 200 companies with higher price-to-book ratios and higher forecasted
growth values. The stocks are also members of the Russell 1000 Growth index.
Russell Top 200(TM) Value Index - measures the performance of those Russell
Top 200 companies with lower price-to-book ratios and lower forecasted growth
values. The stocks are also members of the Russell 1000 Value index.
Russell Midcap(TM) Growth Index - measures the performance of those Russell
Midcap companies with higher price-to-book ratios and higher forecasted growth
values. The stocks are also members of the Russell 1000 Growth index.
Russell Midcap(TM) Value Index - measures the performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted growth
values. The stocks are also members of the Russell 1000 Value index.
Russell 2500(TM) Growth Index - measures the performance of those Russell 2500
companies with higher price-to-book ratios and higher forecasted growth
values.
Russell 2500(TM) Value Index - measures the performance of those Russell 2500
companies with lower price-to-book ratios and lower forecasted growth values.
Ryan Labs 5 Year GIC Master Index - an arithmetic mean of market rates of $1
million GIC contracts held for five years. The market rates are
representative of a diversified, investment grade portfolio of contracts
issued by credit worthy insurance companies. The index is unmanaged and does
not reflect any transaction costs. Direct investment in the index is not
possible.
Standard & Poor's U.S. Indices:
-------------------------------
52
<PAGE>
In October, 1999, Standard & Poor's and Morgan Stanley Capital International
launched a new global industry classification standard consisting of 10
economic sectors aggregated from 23 industry groups, 59 industries, and 123
sub-industries covering almost 6,000 companies globally. The new
classification standard will be used with all of their respective indices.
Features of the new classification include 10 economic sectors, rather than
the 11 S&P currently uses. Sector and industry gradations are less severe.
Rather than jumping from 11 sectors to 115 industries under the former S&P
system, the new system progresses from 10 sectors through 23 industry groups,
50 industries and 123 sub-industries.
S&P 500 Index - an unmanaged index composed of 400 industrial stocks, 40
financial stocks, 40 utilities stocks and 20 transportation stocks. Widely
regarded as the standard for measuring large-cap U.S. stock market
performance. It is used by 97% of U.S. money managers and pension plan
sponsors. More than $1 trillion is indexed to the S&P 500.
S&P MidCap 400 Index -- consists of 400 domestic stocks chosen for market
size, liquidity, and industry group representation. It is a market-value
weighted index with each stock affecting the index in proportion to its market
value. It is used by over 95% of U.S. managers and pension plan sponsors. More
than $25 billion is indexed to the S&P MidCap 400.
S&P SmallCap 600 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. It is gaining wide acceptance as the preferred
benchmark for both active and passive management due to its low turnover and
greater liquidity. Approximately $8 billion is indexed to the S&P SmallCap
600.
S&P SuperComposite 1500 - combines the S&P 500, MidCap 400, and SmallCap 600
indices, representing 87% of the total U.S. equity market capitalization.
S&P 100 Index - known by its ticker symbol OEX, this index measures large
company U.S. stock market performance. This market capitalization-weighted
index is made up of 100 major, blue chip stocks across diverse industry
groups.
S&P/BARRA Growth and Value Indices - are constructed by grouping the
securities in the S&P 500 Index according to price-to-book ratio. The Value
index contains the companies with the lower price-to-book ratios; while the
companies with the higher price-to-book ratios are contained in the Growth
index.
S&P REIT Composite Index - launched in 1997, this benchmark tracks the market
performance of U.S. Real Estate Investment Trusts, known as REITS. The REIT
Composite consists of 100 REITs chosen for their liquidity and importance in
representing a diversified real estate Fund. The Index covers over 80% of the
securitized U.S. real estate market.
S&P 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.
Standard & Poor's CANADA Indices:
---------------------------------
S&P/TSE Canadian MidCap Index - measures the performance of the mid-size
company segment of the Canadian equity market.
S&P/TSE Canadian SmallCap Index - Measures the small company segment of the
Canadian equity market.
Standard & Poor's Global Indices:
---------------------------------
S&P Global 1200 Index - aims to provide investors with an investable Fund.
This index, which covers 29 countries and consists of seven regional
components, offers global investors an easily accessible, tradable set of
stocks and particularly suits the new generation of index products, such as
exchange-traded funds (ETFs).
S&P Euro and S&P Euro Plus Indices - the S&P Euro Index covers the Eurobloc
countries; the Euro Plus Index includes the Euro markets as well as Denmark,
Norway, Sweden and Switzerland. The S&P Euro Plus Index contains 200
constituents, and the S&P Euro Index, a subset of Euro Plus, contains 160
constituents. Both indices provide geographic and economic diversity over 11
industry sectors.
53
<PAGE>
S&P/TSE 60 Index - developed with the Toronto Stock Exchange, is designed as
the new Canadian large cap benchmark and will ultimately replace the Toronto
35 and the TSE 100.
S&P/TOPIX 150 - includes 150 highly liquid securities selected from each
major sector of the Tokyo market. It is designed specifically to give
portfolio managers and derivative traders an index that is broad enough to
provide representation of the market, but narrow enough to ensure liquidity.
S&P Asia Pacific 100 Index - includes highly liquid securities from each major
economic sector of major Asia-Pacific equity markets. Seven countries --
Australia, Hong Kong, Korea, Malaysia, New Zealand, Singapore, and Taiwan --
are represented in the new index.
S&P Latin America 40 Index - part of the S&P Global 1200 Index, includes
highly liquid securities from major economic sectors of Mexican and South
American equity markets. Companies from Mexico, Brazil, Argentina, and Chile
are represented in the new index.
S&P United Kingdom 150 Index - includes 150 highly liquid securities selected
from each of the new S&P sectors. The S&P UK 150 is designed to be broad
enough to provide representation of the market, but narrow enough to ensure
liquidity.
Salomon Smith Barney Global excluding U.S. Equity Index - an unmanaged index
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 of 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.
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.
Target Large Company Value Index - an index comprised of large companies with
market capitalizations currently extending down to approximately $1.9 billion
that are monitored using a variety of relative value criteria in order to
capture the most attractive value opportunities available. A high quality
profile is required and companies undergoing adverse financial pressures are
eliminated.
U.S. Three-Month Treasury Bill Average - the average return for all treasury
bills for the previous three month period.
Value Line Composite Index -- 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 the 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.
54
<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 41 = Post Effective Amendment No.
42 filed on April 28, 2000; Post-Effective Amendment No. 41 filed on February
28, 2000; PEA 39 = Post-Effective Amendment No. 39 filed on December 28, 1999;
PEA 35 = Post-Effective Amendment No. 35 filed on August 9, 1999; PEA 34 =
Post-Effective Amendment No. 34 filed on July 28, 1999, PEA 30 = Post-Effective
Amendment No. 30 filed on April 23, 1999, PEA 29 = Post-Effective Amendment No.
29 filed on April 12, 1999, 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
Exhibit Reference to (Location):
------- ------------------------
<S> <C>
A. 1. Agreement and Declaration of Trust PEA 24
2. Certificate of Trust PEA 24
3. Certificate of Amendment to Certificate of Trust PEA 24
B. 1. By-Laws PEA 24
2. Amendment to By-Laws dated December 10, 1998 PEA 27
C. 1. Form of Specimen Share Certificate PEA 24
2. The rights of security holders are defined in the Registrant's Agreement
and Declaration of Trust and By-Laws PEA 24
D. 1. Investment Advisory Agreement between Registrant and Barrow, Hanley,
Mewhinney & Strauss PEA 27
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
4. Investment Advisory Agreement between Registrant and Chicago Asset Management
Company (Value/Contrarian Portfolio) PEA 27
5. Investment Advisory Agreement between Registrant and Dwight Asset Management Company PEA 27
7. Investment Advisory Agreement between Registrant and First Pacific Advisors, Inc. PEA 27
8. Investment Advisory Agreement between Registrant and Hanson Investment Management Company PEA 27
9. Investment Advisory Agreement between Registrant and Heitman/PRA Securities Advisors, Inc. PEA 27
10. Investment Advisory Agreement between Registrant and Jacobs Asset Management, L.P. PEA 27
10. A. Form of Amendment to Investment Advisory Agreement between Registrant and Jacobs Asset filed herewith
Management, L.P.
11. Investment Advisory Agreement between Registrant and Murray Johnstone International Limited PEA 27
12. Investment Advisory Agreement between Registrant and Pacific Financial Research, Inc. PEA 27
13. Investment Advisory Agreement between Registrant and Pell Rudman Trust Company, N.A. PEA 27
14. Investment Advisory Agreement between Registrant and Provident Investment Counsel PEA 39
15. Investment Advisory Agreement between Registrant and Tom Johnson Investment Management PEA 27
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 31, 1999 (Advisor Class Shares) PEA 29
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 PEA 29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Incorporated by
Exhibit Reference to (Location):
------- -----------
<S> <C>
dated as of March 31, 1999
5. A. Form of Selling Dealer Agreement - Institutional Service Class Shares PEA 42
B. Form of Selling Dealer Agreement - Institutional Class Shares PEA 42
C. Form of Broker Services Agreement - Institutional Service Class Shares PEA 42
D. Form of Broker Services Agreement - Institutional Class Shares PEA 42
F. Trustees' and Officers' Contracts and Programs Not applicable
G. 1. Global Custody Agreement PEA 16
H. 1. Fund Administration Agreement PEA 27
2. Fund Administration Agreement Fee Schedule PEA 30
3. Mutual Funds Service Agreement PEA 41
I. Opinions and Consents of Counsel PEA 34, PEA 39, PEA 41, 42,
filed herewith
J. Consent of Independent Auditors PEA 34, PEA 35, PEA 39, PEA 41,
42,filed herewith
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
N. Amended and Restated Rule 18f-3 Multiple Class Plan PEA 24
O. Powers of Attorney PEA 24, PEA 27
P. 1. Code of Ethics of The UAM Funds filed herewith
2. Code of Ethics of UAM Funds Distributors, Inc. (distributor) filed herewith
3. Code of Ethics - Cambiar Investors, Inc. (investment adviser) filed herewith
4. Code of Ethics - Chicago Asset Management Company (investment adviser) filed herewith
5. Code of Ethics - Dwight Asset Management Company (investment adviser) filed herewith
6. Code of Ethics - First Pacific Advisors, Inc. (investment adviser) filed herewith
7. Code of Ethics - Heitman/PRA Securities Advisors, Inc. (investment adviser) filed herewith
8. Code of Ethics - Murray Johnstone International Limited (investment adviser) filed herewith
9. Code of Ethics - Pacific Financial Research, Inc. (investment adviser) filed herewith
10. Code of Ethics - Pell Rudman Trust Company (investment adviser) filed herewith
11. Code of Ethics - Provident Investment Counsel, Inc. (investment adviser) filed herewith
12. Code of Ethics - Thompson, Siegel & Walmsley, Inc. (investment adviser) filed herewith
13. Code of Ethics - Tom Johnson Investment Management, Inc. (investment adviser) filed herewith
</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
<PAGE>
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Provisions for indemnification of UAM Fund Services, Inc. are contained in
Section 6 of its Fund Administration Agreement with the Registrant.
Provisions for indemnification of the Registrant's investment advisers are
contained in Section 7 of their respective Investment Advisory Agreements with
the Registrant.
Provisions for indemnification of Registrant's principal underwriter, UAM Fund
Distributors, Inc., are contained in its Distribution Agreement with the
Registrant.
Provisions for indemnification of Registrant's custodian, The Chase Manhattan
Bank, are contained in Section 12 of its Fund Global Custody Agreement with the
Registrant.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the caption "Investment Adviser" in the Prospectuses
constituting Part A of this Registration Statement and "Investment Adviser" in
Part B of this Registration Statement. Except for information with respect to
Pell Rudman Trust Company, N.A., the information required by this Item 26 with
respect to each director, officer, or partner of each other investment adviser
of the Registrant is incorporated by reference to the Forms ADV filed by the
investment advisers listed below with the Securities and Exchange Commission
pursuant to the Investment Advisers Act of 1940, as amended, under the file
numbers indicated:
<TABLE>
<CAPTION>
Investment Adviser File No.
------------------ --------
<S> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. 801-31237
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
Murray Johnstone International Ltd. 801-34926
Pacific Financial Research, Inc. 801-54352
Provident Investment Counsel, Inc. 801-47993
Thompson, Siegel & Walmsley, Inc. 801-06273
Tom Johnson Investment Management, Inc. 801-42549
</TABLE>
<TABLE>
<CAPTION>
Positions and Offices with Pell Rudman Positions and Offices with
Name and Principal Business Address Trust Company, N.A. Pell 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
100 Federal Street Pell, 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
100 Federal Street Pell, Rudman & Co., Inc.
Boston, Massachusetts
</TABLE>
<PAGE>
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., L.P., Murray Johnstone International Ltd., Pacific Financial
Research, Inc., Pell Rudman Trust Company, N.A., Provident Investment Counsel,
Thompson Siegel & Walmsley, Inc., 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) UAM Fund Distributors, Inc. ("UAMFDI") acts as distributor of the
registrant's shares. ACG Capital Corporation ("ACG") also acts as
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.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act of 1940, as amended, and the rules promulgated thereunder
will be maintained in the physical possession of the Registrant, the
Registrant's Advisers, the Registrant's Administrator (UAM Fund Services, Inc.,
211 Congress Street, 4th Floor, Boston, MA 02110), Sub-Administrative Agent (SEI
Investments Mutual Funds Services, 530 East Swedesford Road, Wayne, PA
19087-1658), Sub-Shareholder Servicing Agent (UAM Shareholder Services Center,
Inc., 825 Duportail Road, Wayne, PA 19087), the Registrant's Sub-Transfer Agent
(DST Systems, Inc., 210 West 10th Street, Kansas City, MO 64105), and the
Registrant's Custodian Bank (The Chase Manhattan Bank 4 Chase MetroTech Center,
Brooklyn, New York, 11245).
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the registrant certifies that it meets all of the requirement for
effectiveness of this registration statement under Rule 485(b) under the
Securities Act and has duly caused this registration statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Boston, and State
of Massachusetts on the 27th day of July, 2000.
UAM FUNDS TRUST
/s/ Linda T. Gibson
-------------------
Linda T. Gibson
Secretary
Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons in the capacities indicated on
this 27th day of July, 2000.
*
---------------------------------
Norton H. Reamer, Chairman and
President
*
---------------------------------
John T. Bennett, Jr., Trustee
*
---------------------------------
Nancy J. Dunn, Trustee
*
---------------------------------
Philip D. English, Trustee
*
---------------------------------
William A. Humenuk, Trustee
*
---------------------------------
James P. Pappas, Trustee
*
---------------------------------
Peter M. Whitman, Jr., Trustee
/s/Gary L. French
-----------------
Gary L. French, Treasurer
/s/Gary L. French
-----------------
* Gary L. French
(Attorney-in-Fact)
<PAGE>
UAM FUNDS TRUST
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
D. 10. A Form of Amendment to the Investment Advisory Agreement
between Registrant and Jacobs Investment Management, L.P.
I. Consent of PricewaterhouseCoopers LLC
J. Other Opinions and Consents
P. 1. Code of Ethics of The UAM Funds
2. Code of Ethics of UAM Funds Distributors, Inc. (distributor)
3. Code of Ethics - Barrow, Hanley, Mewhinney & Strauss, Inc.
(investment adviser)
4. Code of Ethics - Cambiar Investors, Inc. (investment
adviser)
5. Code of Ethics - Chicago Asset Management Company
(investment adviser)
6. Code of Ethics - Dwight Asset Management Company (investment
adviser)
7. Code of Ethics - First Pacific Advisors, Inc. (investment
adviser)
8. Code of Ethics - Hanson Investment Management Company
(investment adviser)
9. Code of Ethics - Heitman/PRA Securities Advisors, Inc.
(investment adviser)
10. Code of Ethics - Murray Johnstone International Limited
(investment adviser)
11. Code of Ethics - Pacific Financial Research, Inc.
(investment adviser)
12. Code of Ethics - Pell Rudman Trust Company (investment
adviser)
13. Code of Ethics - Provident Investment Counsel, Inc.
(investment adviser)
14. Code of Ethics - Thompson, Siegel & Walmsley, Inc.
(investment adviser)
15. Code of Ethics - Tom Johnson Investment Management, Inc.
(investment adviser)
