<PAGE>
------------------------------
UAM Funds
Enhanced Monthly
Income Portfolio
------------------------------
Annual Report
October 31, 1996
- --------------------------------------------------------------------------------
UAM FUNDS
ENHANCED MONTHLY
INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Officers and Directors
Norton H. Reamer
Director, President
and Chairman
William H. Park
Vice President
John T. Bennett, Jr.
Director
Philip D. English
Director
William A. Humenuk
Director
Peter M. Whitman, Jr.
Director
Michael E. DeFao
Secretary
Karl O. Hartmann
Assistant Secretary
Gary L. French
Treasurer
Robert R. Flaherty
Assistant Treasurer
- --------------------------------------------------------------------------------
Investment Adviser
Spectrum Asset Management, Inc.
Four High Ridge Park
Stamford, CT 06905
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Administrator
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
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Custodian
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, NY 11245
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Legal Counsel
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
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Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
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Distributor
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
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This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
<PAGE>
S P E C T R U M
Dear Shareholders:
The capitalization of United Asset Management Inc. Enhanced Monthly Income
Portfolio (the "Portfolio") grew to $2.4 million since inception on November 15,
1995. The marketing process has been a "slow" one due to the fact that the
underlying securities in the Portfolio are relatively new, which makes for a
longer lead time in the sales process. Additionally, many investors like more
performance history before committing funds.
The total return for the Portfolio for the fourth quarter was 1.71% compared to
1.36% for the three month U.S. Treasury Bill. For the 11 1/2 months since
inception, the Portfolio earned 6.23%, or 6.51% annualized, compared to 5.34% on
the one year U.S. Treasury Bill and 6.01% on the Salomon 1-3 year Treasury
index. The portfolio outperformed the benchmarks over the time periods in spite
of a relatively difficult market for a portion of the portfolio. The portfolio
is comprised of 55% hybrid securities and 45% securities which qualify for the
dividends received deduction (DRD). Hybrid securities experienced some widening
of spreads relative to the hedge of Treasury futures and options on Treasury
futures primarily due to a great deal of supply coming to market. In fact, last
week it was announced that banks will be allowed to include these types of
hybrid securities in Tier 1 Capital. This should spark yet another wave of new
issuance as banks rush to file deals. Although spreads may widen over the short
term, it will be good for the hybrid market going forward for 2 reasons. First,
it will allow us to diversify into more stocks and into another industry.
Secondly, we expect some of the new bank issues to include better call features,
i.e., 10 year non-callable. This bodes well for the hybrid market capturing
more institutional interest, and thus the possibility of more efficient
markets. An offset to the widening of spreads in hybrid securities during the
last 2 quarters was the good performance in the DRD preferred stocks. These
securities tightened relative to the hedge because of strong technicals in the
market. Very little issuance has come in fiscal 1996, while demand remains
high. Although this Portfolio is not geared toward tax advantaged investments,
we have maintained 45% exposure to this sector given the high probability of
capital appreciation.
Respectfully,
Spectrum Asset Management, Inc.
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
<TABLE>
<CAPTION>
Shares Value+
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS (94.2%)
- ----------------------------------------------------------------------------------------------------------------------------------
Banking-Foreign (3.0%)
Banco Bilbao Vizcaya International, Series B, 9.00% 2,600 $ 71,175
- ----------------------------------------------------------------------------------------------------------------------------------
Banking-National (6.8%)
BankAmerica Corp., Series K, 8.375% 2,700 70,200
Chase Manhattan Corp.-New, Series H, 8.375% 3,600 92,340
------------------------
162,540
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Services (34.0%)
ComEd Financing I, 8.48% 3,500 86,625
Conagra Capital LC, Series B, Floating Rate, 6.41% 3,700 80,938
Household Capital Trust II, 8.70% 3,600 92,700
Illinois Power Capital LP, Series A, 9.45% 3,300 86,625
Lehman Brothers Holdings, Inc., Series A, 8.30% 3,600 89,100
Morgan Stanley Group, Inc., 7.75% 2,000 105,000
Swedish Export Credit, 7.375% 4,000 93,000
Texaco Capital LLC, Series B, Floating Rate, 6.25% 4,500 99,000
Travelers Group, Series A, 8.125% 3,200 82,560
------------------------
815,548
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages, Food & Tobacco (3.9%)
Cadbury Schweppes Co., Series A, 8.625% 3,600 93,600
- ----------------------------------------------------------------------------------------------------------------------------------
Telecommunications (4.8%)
GTE California, Inc., Series 56, 4.50% 4,000 56,200
GTE Florida, Inc., Series B, $1.30 2,960 58,534
------------------------
114,734
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities-Electrical & Gas (41.7%)
Appalachian Power Co., Series A, 8.25% 4,000 98,500
Carolina Power & Light Co., $7.95 900 91,485
Cincinnati Gas & Electric Co., 8.28% 2,600 65,975
Columbus Southern Power Corp., Series A, 8.375% 3,500 87,500
IES Utilities, Inc. Series A, 7.875% 3,600 89,100
Ohio Power Co., 8.16% 3,600 90,000
Pacific Enterprises, Inc., $4.50 1,430 99,027
Pacific Gas & Electric Co., Series G, 4.80% 5,800 105,850
San Diego Gas & Electric Co., 4.40% 7,200 95,220
Sierra Pacific Power Co., Series 1, 7.80% 1,080 29,484
Southwest Gas Capital I, 9.13% 2,800 72,100
UtiliCorp United, Inc., $2.05 2,900 74,095
------------------------
998,336
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TOTAL PREFERRED STOCKS (Cost $2,228,940) 2,255,933
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No. of
Contracts
- ---------------------------------------------------------------------------------------------------------------------------------
PURCHASED PUT OPTIONS (0.6%)
U.S. Treasury Bond, expiring 3/1/97, strike price $108 1 $ 906
U.S. Treasury Bond, expiring 3/1/97, strike price $110 1 1,453
U.S. Treasury Bond, expiring 3/1/97, strike price $112 6 13,500
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS (Cost $17,717) 15,859
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS--(Continued)
October 31, 1996
<TABLE>
<CAPTION>
Face
Amount
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.9%)
- ----------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement (4.9%)
Chase Securities, Inc., 5.58% dated 10/31/96, due 11/1/96, to be
repurchased at $117,018, collateralized by $113,093 of various
U.S. Treasury Notes 5.875%-7.75%, due 3/31/99-11/30/99, valued at
$117,000 (Cost $117,000) $ 117,000 117,000
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TOTAL INVESTMENTS (99.7%) (Cost $2,363,657) (a) 2,388,792
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%) 7,276
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS (100%) $ 2,396,068
==================================================================================================================================
</TABLE>
+ - See Note A to Financial Statements
(a) - The cost for federal income tax purposes was $2,363,852. At
October 31, 1996, net unrealized appreciaton for all securities
based on tax cost was $24,940. This consisted of aggregate gross
unrealized appreciation for all securities of $41,668 and
aggregate gross unrealized depreciation for all securities of
$16,728.
The accompanying notes are an integral part of the financial statements.
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Assets
<S> <C>
Investments, at Cost....................................... $ 2,363,657
==========
Investments, at Value...................................... $ 2,388,792
Cash....................................................... 398
Receivable due from Investment Adviser..................... 17,316
Margin Deposits on Futures Contracts....................... 15,000
Dividends Receivable....................................... 4,640
Other Assets............................................... 95
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Total Assets............................................ 2,426,241
- -----------------------------------------------------------------------------
Liabilities
Payable for Administrative Fees............................ 3,862
Payable for Daily Variation on Margin Futures.............. 2,438
Payable for Custodian Fees................................. 1,443
Payable for Directors' Fees................................ 606
Other Liabilities.......................................... 21,824
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Total Liabilities....................................... 30,173
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Net Assets.................................................... $ 2,396,068
=============================================================================
Net Assets Consist of:
Paid in Capital............................................ 2,398,976
Undistributed Net Investment Income........................ 5,926
Accumulated Net Realized Gain.............................. (18,719)
Unrealized Appreciation.................................... 9,885
- -----------------------------------------------------------------------------
Net Assets.................................................... $ 2,396,068
=============================================================================
Institutional Class Shares
Shares Issued and Outstanding ($0.001 par value)
(Authorized 25,000,000)................................. 238,982
Net Asset Value, Offering and
Redemption Price Per Share.............................. $ 10.03
=============================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
November 15, 1995*
to
October 31, 1996
- --------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Dividends .................................................................. $ 130,790
Interest ................................................................... 19,575
- --------------------------------------------------------------------------------------------------
Total Income ............................................................ 150,365
- --------------------------------------------------------------------------------------------------
Expenses
Investment Advisory Fees - Note B
Basic Fees............................................................... $12,113
Less: Fees Waived........................................................ (12,113) -
---------
Administrative Fees - Note C ............................................... 35,565
Printing Fees............................................................... 17,505
Audit Fees ................................................................. 12,852
Registration & Filing Fees.................................................. 11,076
Custodian Fees - Note D..................................................... 4,722
Directors' Fees - Note G ................................................... 2,467
Other Expenses ............................................................. 6,414
Expenses Assumed by the Adviser-Note B (67,886)
- --------------------------------------------------------------------------------------------------
Total Expenses .......................................................... 22,715
Expense Offset-Note A....................................................... (2,242)
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Net Expenses............................................................. 20,473
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Net Investment Income ........................................................ 129,892
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Net Realized Gain (Loss) on:
Investments ................................................................ (23,090)
Futures .................................................................... 4,371
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Total Net Realized Gain (Loss) ............................................. (18,719)
- --------------------------------------------------------------------------------------------------
Net Change in Unrealized Appreciation/Depreciation on:
Investments ................................................................ 25,135
Futures .................................................................... (15,250)
- --------------------------------------------------------------------------------------------------
Total Net Change in Unrealized Appreciation/Depreciation...................... 9,885
- --------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments and Futures Contracts.......................... (8,834)
- --------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ......................... $ 121,058
==================================================================================================
</TABLE>
* Commencement of Operations
The accompanying notes are an integral part of the financial statements.
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
November 15, 1995*
to
October 31, 1996
- ------------------------------------------------------------------------------------
<S> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income............................................. $129,892
Net Realized (Loss)............................................... (18,719)
Net Change in Unrealized Appreciation/Depreciation................ 9,885
- ------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations................................................... 121,058
- ------------------------------------------------------------------------------------
Distributions:
Net Investment Income............................................. (124,224)
- ------------------------------------------------------------------------------------
Capital Share Transactions: (1)
Issued - Regular.................................................. 2,325,010
- In Lieu of Cash Distributions............................ 124,224
Redeemed.......................................................... (50,000)
- ------------------------------------------------------------------------------------
Net Increase from Capital Share Transactions................... 2,399,234
- ------------------------------------------------------------------------------------
Total Increase.................................................... 2,396,068
Net Assets:
Beginning of Period .............................................. -
- ------------------------------------------------------------------------------------
End of Period (including undistributed net investment
income of $5,926).............................................. $2,396,068
====================================================================================
(1) Shares Issued and Redeemed:
Shares Issued ................................................. 231,629
In Lieu of Cash Distributions.................................. 12,368
Shares Redeemed ............................................... (5,015)
- ------------------------------------------------------------------------------------
238,982
====================================================================================
</TABLE>
*Commencement of Operations
The accompanying notes are an integral part of the financial statements.
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding Throughout The Period
<TABLE>
<CAPTION>
For the Period
November 15, 1995*
to
October 31, 1996
- -----------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period............................... $10.00
- -----------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income.......................................... 0.60
Net Realized and Unrealized Gain............................... 0.01 #
- -----------------------------------------------------------------------------------
Total from Investment Operations............................ 0.61
- -----------------------------------------------------------------------------------
Distributions
Net Investment Income.......................................... (0.58)
- -----------------------------------------------------------------------------------
Net Asset Value, End of Period..................................... $10.03
===================================================================================
Total Return....................................................... 6.23% +
===================================================================================
Ratios and Supplemental Data
Net Assets, End of Period (Thousands).............................. $2,396
Ratio of Expenses to Average Net Assets ........................... 1.12% *
Ratio of Net Investment Income to Average Net Assets............... 6.43% *
Portfolio Turnover Rate............................................ 159%
Average Commission Rate ........................................... $0.0276
- -----------------------------------------------------------------------------------
Voluntary Waived Fees and
Expenses Assumed by the Adviser Per Share...................... $ 0.37
Ratio of Expenses to Average Net
Assets Including Expense Offsets............................... 1.00% *
- -----------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Total return would have been lower had certain expenses not been waived or
reimbursed during the period.
# The amount shown for the period November 15, 1996 to October 31, 1996, for a
share outstanding throughout the period does not accord with the aggregate
net gains on investments for that period because of the timing of sales and
repurchases of portfolio shares in relation to fluctuating market values of
the investments of the Portfolio.
The accompanying notes are an integral part of the financial statements.
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") are
registered under the Investment Company Act of 1940, as amended. The Enhanced
Monthly Income Portfolio (the "Portfolio"), portfolio of UAM Funds, Inc., is a
diversified, open-end management investment company. At October 31, 1996, the
UAM Funds were composed of forty active portfolios. The financial statements of
the remaining portfolios are presented separately. The objective of the
Portfolio is to provide a high level of dividend income consistent with capital
preservation.
A. Significant Accounting Policies: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are consistently followed by the Portfolio in the preparation of its
financial statements. Generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results may differ from
those estimates.
1. Security Valuation: Exchange listed preferred securities for which
market quotations are readily available may be valued at the last quoted
sales price as of the close of business on the day the valuation is made by
the primary exchange on which the securities are traded. Under procedures
approved by the Board of Directors, fixed income securities and most fixed-
dividend preferred securities are valued according to the broadest and most
representative market which will ordinarily be the over-the-counter market,
or if there is no actively quoted price, the securities may be valued based
on a matrix system which considers such factors as security prices, yields
and maturities. Short-term investments that have remaining maturities of
sixty days or less at time of purchase are valued at amortized cost, if it
approximates market value. The value of other assets and securities for
which no quotations are readily available are determined in good faith at
fair value using methods determined by the Board of Directors.
2. Federal Income Taxes: It is the Portfolio's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required in the financial statements.
At October 31, 1996, the Portfolio had available $35,633 of
capital loss carryover for Federal income tax purposes, which will expire
October 31, 2004.
3. Repurchase Agreements: In connection with transactions involving
repurchase agreements, the Portfolio's custodian bank takes possession of
the underlying securities, the value of which exceeds the principal amount
of the repurchase transaction, including accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is monitored on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolio has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the UAM Funds may transfer their daily uninvested cash balances
into a joint trading account which invests in one or more repurchase
agreements. This joint repurchase agreement is covered by the same
collateral requirements as discussed above.
<PAGE>
4. Futures and Options Contracts: The Portfolio may use futures and
options contracts to hedge against changes in the values of securities the
Portfolio owns or expects to purchase. The Portfolio may also write
covered options on securities it owns or in which it may invest to increase
its current returns.
The Portfolio had the following futures contracts open at October 31, 1996:
<TABLE>
<CAPTION>
Net
Unrealized
Number of Aggregate Expiration Appreciation
Contracts Contracts Face Value Date (Depreciation)
----------------- --------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sales:
December
U.S. Treasury Long Bond 6 $678,000 1996 ($15,249)
</TABLE>
The potential risk to the Portfolio is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is unable
to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written options.
5. Distributions to Shareholders: The Portfolio will normally distribute
substantially all of its net investment income monthly. Any realized net
capital gains will be distributed annually. All distributions are recorded
on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles.
Current year permanent book-tax differences are not included in ending
undistributed net investment income for the purpose of calculating net
investment income per share in the financial highlights.
6. Other: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Most expenses of the
UAM Funds can be directly attributed to a particular portfolio. Expenses
which cannot be directly attributed are apportioned among the portfolios of
the UAM Funds based on their relative net assets. Additionally, certain
expenses are apportioned among the portfolios of the UAM Funds and AEW
Commercial Mortgage Securities Fund, Inc. ("AEW"), an affiliated closed-end
management investment company, based on their relative net assets.
Custodian fees for the Portfolio have been increased to include expense
offsets for custodian balance credits.
B. Advisory Services: Under the terms of an investment advisory agreement,
Spectrum Asset Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio at a fee calculated at an annual rate of 0.60% of
average daily net assets. The Adviser has voluntarily agreed to waive a portion
of its advisory fees and to assume expenses, if necessary, in order to keep the
Portfolio's total annual operating expenses, after the effect of expense offset
arrangements, from exceeding 1.00% of average daily net assets.
<PAGE>
C. Administration Services: Effective April 15, 1996, UAM Fund Services, Inc.
(the "Administrator"), a wholly-owned subsidiary of UAM, provides and oversees
administrative, fund accounting, dividend disbursing and transfer agent services
to the UAM Funds and AEW under a Fund Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.20% of the first
$200 million of the combined aggregate net assets; plus 0.12% of the next $800
million of the combined aggregate net assets; plus 0.08% of the next $2 billion
of the combined aggregate net assets; plus 0.06% of the combined aggregate net
assets in excess of $3 billion. The fees are allocated among the portfolios of
the UAM Funds and AEW on the basis of their relative net assets and are subject
to a graduated minimum fee schedule per portfolio which rises from $2,000 per
month, upon inception of a portfolio, to $70,000 annually after two years. For
portfolios with more than one class of shares, the minimum annual fee increases
to $90,000. In addition, the Administrator receives a Portfolio-specific
monthly fee of 0.04% of average daily net assets of the Portfolio. Also
effective April 15, 1996, the Administrator has entered into a Mutual Funds
Service Agreement with Chase Global Funds Services Company ("CGFSC"), an
affiliate of The Chase Manhattan Bank, under which CGFSC agrees to provide
certain services, including but not limited to, administration, fund accounting,
dividend disbursing and transfer agent services. Pursuant to the Mutual Funds
Service Agreement, the Administrator pays CGFSC a monthly fee. For the period
April 15,1996 to October 31, 1996, UAM Fund Services, Inc. earned $23,210 from
the Portfolio as Administrator of which $22,706 was paid to CGFSC for their
services as sub-Administrator.
Prior to April 15, 1996, CGFSC, served as the administrator to the UAM Funds and
AEW. For its services as administrator CGFSC received annual fees, computed
daily and payable monthly, based on the combined aggregate average daily net
assets of the UAM Funds and AEW, as follows: 0.20% of the first $200 million of
the combined aggregate net assets; plus 0.12% of the next $800 million of the
combined aggregate net assets; plus 0.08% of the combined aggregate net assets
in excess of $1 billion but less than $3 billion; plus 0.06% of the combined
aggregate net assets in excess of $3 billion. The fees were allocated among the
portfolios of the UAM Funds and AEW on the basis of their relative net assets
and were subject to a graduated minimum fee schedule per portfolio which rose
from $2,000 per month, upon inception of a portfolio, to $70,000 annually after
two years. For the period November 1,1995 to April 15, 1996, CGFSC earned
$12,355 from the Portfolio as Administrator.
D. Custodian: Effective July 17, 1996, The Chase Manhattan Bank (the "Bank"), an
affiliate of CGFSC, is custodian for the Portfolio's assets held in accordance
with the custodian agreement. For the period July 17, 1996 to October 31, 1996,
the amount charged to the Portfolio by the Bank aggregated $1,240, all of which
is unpaid at October 31, 1996.
E. Distribution Services: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolio. The
Distributor does not receive any fee or other compensation with respect to the
Portfolio.
F. Purchases and Sales: For the year ended October 31, 1996, the Portfolio
made purchases of $4,801,022 and sales of $2,563,233 of investment securities
other than long-term U.S. Government and short-term securities. There were no
purchases or sales of long-term U.S. Government securities.
G. Directors' Fees: Each Director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the active portfolios of UAM Funds and AEW, plus a quarterly retainer of $150
for each active portfolio of the UAM Funds and AEW, and reimbursement of
expenses incurred in attending Board meetings.
H. Concentration of Credit: The Portfolio invests primarily in preferred and
fixed income securities in the utilities industry. The Portfolio is more
susceptible to economic factors adversely affecting the utilities industry than
portfolios that are not concentrated in this industry to the same extent.
<PAGE>
I. Other: At October 31, 1996, approximately 88% of total shares outstanding
were held by three affiliated record shareholders owning 10% or greater of the
aggregate total shares outstanding.
The Portfolio placed a portion of its portfolio transactions with the Adviser,
which is a registered dealer. The Commissions paid to the Adviser for the year
ended October 31, 1996 amounted to $5,398. During the year ended October 31,
1996 the Adviser waived a portion of its commissions, amounting to $1,086.
J. Subsequent Event: Effective December 9, 1996, the Board of Directors of
the Enhanced Monthly Income Portfolio decided to liquidate and close down the
Portfolio.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Enhanced Monthly Income Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Enhanced Monthly Income Portfolio
(the "Portfolio"), a Portfolio of the UAM Funds, Inc., at October 31, 1996, and
the results of its operations, the changes in its net assets and the financial
highlights for the period November 15, 1995 (commencement of operations) to
October 31, 1996, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at October
31, 1996 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above.
As explained in Note J, the Portfolio liquidated its assets and redeemed its
capital shares on December 9, 1996 and ceased its operations shortly thereafter.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 9, 1996
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (Unaudited)
For the period November 15, 1995 to October 31, 1996, the percentage of
dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders was 97.6%.
