<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
RICE, HALL, JAMES SMALL CAP PORTFOLIO
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Mary Rudie Barneby Peter M. Whitman, Jr.
Director and Director
Executive Vice President
John T. Bennett, Jr. William H. Park
Director Vice President and
Assistant Treasurer
J. Edward Day Karl O. Hartmann
Director Secretary
Philip D. English Robert R. Flaherty
Director Treasurer
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Rice, Hall, James & Associates
600 West Broadway, Suite 1000
San Diego, CA 92101
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
RICE, HALL,
JAMES SMALL
CAP PORTFOLIO
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
May 7, 1996
Dear Shareholder,
The performance of the Rice, Hall, James Small Cap Portfolio as of April 30,
1996 is presented below. Three indices are provided for comparative purposes:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
YEAR SIX MONTHS YEAR 7/1/94*
QTR ENDED ENDED ENDED ENDED THROUGH
4/30/96 4/30/96 4/30/96 3/31/96 3/31/96
--------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
RHJ Small Cap Portfolio............ 19.32% 54.98% 22.85% 46.98% 37.23%
Russell 2000....................... 10.84% 32.99% 18.42% 29.09% 22.05%
S&P 500............................ 3.40% 30.18% 13.76% 32.07% 27.01%
Value Line**....................... 6.38% 19.46% 12.07% 18.13% 13.85%
</TABLE>
- --------
* Commencement of Operations
** Excludes dividend income
The Rice, Hall, James Small Cap Portfolio exceeded all three indices during
the periods above. While the small stock Russell 2000 Index eclipsed the
returns on the S&P 500 over the last year, the Portfolio increased its
positive performance gap versus the former index over each respective time
period. It will be difficult to sustain such a large degree of outperformance
over time.
After a brief respite, the technology sector once again offered opportunity,
as the weighting and number of stocks in this broad area rose significantly
during the quarter. Valuations were more reasonable after the sharp selloff
last fall, and investors' fears of recession receded. At the same time, energy
stocks appreciated nicely due to strong demand for energy products, further
spurring the performance of the Portfolio. We continue to like selected
exploration and energy service stocks. Health care stocks remain promising,
but this quarter were a slightly smaller percentage of the total Portfolio.
Finally, our analysts uncovered several specialty retail stocks which
benefitted from stronger consumer spending this spring.
As we start the final half of the fiscal year, our focus on small,
fundamentally attractive businesses should lead to opportunities for
significant stock price appreciation. Dividend yield is not an important
factor in our investment process. No derivative instruments were used in our
investment strategy.
Sincerely,
(ART)
Timothy A. Todaro
Partner
1
<PAGE>
DEFINITIONS OF THE COMPARATIVE INDICES
--------------------------------------
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Russell 2000 Index is an unmanaged index composed of the 2,000 smallest
stocks in the Russell 3000, a market value weighted index of the 3,000 largest
U.S. publicly traded companies.
Value Line is an unmanaged index composed of over 1,600 stocks in the Value
Line Investment Survey.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
2
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (89.8%)
- -------------------------------------------------------------------------------
BANKS (4.8%)
Bank of Commerce/San Diego.................................... 15,000 $ 266
*MS Financial, Inc. ........................................... 50,000 344
RAC Financial Group, Inc. .................................... 15,000 456
*Surety Capital Corp. ......................................... 85,000 324
-------
1,390
- -------------------------------------------------------------------------------
BASIC RESOURCES (7.0%)
Harmon Industries, Inc. ...................................... 24,000 372
*Layne, Inc. .................................................. 41,500 456
*Park-Ohio Industries.......................................... 20,000 372
Pittston Minerals Group....................................... 25,000 337
*Universal Stainless & Alloy Products, Inc. ................... 20,000 215
*Whitehall Corp. .............................................. 8,000 276
-------
2,028
- -------------------------------------------------------------------------------
CONSTRUCTION (2.1%)
Cavalier Homes, Inc. ......................................... 18,937 367
Monarch Cement Co. ........................................... 17,200 249
-------
616
- -------------------------------------------------------------------------------
CONSUMER DURABLES (2.5%)
*Temtex Industries, Inc. ...................................... 50,000 225
*TurboChef, Inc. .............................................. 20,000 225
Wynn's International, Inc. ................................... 10,500 285
-------
735
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.2%)
*Opta Food Ingredients, Inc. .................................. 20,000 280
Riser Foods, Inc., Class A.................................... 15,000 285
*Unimark Group, Inc. .......................................... 25,000 369
-------
934
- -------------------------------------------------------------------------------
ELECTRONICS (0.9%)
Technitrol, Inc. ............................................. 7,000 246
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (13.4%)
3-D Geophysical, Inc. ......................................... 50,000 $ 587
*Belden & Blake Corp. .......................................... 33,000 668
*Cairn Energy USA, Inc. ........................................ 55,000 674
*Dreco Energy Services Ltd.--Series A........................... 27,000 682
*Global Natural Resources, Inc. ................................ 37,000 536
*Newpark Resources, Inc. ....................................... 10,000 314
*Oceaneering International, Inc. ............................... 26,000 409
-------
3,870
- --------------------------------------------------------------------------------
HEALTH CARE (18.4%)
*Alcide Corp. .................................................. 5,000 116
*Biofield Corp. ................................................ 10,000 131
*Biomira, Inc. ................................................. 60,000 439
*Cohr, Inc. .................................................... 30,000 660
*Copley Pharmaceuticals, Inc. .................................. 30,000 450
*Global Pharmaceutical Corp. ................................... 25,000 266
*Guilford Pharmaceuticals, Inc. ................................ 11,400 291
Kinetic Concepts, Inc. ........................................ 24,000 354
*LanVision Systems, Inc. ....................................... 37,000 680
*Life Medical Sciences, Inc. ................................... 20,000 160
Meridian Diagnostics, Inc. .................................... 35,000 324
*Metra Biosystems, Inc. ........................................ 25,000 338
*Osteotech, Inc. ............................................... 40,000 270
*Protein Design Labs, Inc. ..................................... 20,000 525
*Royce Laboratories, Inc. ...................................... 30,000 300
-------
5,304
- --------------------------------------------------------------------------------
INDUSTRIAL (2.1%)
*Bonded Motors, Inc. ........................................... 15,000 109
*CET Environmental Services, Inc. .............................. 15,000 159
*Meadow Valley Corp. ........................................... 25,000 141
Optical Coating Laboratory, Inc. .............................. 15,000 187
-------
596
- --------------------------------------------------------------------------------
INSURANCE (2.6%)
Meadowbrook Insurance Group, Inc. ............................. 10,000 311
*Philadelphia Consolidated Holding Corp. ....................... 10,000 213
Stewart Information Services Corp. ............................ 11,000 219
-------
743
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
REAL ESTATE (0.9%)
Lawyers Title Corp. ........................................... 15,000 $ 270
- --------------------------------------------------------------------------------
RETAIL (6.8%)
*Kenneth Cole Productions, Inc.--Series A....................... 20,000 400
*Piercing Pagoda, Inc. ......................................... 23,000 334
*Quicksilver, Inc. ............................................. 13,500 510
Regis Corp. ................................................... 15,000 548
*Rock Bottom Restaurants, Inc. ................................. 15,000 178
-------
1,970
- --------------------------------------------------------------------------------
SERVICES (6.3%)
*Barnett, Inc. ................................................. 10,000 238
*Childtime Learning Centers..................................... 30,000 281
*Daisytek International Corp. .................................. 7,000 285
*DecisionOne Corp. ............................................. 13,500 334
*Health Systems Design Corp. ................................... 20,000 300
Penske Motorsports, Inc. ...................................... 2,500 74
*Rural/Metro Corp. ............................................. 10,000 293
-------
1,805
- --------------------------------------------------------------------------------
TECHNOLOGY (13.8%)
*Applied Digital Access, Inc. .................................. 25,000 325
*Bel Fuse, Inc. ................................................ 25,000 463
*Butler International, Inc. .................................... 37,000 278
*Cybex Computer Products Corp. ................................. 25,000 409
*Intelect, Inc. ................................................ 50,000 319
*Intevac, Inc. ................................................. 30,000 469
MacNeal-Schwendler Corp. ...................................... 25,000 341
*Planning Sciences International plc ADR........................ 15,500 372
*Premenos Technology Corp. ..................................... 20,000 445
*Qlogic Corp. .................................................. 30,000 308
SCB Computer Technology, Inc. ................................. 10,000 257
-------
3,986
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (4.4%)
*Comarco, Inc. ................................................. 20,000 295
*U.S. Satellite Broadcasting Co., Inc. ......................... 6,863 232
*VTEL Corp. .................................................... 35,000 372
Wireless Telecom Group, Inc. .................................. 22,000 382
-------
1,281
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (0.6%)
*Mark VII, Inc. ............................................ 9,000 $ 179
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $20,741).......................... 25,953
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (9.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (9.2%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $2,648, collateralized by
$1,801 U.S. Treasury Bonds 12.5%, due 8/15/14, valued at
$2,702 (COST $2,648)...................................... $ 2,648 2 ,648
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.0%) (COST $23,389).................... 28,601
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
- -------------------------------------------------------------------------------
Cash....................................................... 1
Receivable for Investments Sold............................ 1,184
Receivable for Portfolio Shares Sold....................... 306
Dividends Receivable....................................... 2
Other Assets............................................... 5
Payable for Investments Purchased.......................... (1,169)
Payable for Investment Advisory Fees....................... (17)
Payable for Administrative Fees............................ (7)
Payable for Directors' Fees................................ (1)
Other Liabilities.......................................... (18)
-------
286
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,785,149 outstanding shares $0.001 par value
Institutional Class shares (authorized 25,000,000 shares). $28,887
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.... $ 16.18
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements
*Non-Income Producing Security
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
1996
(In Thousands) (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest........................................................... $ 37
Dividends.......................................................... 28
- --------------------------------------------------------------------------------
Total Income...................................................... 65
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B................................... 79
Administrative Fees--Note C........................................ 37
Custodian Fees..................................................... 7
Directors' Fees--Note F............................................ 1
Other.............................................................. 24
- --------------------------------------------------------------------------------
Total Expenses.................................................... 148
Expense Offset--Note A............................................. (1)
- --------------------------------------------------------------------------------
Net Expenses...................................................... 147
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS................................................. (82)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.................................... 1,905
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS................ 2,987
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS............................................. 4,892
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $4,810
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Loss................................... $ (84) $ (82)
Net Realized Gain..................................... 3,475 1,905
Net Change in Unrealized Appreciation................. 1,698 2,987
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 5,089 4,810
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (4) --
In Excess of Net Investment Income.................... (4) --
Net Realized Gain..................................... -- (3,318)
- --------------------------------------------------------------------------------
Total Distributions.................................. (8) (3,318)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 5,697 5,420
--In Lieu of Cash Distributions..................... 8 3,274
Redeemed.............................................. (163) (209)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 5,542 8,485
- --------------------------------------------------------------------------------
Total Increase......................................... 10,623 9,977
Net Assets:
Beginning of Period................................... 8,287 18,910
- --------------------------------------------------------------------------------
End of Period (2)..................................... $18,910 $28,887
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Shares Issues and Redeemed:
Shares Issued...................................... 459 365
In Lieu of Cash Distributions...................... 1 242
Shares Redeemed.................................... (12) (14)
- --------------------------------------------------------------------------------
448 593
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital.................................... $13,377 $21,862
Undistributed Net Investment Loss.................. -- (82)
Accumulated Net Realized Gain...................... 3,308 1,895
Unrealized Appreciation............................ 2,225 5,212
- --------------------------------------------------------------------------------
$18,910 $28,887
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
JULY 1, ENDED
1994** TO YEAR ENDED APRIL 30,
OCTOBER 31, OCTOBER 31, 1996
1994 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $10.00 $ 11.14 $ 15.87
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)............ 0.01+ (0.07)+ (0.05)
Net Realized and Unrealized Gain........ 1.13 4.81 3.13
- --------------------------------------------------------------------------------
Total From Investment Operations....... 1.14 4.74 3.08
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................... -- (0.01) (0.00)##
In Excess of Net Investment Income...... -- (0.00)## (0.00)##
Net Realized Gain....................... -- -- (2.77)
- --------------------------------------------------------------------------------
Total Distributions.................... -- (0.01) (2.77)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........... $11.14 $ 15.87 $ 16.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN............................. 11.40%++ 42.59%++ 22.85%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).... $8,287 $18,910 $28,887
Ratio of Expenses to Average Net Assets.. 1.40%*+ 1.40%#+ 1.40%*#
Ratio of Net Investment Income (Loss) to
Average Net Assets...................... 0.30%*+ (0.63)%+ (0.78)%*
Portfolio Turnover Rate.................. 5% 180% 105%
Average Commission Rate###............... N/A N/A $0.0518
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of
$0.05 and $0.01 per share for the period ended October 31, 1994 and for
the year ended October 31, 1995, respectively.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# For the year ended October 31, 1995 and the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses
to Average Net Assets would not significantly differ.
## Value is less than $0.01 per share.
### For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The Rice, Hall, James Small Cap Portfolio
(the "Portfolio"), a portfolio of UAM Funds, Inc., began operations on July 1,
1994. At April 30, 1996, the UAM Funds were comprised of thirty-seven active
portfolios. The financial statements of the remaining portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid price on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid price. 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 is 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 continue 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.
Undistributed net investment income and accumulated net realized gain have
been adjusted for prior year permanent book-tax differences.
Reclassifications arose principally from differing book and tax treatments
for the characterization of net operating losses.
At April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $23,389,000. Net unrealized appreciation for
Federal income tax purposes aggregated approximately $5,212,000, of which
$5,619,000 related to appreciated securities and $407,000 related to
depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market 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.
10
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all its net investment income to shareholders quarterly. Any
realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to permanent differences as presented in Note A2.
5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. 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.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Rice, Hall, James & Associates (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 0.75% 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 1.40% of average daily net assets.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
11
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $3,386 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases and sales of approximately $24,602,000 and $21,005,000,
respectively, of investment securities other than long-term U.S. Government
and short-term securities. There were no purchases and sales of long-term U.S.
Government securities.
F. 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.
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
12
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
TS&W PORTFOLIOS
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and
Executive Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Thompson, Siegel & Walmsley, Inc.
5000 Monument Avenue
Richmond, VA 23230-0883
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
TS&W
PORTFOLIOS
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
UAM FUNDS TS&W PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Equity.................................................................... 5
Fixed Income.............................................................. 9
International Equity...................................................... 12
Statements of Operations.................................................... 18
Statement of Changes in Net Assets
Equity.................................................................... 19
Fixed Income.............................................................. 20
International Equity...................................................... 21
Financial Highlights
Equity.................................................................... 22
Fixed Income.............................................................. 23
International Equity...................................................... 24
Notes to Financial Statements............................................... 25
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholder:
We are pleased to provide you with our semi-annual report for the period ended
April 30, 1996 on the UAM Funds' Portfolios managed by Thompson, Siegel &
Walmsley, Inc. (TS&W).
The TS&W Equity, Fixed Income and International Equity Portfolios have
continued to grow since our last report of October 31, 1995. The Equity
Portfolio's net assets on April 30, 1996 were $80,417,229, the Fixed Income
Portfolio's net assets were $58,596,086 and the International Equity
Portfolio's net assets were $99,557,368.
Participants in these Portfolios include the TS&W retirement plans, existing
TS&W clients, and others seeking investment management direction from TS&W. We
encourage many of our clients to pursue a balanced investment approach,
utilizing a combination of these Portfolios to help achieve their specific
investment objectives.
The Portfolios are managed by the TS&W team of investment professionals
utilizing the same investment philosophy and decision making process which has
been in place at our firm for over two decades. We pursue a conservative
approach that emphasizes relative values in the selection of securities. We
stress quality securities and a diversified approach in structuring
portfolios.
Our decision making process focuses on top-down economic analysis, fundamental
analysis of economic sectors, industries, and companies, and an analysis of
absolute and relative values in the market. Our long-term goal is to achieve
above-average results at below-average levels of risk over a complete economic
or market cycle.
TS&W EQUITY PORTFOLIO
The TS&W Equity Portfolio had total net assets of $80,417,229 on April 30,
1996 with $74,520,031 (93% of net assets) invested in common and preferred
stocks, and the remainder in cash reserves. For the first half of fiscal 1996
(November 1, 1995 to April 30, 1996), the TS&W Equity Portfolio returned
14.28% versus the S&P 500 Index return of 13.76%.
The U.S. economy continues along a path of moderate growth which we believe
will lead us into 1997 without a recession. The Federal Reserve has been
successful in its efforts to keep inflation low and economic growth at a
sustainable pace. It is likely that some modest inflationary pressures may
arise this year, but we do not expect significantly higher consumer prices.
Some recent measures of the economy have been relatively strong, and this has
led the Federal Reserve to postpone any reductions in the short term rates it
controls. Inflation expectations and the hesitancy of the Fed to lower rates
have already affected the bond markets.
We have now gone over five years without a 10% decline in the stock market. We
believe the probability of a correction in the equity markets is increasing so
we have been gradually adjusting the Portfolio over the last few quarters to
become more defensive. There are many positive long term influences that will
continue to make equity investments attractive, but we are quite active in
adding stocks which traditionally do well in a period of slowing corporate
profit growth.
Profit growth for corporations has been tremendous for the last two years.
While we expect profits to continue to grow, the rate of growth will likely be
significantly lower. Due to this slow profit growth, we expect to witness many
negative earnings surprises as company profits do not meet the expectations of
investors. We have been
1
<PAGE>
attempting to insulate the Portfolio from these shocks by concentrating on
sectors that have stable earnings patterns (utilities and Real Estate
Investment Trusts (REITs)) or have the prospect for achieving a greater share
of total corporate profits (energy).
Some of the new common stocks in the Portfolio are Intel and Motorola in the
technology sector; Liberty Property Trust, Merry Land & Investment Co., and
United Dominion Realty in the REIT industry; and Wal-Mart and Archer-Daniels-
Midland in the consumer sector.
TS&W FIXED INCOME PORTFOLIO
The TS&W Fixed Income Portfolio had total net assets of $58,596,086 on April
30, 1996. For the quarter ended April 30, 1996, the TS&W Fixed Income
Portfolio total return was -3.53% versus -3.61% for the Lehman Brothers
Government/Corporate Index. For the period from November 1, 1995 to April 30,
1996, the Portfolio was down -0.28% versus the Index return of 0.04%.
Rates rose for all maturities during the past quarter. These rate increases
were most apparent for intermediate and long maturities as market participants
relinquished expectations of continued easing of monetary policy by the
Federal Reserve. Three month Treasury Bill rates rose to 5.11% from 5.04% as
five year Treasury rates rose to 6.32% from 5.23% for an increase of 109 basis
points. Long term rates rose the same degree as intermediate rates with the
yield on ten year Treasury issues rising to 6.58% from 5.57% and thirty year
rates rising to 6.82% from 6.02%.
The rise in rates was triggered by economic data suggesting the economy gained
momentum during the early spring. Evidence of a more robust economy than
expected, associated with increased commodity prices, has caused concern among
bond investors that inflation is accelerating. Increased inflation erodes the
value of bond income and consequently bond prices drop. An additional factor
the bond market has also come to grips with is the realization that the
Federal Reserve will be more cautious about continued lowering of short term
rates.
Market participants had discounted successive easing moves by the Federal
Reserve at year end 1995. These expectations were fulfilled in late January as
short term rates were lowered 25 basis points to 5.25% from 5.50%. Market
participants bid up bond prices as they factored in additional easing moves by
the Fed. However, subsequent to the Fed's easing move action in late January,
commodity prices rose, employment gains were significant, and economic data
was positive. These factors led the market to believe it would be dealing with
a less friendly Federal Reserve and even raised the prospect that the Fed
could reverse their current policy and raise short term rates.
Our strategy during this period has been to take advantage of the backup in
rates by gradually extending the Portfolio's average maturity. A recent
example of this strategy was an increase in the holdings of thirty year bonds
to 19% of the total Portfolio when the yield was greater than 7%. By the close
of December 1995 we had reduced our weighting in thirty year assets to less
than 14% of fund assets versus an average of 18% through most of the fourth
quarter of 1995. We shortened the average maturity of the Portfolio as demand
took the yield below 6% at the end of 1995.
Our view is that there is decent value in intermediate bonds at current levels
and good value in longer dated securities around the 7% level. This judgment
is based on the increase in rates experienced this year, the
2
<PAGE>
prospects for favorable inflation data, and a Federal Reserve seeking to avoid
significant economic weakness. While the economy has demonstrated greater
resilience than expected, the rise in rates will certainly have an impact on
the interest-sensitive sectors of our economy. The consumer segment of our
economy, responsible for approximately 66% of GDP growth, has accumulated
considerable debt loads. Consequently, we believe the consumer is not in the
position to continue spending at the current pace. In a similar fashion,
manufacturing activity is impacted by an inability to push through price
increases, some accumulation of unwanted inventories, and a decline in exports
due to subdued European and Asian economies. Economic growth at the current
level is probably not enough to rekindle fears of a resurgence in inflation.
Bonds are attractive investment alternatives when inflation is low because
purchasing power does not suffer.
The Portfolio as of April 30, 1996 was composed of 70.7% Treasury issues,
14.4% corporate bonds, 1.9% overnight funds, 4.7% Yankee bonds, and 8.3%
mortgage passthrough securities. Portfolio composition changed during the
recent quarter by an increased weighting in the mortgage sector. The mortgage
sector performed relatively poorly during 1995, resulting in mortgage
passthrough securities' relative value increasing vis-a-vis corporate bonds
and Treasury issues. This sector continues to be attractive and will be added
to on a gradual basis. The rating of the Portfolio is AGENCY--an average
rating just below that of an all Treasury portfolio. The effective maturity is
8.2 years. The Portfolio duration is 4.8 years versus the benchmark index
duration of 5.0 years.
TS&W INTERNATIONAL EQUITY PORTFOLIO
The TS&W International Equity Portfolio had total net assets of $99,557,368 on
April 30, 1996. The TS&W International Equity Portfolio's total return was
6.72% for the quarter and 10.47% for the six months ended April 30, 1996.
EAFE, our benchmark index, returned 5.45% and 13.21% during those periods,
respectively.
The first quarter of the fiscal year was marked by increased concerns over the
slowdown of European economies. This led to profit taking in the better
performing markets of 1995, Sweden and Switzerland, with proceeds re-invested
in low interest rate markets like Japan, or markets with good probability of
lower interest rates, e.g., Hong Kong and Spain. On an industry level,
interest rate sensitive industries such as real estate and financial services
did well.
The best performing countries in the quarter were Japan, Spain, Singapore and
Hong Kong, in what can be best termed a liquidity rally. Emerging markets were
also strong as investors were emboldened by the New Year to diversify into
markets which had underperformed last year.
Over the last three months, EAFE was bolstered by Japan's strong performance.
Stocks in the financial sector led the rally in reaction to government action
on the real estate crisis. The Japanese market has been hobbled for years by
the after-effects of a massive real estate and stock market bubble during the
late 1980's. The government is finally attempting, via changes in the
regulatory system and significant monetary easing, to resolve the resultant
banking and property mess. The secondary effects from a weaker yen and
recovery from a prolonged recession will make profit growth comparisons very
favorable. Our stock emphasis continues to be with world class companies that
benefit from a weaker currency and from several years of restructuring. We are
also seeking stocks with more direct exposure to a recovering domestic
economy, for example, capital goods and transportation companies. Japan
continues to be our largest single country exposure at nearly 26% of equity
holdings.
3
<PAGE>
In Europe we believe that interest rates must come down in order to keep the
economies from sputtering to a halt. Currently, economic growth is slowing,
unemployment is high, and consumer confidence is falling. Our overweight
positions in economically sensitive companies are maintained due to attractive
valuation attributes. In addition, accommodative monetary policies by most
European central bankers will lead to stronger economic conditions.
Positions in Asia excluding Japan have been boosted this quarter as valuation
measures in those markets continue to improve. Most of the Southeast Asian
economies have reined in growth to more sustainable, albeit comparatively
high, rates. As a result of these purchases, our cash position has been
reduced during the quarter to a 6% level, just about fully invested.
As Wall Street continues to establish record highs, the valuation differential
of U.S. versus foreign markets widens. We continue to believe that
international markets offer greater relative return prospects than the U.S.
market over the next several years.
CONCLUSION
While both domestic and international equity markets have produced strong
returns so far this year, interest rates have risen, and bond returns have
been negative. Stronger than expected economic reports have led to a more
volatile bond market, and the likelihood of further Fed easing has all but
disappeared. While we expect continued economic growth through 1996, earnings
gains are decelerating and the potential for inflationary pressures to build
and interest rates to increase exists. In this type of environment a defensive
investment posture is warranted.
Respectfully submitted,
/s/ Matthew G. Thompson
Matthew G. Thompson, CFA
Managing Director
/s/ John T. Siegel
John T. Siegel, CFA
Managing Director
DEFINITION OF THE COMPARATIVE INDICES
-------------------------------------
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Lehman Brothers Government/Corporate Index is an unmanaged index composed
of a combination of the Government and Corporate Bond Indices. The Government
Index includes public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The Corporate Bond
Index includes fixed-rate nonconvertible corporate debt. Also included are
Yankee Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. All issues are investment grade (BBB)
or higher, with maturities of at least one year and outstanding par value of
at least $100 million for U.S. Government issues and $25 million for others.
Any security downgraded during the month is held in the index until month-end
and then removed. All returns are market value weighted inclusive of accrued
income.
The Morgan Stanley Capital International EAFE Index is an unmanaged index
composed of 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.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
- ---------------------------------------------------------
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. For a complete discussion of the risks associated with
international investing, please refer to the TS&W Portfolios' Prospectus.
4
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.7%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.1%)
Raytheon Co. .................................................. 16,910 $ 856
- -------------------------------------------------------------------------------
BANKS (6.2%)
BankAmerica Corp. ............................................. 26,950 2,041
Crestar Financial Corp. ....................................... 10,795 609
National City Corp. ........................................... 35,200 1,298
NationsBank Corp. ............................................. 12,500 997
-------
4,945
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (8.4%)
Archer-Daniels-Midland Co. .................................... 40,000 755
CPC International, Inc. ....................................... 19,970 1,380
PepsiCo, Inc. ................................................. 24,425 1,551
Procter & Gamble Co. .......................................... 22,900 1,935
RJR Nabisco Holdings Corp. .................................... 4,537 136
Unilever N.V.--New York Shares ADR............................. 7,300 997
-------
6,754
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (0.9%)
Gannett Co. ................................................... 10,500 718
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (7.5%)
Albany International Corp., Class A............................ 51,225 1,101
BW/IP, Inc. ................................................... 45,895 941
Caterpillar, Inc. ............................................. 16,500 1,056
Goulds Pumps, Inc. ............................................ 19,975 465
Ingersoll-Rand Co. ............................................ 17,500 678
Keystone International, Inc. .................................. 36,935 808
Trinity Industries, Inc. ...................................... 28,280 986
-------
6,035
- -------------------------------------------------------------------------------
CHEMICALS (5.2%)
Air Products & Chemical, Inc. ................................. 20,450 1,168
Dow Chemical Co. .............................................. 21,720 1,931
Nalco Chemical Co. ............................................ 36,340 1,108
-------
4,207
- -------------------------------------------------------------------------------
CONSTRUCTION (1.5%)
Masco Corp. ................................................... 45,420 1,238
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER CYCLICAL (2.6%)
Corning, Inc. ................................................. 59,600 $ 2,071
- -------------------------------------------------------------------------------
ELECTRONICS (7.9%)
AMP, Inc. ..................................................... 3,500 157
Emerson Electric Co. .......................................... 10,050 840
General Electric Co. .......................................... 21,490 1,665
Hewlett-Packard Co. ........................................... 12,900 1,366
Intel Corp. ................................................... 12,500 847
Motorola, Inc. ................................................ 23,300 1,427
-------
6,302
- -------------------------------------------------------------------------------
ENERGY (12.6%)
Chevron Corp. ................................................. 28,600 1,659
Coastal Corp. ................................................. 20,670 819
Dresser Industries, Inc. ...................................... 49,550 1,579
Elf Aquitaine ADR.............................................. 41,979 1,580
Enron Corp. ................................................... 24,725 995
Murphy Oil Corp. .............................................. 13,000 580
Schlumberger Ltd. ............................................. 15,670 1,383
Texaco, Inc. .................................................. 17,500 1,496
-------
10,091
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (1.2%)
Eastman Kodak Co. ............................................. 12,160 930
- -------------------------------------------------------------------------------
HEALTH CARE (7.2%)
Bristol-Myers Squibb Co. ...................................... 19,675 1,618
Columbia/HCA Healthcare Corp. ................................. 36,300 1,929
Pfizer, Inc. .................................................. 15,700 1,081
Schering-Plough Corp. ......................................... 20,740 1,190
-------
5,818
- -------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.3%)
Sunbeam-Oster Co., Inc. ....................................... 75,180 1,043
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (2.7%)
Bob Evans Farm, Inc. .......................................... 64,150 1,010
McDonald's Corp. .............................................. 24,430 1,170
-------
2,180
- -------------------------------------------------------------------------------
</TABLE>
6
The accompanying notes are an integral part of the financial statements.
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
METALS (2.0%)
Reynolds Metals Co. ........................................... 30,405 $ 1,634
- -------------------------------------------------------------------------------
PAPER & PACKAGING (2.4%)
Chesapeake Corp. .............................................. 3,000 87
*Crown Vantage, Inc. ........................................... 660 11
International Paper Co. ....................................... 46,300 1,846
-------
1,944
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (2.7%)
Liberty Property Trust......................................... 35,000 722
Merry Land & Investment Co., Inc. ............................. 35,800 752
United Dominion Realty Trust................................... 50,000 712
-------
2,186
- -------------------------------------------------------------------------------
RETAIL (3.3%)
Circuit City Stores, Inc. ..................................... 25,625 814
Nordstrom, Inc. ............................................... 13,800 699
Wal-Mart Stores, Inc. ......................................... 47,800 1,141
-------
2,654
- -------------------------------------------------------------------------------
SERVICES (5.1%)
Minnesota Mining & Manufacturing Co. .......................... 27,565 1,812
WMX Technologies, Inc. ........................................ 65,120 2,263
-------
4,075
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (0.8%)
Spring Industries, Inc., Class A............................... 13,875 638
- -------------------------------------------------------------------------------
TRANSPORTATION (0.7%)
Conrail, Inc. ................................................. 8,500 593
- -------------------------------------------------------------------------------
UTILITIES (9.4%)
American Telephone & Telegraph Corp. .......................... 15,307 938
Dominion Resources, Inc. ...................................... 47,450 1,827
GTE Corp. ..................................................... 47,200 2,047
Pacificorp..................................................... 83,200 1,664
Southern Co. .................................................. 50,600 1,113
-------
7,589
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $62,813).............................. 74,501
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (0.0%)
- -------------------------------------------------------------------------------
MANUFACTURING (0.0%)
Teledyne, Inc., $1.20 Series E (COST $11)..................... 1,317 $ 19
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (7.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.3%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $5,879, collateralized by $5,630
U.S. Treasury Notes, 7.5%, due 2/15/05, valued at $5,996
(COST $5,878)................................................ $5,878 $ 5,878
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%) (COST $68,702) 80,398
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%)
- -------------------------------------------------------------------------------
Cash.......................................................... 1
Dividends Receivable.......................................... 89
Receivable for Portfolio Shares Sold.......................... 2
Interest Receivable........................................... 1
Other Assets.................................................. 8
Payable for Investment Advisory Fees.......................... (45)
Payable for Portfolio Shares Redeemed......................... (12)
Payable for Administrative Fees............................... (9)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (15)
-------
19
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 5,848,000 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $80,417
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 13.75
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
ADR--American Depositary Receipt.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (69.4%)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (18.6%)
6.25%, 8/15/23................................................. $3,900 $ 3,517
7.125%, 2/15/23................................................ 3,475 3,491
8.125%, 8/15/19................................................ 3,490 3,892
-------
10,900
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (50.8%)
4.375%, 8/15/96-11/15/96....................................... 2,425 2,415
5.125%, 2/28/98................................................ 750 738
6.00%, 6/30/96................................................. 1,910 1,913
6.25%, 8/31/00-2/15/03......................................... 6,000 5,927
6.375%, 7/15/99-1/15/00........................................ 4,300 4,310
6.50%, 8/15/05................................................. 2,725 2,686
7.125%, 2/29/00................................................ 1,400 1,435
7.25%, 8/15/04................................................. 3,090 3,198
7.50%, 11/15/01-5/15/02........................................ 3,610 3,784
7.875%, 11/15/99............................................... 1,940 2,033
8.00%, 5/15/01................................................. 1,235 1,316
-------
29,755
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $41,114)................. 40,655
- -------------------------------------------------------------------------------
AGENCY SECURITIES (8.7%)
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
8.00%, 2/1/23.................................................. 3,018 3,047
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
Various Pools:
7.50%, 1/15/07................................................ 2 1
7.50%, 12/15/22............................................... 2,075 2,055
12.50%, 11/15/13.............................................. 6 7
-------
2,063
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $5,202)........................... 5,110
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (14.3%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (5.3%)
~CIT Group Holdings 5.49%, 5/2/97.............................. $1,425 $ 1,425
Countrywide Funding Corp. 8.25%, 7/15/02...................... 915 961
Fleet/Norstar Group 8.125%, 7/1/04............................ 655 687
-------
3,073
- -------------------------------------------------------------------------------
INDUSTRIAL (9.0%)
~Ford Motor Credit Co. 5.54%, 5/20/97.......................... 1,970 1,970
~G.E. Capital Corp. 5.38%, 8/11/97............................. 2,205 2,204
General Motors Acceptance Corp. 7.625%, 2/15/97............... 1,100 1,112
-------
5,286
- -------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS (COST $6,905)...................... 8,359
- -------------------------------------------------------------------------------
YANKEE BONDS (4.6%)
- -------------------------------------------------------------------------------
Quebec Province 8.80%, 4/15/03................................ 1,255 1,371
WestPac Banking Ltd. 9.125%, 8/15/01.......................... 1,215 1,332
- -------------------------------------------------------------------------------
TOTAL YANKEE BONDS (COST $4,173)............................... 2,703
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.3%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due 5/1/96
to be repurchased at $790, collateralized by $770 U.S.
Treasury Notes, 7.25%, due 8/15/04, valued at $807 (COST
$790)........................................................ 790 790
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.3%) (COST $58,184)....................... 57,617
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.7%)
- -------------------------------------------------------------------------------
Cash.......................................................... 1
Interest Receivable........................................... 966
Receivable for Portfolio Shares Sold.......................... 54
Other Assets.................................................. 7
Payable for Investment Advisory Fees.......................... (20)
Payable for Administrative Fees............................... (8)
Payable for Dividends......................................... (3)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (17)
-------
979
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 5,791,477 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)...................... $58,596
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE........... $ 10.12
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
~Variable/Floating rate security--rate disclosed is as of April 30, 1996.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.6%)
- --------------------------------------------------------------------------------
ARGENTINA (0.9%)
YPF S.A. ADR ................................................. 40,000 $ 875
- --------------------------------------------------------------------------------
AUSTRALIA (1.5%)
Brambles Industries Ltd. ..................................... 106,000 1,453
- --------------------------------------------------------------------------------
AUSTRIA (1.4%)
Flughafen Wien AG............................................. 20,100 1,410
- --------------------------------------------------------------------------------
BRAZIL (1.0%)
#Usiminas S.A. ADS............................................. 84,000 956
- --------------------------------------------------------------------------------
FRANCE (5.7%)
Banque Paribas................................................ 18,429 1,186
Castorama Dubois.............................................. 5,396 1,033
Cie Generale des Eaux......................................... 11,156 1,214
Elf Aquitaine................................................. 12,463 927
Elf Aquitaine ADR............................................. 3,227 121
Valeo S.A. ................................................... 22,000 1,221
-------
5,702
- --------------------------------------------------------------------------------
GERMANY (6.0%)
adidas AG..................................................... 12,000 906
Bayerische Motoren Werke AG................................... 1,750 943
Mannesmann AG................................................. 3,681 1,259
Schmalbach Lubeca AG.......................................... 4,000 705
#Tarkett AG.................................................... 34,000 777
Veba AG....................................................... 28,000 1,384
-------
5,974
- --------------------------------------------------------------------------------
HONG KONG (5.8%)
HSBC Holdings plc............................................. 102,851 1,536
Hutchison Whampoa Ltd. ....................................... 250,000 1,551
Sun Hung Kai Properties Ltd. ................................. 150,000 1,430
Swire Pacific Ltd., Class A................................... 150,000 1,280
-------
5,797
- --------------------------------------------------------------------------------
INDIA (0.3%)
#*Oryx (India) Fund Ltd. ...................................... 40,000 310
- --------------------------------------------------------------------------------
ISRAEL (1.2%)
Scitex Corp. ................................................. 55,000 1,148
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
JAPAN (25.0%)
Canon, Inc. .................................................. 97,000 $ 1,927
Dai-Tokyo Fire & Marine Insurance Co., Ltd. .................. 249,000 1,955
East Japan Railway Co. ....................................... 300 1,602
Hitachi Ltd. ................................................. 143,000 1,544
Ito-Yokado Co., Ltd. ......................................... 20,000 1,179
Japan Associated Finance Co., Ltd. ........................... 6,000 745
*Kobe Steel Ltd. .............................................. 474,000 1,471
Kyocera Corp. ................................................ 19,000 1,430
Mabuchi Motor Co., Ltd. ...................................... 12,200 750
Maezawa Kyuso Industries Co. ................................. 43,000 1,146
Mitsubishi Heavy Industries Ltd. ............................. 223,000 1,990
Mitsui & Co. Ltd. ............................................ 199,000 1,895
Murata Manufacturing Co., Ltd. ............................... 25,718 997
Nippondenso Co., Ltd. ........................................ 74,000 1,612
Nomura Securities Co., Ltd. .................................. 90,000 1,960
Sony Corp. ................................................... 15,000 974
Yamatake-Honeywell Co., Ltd. ................................. 90,000 1,702
-------
24,879
- --------------------------------------------------------------------------------
KOREA (2.3%)
Korea Electric Power Corp. ADR................................ 82,000 2,276
- --------------------------------------------------------------------------------
MALAYSIA (1.7%)
Land & General Bhd. .......................................... 320,000 854
Telekom Malaysia Bhd. ........................................ 94,108 887
-------
1,741
- --------------------------------------------------------------------------------
NETHERLANDS (2.9%)
*ASM Lithography Holding N.V. ................................. 17,000 758
Philips Electronics N.V. ..................................... 24,000 848
Royal PTT Nederland N.V. ..................................... 19,710 740
#Royal PTT Nederland N.V. ADR.................................. 15,394 581
-------
2,927
- --------------------------------------------------------------------------------
SINGAPORE (2.1%)
Datacraft Asia Ltd. .......................................... 948,000 1,062
Keppel Corp. ................................................. 118,000 1,066
-------
2,128
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
SPAIN (2.6%)
ENDESA........................................................ 22,800 $ 1,433
Repsol S.A. ADR............................................... 31,500 1,166
-------
2,599
- --------------------------------------------------------------------------------
SWEDEN (6.6%)
Astra AB, Class B............................................. 25,500 1,126
Ericsson (LM) ADR............................................. 67,000 1,365
Stora Kopparbergs Bergslags Aktiebolag, Class A............... 109,000 1,471
Sparbanken Sverige AB, Class A................................ 110,000 1,241
*Tornet Fastighets AB.......................................... 110,000 114
Volvo AB...................................................... 53,000 1,215
-------
6,532
- --------------------------------------------------------------------------------
SWITZERLAND (6.9%)
ABB AG (Bearer)............................................... 1,380 1,663
CS Holding AG (Registered).................................... 12,000 1,090
Nestle S.A. (Registered)...................................... 1,145 1,274
Societe Generale de Surveillance Holding S.A. (Bearer)........ 695 1,567
Zurich Insurance Co. (Registered)............................. 4,550 1,272
-------
6,866
- --------------------------------------------------------------------------------
THAILAND (2.0%)
Siam Cement Co., Ltd. (Foreign)............................... 21,000 1,081
Thai Farmers Bank Ltd. ....................................... 114,000 872
-------
1,953
- --------------------------------------------------------------------------------
UNITED KINGDOM (15.7%)
British Airport Authority plc................................. 131,458 1,081
British Gas plc............................................... 207,000 734
*Flextech plc.................................................. 183,000 1,398
Geest plc..................................................... 370,000 1,196
Glaxo Wellcome plc............................................ 100,000 1,212
Marks & Spencer plc........................................... 101,000 673
MEPC plc...................................................... 110,000 710
Nurdin & Peacock plc.......................................... 150,000 386
Psion plc..................................................... 70,000 1,205
Rolls-Royce plc............................................... 404,816 1,442
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UNITED KINGDOM--(CONTINUED)
RTZ Corp. plc (Registered)................................ 78,227 $ 1,229
TI Group plc.............................................. 175,148 1,440
*Trafalgar House Corp. plc................................. 1,007,775 758
TransTec plc.............................................. 750,000 1,252
Unilever plc.............................................. 50,000 914
-------
15,630
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $78,146)......................... 91,156
- -------------------------------------------------------------------------------
WARRANTS (0.5%)
- -------------------------------------------------------------------------------
INDIA (0.0%)
#*Oryx (India) Fund........................................ 6,000 5
- -------------------------------------------------------------------------------
UNITED STATES (0.5%)
*Merrill Lynch & Co., expiring 5/15/97..................... 79,000 553
- -------------------------------------------------------------------------------
TOTAL WARRANTS (COST $564)................................. 558
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (7.7%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.7%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96 to be repurchased at $7,666, collateralized by
$7,215 U.S. Treasury Notes, 7.50%, due 11/15/01 valued at
$7,819 (COST $7,665)..................................... $ 7,665 7,665
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%) (COST $86,375) 99,379
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- -------------------------------------------------------------------------------
Cash...................................................... 253
Receivable for Investments Sold........................... 1,268
Dividends Receivable...................................... 316
Receivable for Portfolio Shares Sold...................... 82
Receivable for Withholding Tax Reclaims................... 46
Interest Receivable....................................... 1
Other Assets.............................................. 7
Payable for Investments Purchased......................... (1,677)
Payable for Investment Advisory Fees...................... (79)
Payable for Administrative Fees........................... (12)
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Payable for Directors' Fees.......................................... $ (1)
Other Liabilities.................................................... (26)
-------
178
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 6,888,487 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)......................... $99,557
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 14.45
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
#144A Security--certain conditions for public sale may exist.
ADR--American Depositary Receipt.
ADS--American Depositary Shares.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
At April 30, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Automotive..................................................... 3.6% $ 3,606
Basic Resources................................................ 7.4 7,401
Beverages, Food & Tobacco...................................... 1.2 1,196
Capital Equipment.............................................. 9.4 9,359
Consumer Durables.............................................. 6.5 6,457
Electronics.................................................... 7.8 7,728
Energy......................................................... 7.5 7,483
Financial Services............................................. 11.5 11,452
Insurance...................................................... 1.3 1,272
Manufacturing.................................................. 0.8 758
Multi-Industry................................................. 5.1 5,029
Paper & Packaging.............................................. 3.0 3,030
Pharmaceuticals................................................ 1.2 1,212
Real Estate.................................................... 2.3 2,253
Repurchase Agreement........................................... 7.7 7,665
Services....................................................... 13.9 13,870
Technology..................................................... 2.4 2,353
Telecommunications............................................. 3.3 3,314
Textiles & Apparel............................................. 0.9 906
Transportation................................................. 1.6 1,602
Utilities...................................................... 1.4 1,433
- -------------------------------------------------------------------------------
Total Investments............................................ 99.8% $99,379
Other Assets and Liabilities (Net)............................. 0.2 178
- -------------------------------------------------------------------------------
Net Assets................................................... 100.0% $99,557
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
TS&W PORTFOLIOS
STATEMENTS OF OPERATIONS
For the Six Months Ended April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
TS&W TS&W
TS&W FIXED INTERNATIONAL
EQUITY INCOME EQUITY
(In Thousands) PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends................................... $ 759 $ -- $ 712
Interest.................................... 155 1,470 161
Less: Foreign Taxes Withheld................ -- -- (71)
- -------------------------------------------------------------------------------
Total Income............................... 914 1,470 802
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B............ 244 109 428
Administrative Fees--Note C................. 42 42 55
Custodian Fees.............................. 5 6 42
Directors' Fees--Note F..................... 2 2 2
Other Expenses.............................. 26 25 31
- -------------------------------------------------------------------------------
Total Expenses............................. 319 184 558
Expense Offset--Note A...................... (1) (1) (6)
- -------------------------------------------------------------------------------
Net Expenses............................... 318 183 552
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME........................ 596 1,287 250
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS):
Investments................................. 3,099 621 (99)
Foreign Exchange Transactions............... -- -- (2)
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS)............... 3,099 621 (101)
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS............... 4,927 (2,114) 8,766
- -------------------------------------------------------------------------------
NET GAIN (LOSS).............................. 8,026 (1,493) 8,665
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................... $8,622 $ (206) $8,915
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
TS&W EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,016 $ 596
Net Realized Gain..................................... 1,569 3,099
Net Change in Unrealized Appreciation................. 4,327 4,927
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 6,912 8,622
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (945) (631)
Net Realized Gain..................................... (399) (1,594)
- --------------------------------------------------------------------------------
Total Distributions.................................. (1,344) (2,225)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 19,816 15,194
--In Lieu of Cash Distributions..................... 1,299 2,073
Redeemed.............................................. (4,710) (3,599)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 16,405 13,668
- --------------------------------------------------------------------------------
Total Increase........................................ 21,973 20,065
Net Assets:
Beginning of Period................................... 38,379 60,352
- --------------------------------------------------------------------------------
End of Period (2)..................................... $60,352 $80,417
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 1,707 1,121
In Lieu of Cash Distributions......................... 114 162
Shares Redeemed....................................... (397) (276)
- --------------------------------------------------------------------------------
1,424 1,007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $51,860 $65,528
Undistributed Net Investment Income................... 154 119
Accumulated Net Realized Gain......................... 1,569 3,074
Unrealized Appreciation............................... 6,769 11,696
- --------------------------------------------------------------------------------
$60,352 $80,417
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
TS&W FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Interest Income................................... $ 2,221 $ 1,287
Net Realized Gain (Loss).............................. (319) 621
Net Change in Unrealized Appreciation (Depreciation).. 3,633 (2,114)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... 5,535 (206)
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (2,221) (1,287)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 11,493 13,448
--In Lieu of Cash Distributions..................... 2,167 1,269
Redeemed.............................................. (2,415) (1,305)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 11,245 13,412
- --------------------------------------------------------------------------------
Total Increase........................................ 14,559 11,919
Net Assets:
Beginning of Period................................... 32,118 46,677
- --------------------------------------------------------------------------------
End of Period (2)..................................... $46,677 $58,596
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 1,159 1,316
In Lieu of Cash Distributions......................... 216 122
Shares Redeemed....................................... (239) (126)
- --------------------------------------------------------------------------------
1,136 1,312
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $45,805 $59,217
Accumulated Net Realized Loss......................... (675) (54)
Unrealized Appreciation (Depreciation)................ 1,547 (567)
- --------------------------------------------------------------------------------
$46,677 $58,596
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 774 $ 250
Net Realized Loss..................................... (16) (101)
Net Change in Unrealized Appreciation (Depreciation).. (1,034) 8,766
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (276) 8,915
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (326) (847)
Net Realized Gain..................................... (1,317) --
- --------------------------------------------------------------------------------
Total Distributions.................................. (1,643) (847)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 32,154 14,718
--In Lieu of Cash Distributions..................... 1,641 837
Redeemed.............................................. (3,685) (1,619)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 30,110 13,936
- --------------------------------------------------------------------------------
Total Increase........................................ 28,191 22,004
Net Assets:
Beginning of Period................................... 49,362 77,553
- --------------------------------------------------------------------------------
End of Period (2)..................................... $77,553 $99,557
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 2,459 1,078
In Lieu of Cash Distributions......................... 130 64
Shares Redeemed....................................... (289) (119)
- --------------------------------------------------------------------------------
2,300 1,023
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital................... ................... $72,564 $86,500
Undistributed Net Investment Income................... 815 218
Accumulated Net Realized Loss......................... (64) (165)
Unrealized Appreciation............................... 4,238 13,004
- --------------------------------------------------------------------------------
$77,553 $99,557
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
JULY 17,** ENDED
1992 TO YEARS ENDED OCTOBER 31, APRIL 30,
OCTOBER 31, ------------------------- 1996
1992 1993 1994 1995 (UNAUDITED)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $10.00 $ 9.65 $ 11.02 $ 11.23 $ 12.47
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.02+ 0.14 0.19 0.23 0.12
Net Realized and
Unrealized Gain (Loss). (0.35) 1.36 0.33 1.34 1.62
- ---------------------------------------------------------------------------------
Total From Investment
Operations............ (0.33) 1.50 0.52 1.57 1.74
- ---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income... (0.02) (0.13) (0.18) (0.22) (0.13)
Net Realized Gain....... -- -- (0.13) (0.11) (0.33)
- ---------------------------------------------------------------------------------
Total Distributions.... (0.02) (0.13) (0.31) (0.33) (0.46)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.................. $ 9.65 $ 11.02 $ 11.23 $ 12.47 $ 13.75
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN............. (3.30%)++ 15.62% 4.82% 14.32% 14.28%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIO AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands)............. $7,233 $30,953 $38,379 $60,352 $80,417
Ratio of Expenses to Av-
erage Net Assets........ 1.25%*+ 1.22% 1.10% 1.01%# 0.98%#*
Ratio of Net Investment
Income to Average Net
Assets.................. 1.25%*+ 1.51% 1.74% 2.04% 1.83%*
Portfolio Turnover Rate.. 17% 23% 23% 17% 21%
Average Commission Rate
##...................... N/A N/A N/A N/A $0.0693
- ---------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $0.02
per share for the period ended October 31, 1992.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the period indicated.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.99% and 0.98%*, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
JULY 17,** ENDED
1992 TO YEARS ENDED OCTOBER 31, APRIL 30,
OCTOBER 31, -------------------------- 1996
1992 1993 1994 1995 (UNAUDITED)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $10.00 $ 10.09 $ 10.75 $ 9.60 $ 10.42
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... 0.06+ 0.44 0.47 0.56 0.28
Net Realized and
Unrealized Gain (Loss). 0.07 0.68 (1.05) 0.82 (0.30)
- ---------------------------------------------------------------------------------
Total From Investment
Operations............ 0.13 1.12 (0.58) 1.38 (0.02)
- ---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income... (0.04) (0.46) (0.47) (0.56) (0.28)
Net Realized Gain....... -- -- (0.10) -- --
- ---------------------------------------------------------------------------------
Total Distributions.... (0.04) (0.46) (0.57) (0.56) (0.28)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.................. $10.09 $ 10.75 $ 9.60 $ 10.42 $ 10.12
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN............. 1.31%++ 11.31% (5.46%) 14.73% (0.28%)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIO AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands)............. $9,385 $28,987 $32,118 $46,677 $58,596
Ratio of Expenses to Av-
erage Net Assets........ 1.30%*+ 1.15% 1.02% 0.76%# 0.76%#*
Ratio of Net Investment
Income to Average Net
Assets.................. 4.70%*+ 4.39% 4.73% 5.56% 5.31%*
Portfolio Turnover Rate.. 5% 83% 27% 25% 32%
- ---------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $0.02
per share for the period ended October 31, 1992.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the period indicated.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.75% and 0.76%*, respectively.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 18,** YEARS ENDED ENDED
1992 TO OCTOBER 31, APRIL 30,
OCTOBER 31, ---------------- 1996
1993 1994 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 10.00 $ 12.54 $ 13.85 $ 13.22
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERA-
TIONS
Net Investment Income.......... 0.05+ 0.07 0.13 0.03
Net Realized and Unrealized
Gain (Loss)................... 2.49 1.29 (0.31) 1.34
- --------------------------------------------------------------------------------
Total From Investment Opera-
tions........................ 2.54 1.36 (0.18) 1.37
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.......... -- (0.05) (0.09) (0.14)
Net Realized Gain.............. -- -- (0.36) --
- --------------------------------------------------------------------------------
Total Distributions........... -- (0.05) (0.45) (0.14)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.. $ 12.54 $ 13.85 $ 13.22 $ 14.45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.................... 25.40%++ 10.87% (1.11%) 10.47%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands)......................... $28,030 $49,362 $77,553 $99,557
Ratio of Expenses to Average Net
Assets......................... 1.37%*+ 1.38% 1.32%# 1.30%#*
Ratio of Net Investment Income
to Average Net Assets.......... 1.02%*+ 0.70% 1.29% 0.58%*
Portfolio Turnover Rate......... 11% 30% 23% 12%
Average Commission Rate ##...... N/A N/A N/A $0.0339
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $0.02
per share for the period ended October 31, 1993.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the period indicated.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 1.30% and 1.29%*, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds"), were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The TS&W Equity Portfolio, TS&W Fixed Income
Portfolio and TS&W International Equity Portfolio (the "Portfolios"),
portfolios of UAM Funds, Inc., began operations on July 17, 1992, July 17,
1992, and December 18, 1992, respectively. At April 30, 1996, the UAM Funds
were comprised of thirty-seven active portfolios. The financial statements of
the remaining portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the
Portfolios in the preparation of their 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: Equity securities listed on a United States
securities exchange for which market quotations are readily available are
valued at the last quoted sales price as of the close of the exchange on
the day the valuation is made or, if no sale occurred on such day, at the
bid price on such day. Securities listed on a foreign exchange are valued
at their closing price. Price information on listed securities is taken
from the exchange where the security is primarily traded. Over-the-counter
and unlisted equity securities are valued at the current bid price. Fixed
income securities are stated on the basis of valuations provided by brokers
and/or a pricing service which uses information with respect to
transactions in fixed income securities, quotations from dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments that have remaining
maturities of sixty days or less at time of purchase are valued at
amortized cost, if it approximates market value. The value of other assets
and securities for which no quotations are readily available is determined
in good faith at fair value using methods determined by the Board of
Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue 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. The TS&W International Equity Portfolio may be
subject to taxes imposed by countries in which it invests. Such taxes are
generally based on either income or gains earned or repatriated. The TS&W
International Equity Portfolio accrues such taxes when the related income
is earned.
Undistributed net investment income and accumulated net realized gain
(loss) have been adjusted for prior year permanent book-tax differences.
Reclassifications arose principally from differing book and tax treatments
for foreign currency transactions.
At April 30, 1996, cost of investments and unrealized appreciation
(depreciation) of investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
TS&W PORTFOLIOS (000) (000) (000) (000)
--------------- ------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Equity...................... $68,702 $12,519 $ (823) $11,696
Fixed Income................ 58,184 258 (825) (567)
International Equity........ 86,375 14,165 (1,161) 13,004
</TABLE>
25
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
At October 31, 1995, the following portfolios had available approximate
capital loss carryovers for Federal income tax purposes, which will expire
on the dates indicated:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------
TS&W PORTFOLIOS 2002 2003 TOTAL
--------------- -------- -------- --------
<S> <C> <C> <C>
Fixed Income...................................... $356,000 $301,000 $657,000
International Equity.............................. -- 64,000 64,000
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolios' 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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolios have 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.
4. FOREIGN CURRENCY TRANSACTION: The books and records of the TS&W
International Equity Portfolio are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the bid prices of such
currencies against U.S. dollars last quoted by a major bank. The TS&W
International Equity Portfolio does not isolate that portion of realized or
unrealized gains and losses resulting from changes in the foreign exchange
rate from fluctuations arising from changes in the market prices of the
securities. Net realized gains and losses on foreign currency transactions
represent net foreign exchange gains or losses from forward foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between trade and settlement dates on securities
transactions and the difference between the amount of the investment income
and foreign withholding taxes recorded on the TS&W International Equity
Portfolio's books and the U.S. dollar equivalent amounts actually received
or paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The TS&W International
Equity Portfolio may enter into forward foreign currency exchange contracts
to protect the value of securities held and related receivables and
payables against changes in future foreign exchange rates. A forward
currency contract is an agreement between two parties to buy or sell
currency at a set price on a future date. The market value of the contract
will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily using the forward rate and the change in market
value is recorded by the TS&W International Equity Portfolio as unrealized
gain or loss. The TS&W International Equity Portfolio recognizes realized
gain or loss when the contract is closed, equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and are generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: The TS&W Equity Portfolio will normally
distribute substantially all of its net investment income to shareholders
quarterly. The TS&W Fixed Income Portfolio will normally distribute
substantially all of its net investment income to shareholders monthly. The
TS&W International
26
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
Equity Portfolio will normally distribute substantially all of its net
investment income to shareholders annually. Any realized net capital gains
will normally be distributed annually for the Portfolios. All distributions
are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments; for the TS&W International
Equity Portfolio, the reclassification of unrealized gains on certain
securities designated as "passive foreign investment companies" for tax
purposes and permanent differences as presented in Note A2.
7. 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,
except that certain dividends from foreign securities are recorded as soon
as the TS&W International Equity Portfolio is informed of the ex-dividend
date. Interest income is recognized on the accrual basis. Discounts and
premiums on securities purchased are amortized over their respective lives.
Most expenses of UAM Funds can be directly attributed to a particular
portfolio. Expenses which cannot be directly attributed are apportioned
among the portfolios of UAM Funds based on their relative net assets.
Additionally, certain expenses are apportioned among the portfolios of 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 each Portfolio have been increased
to include expense offsets for custodian balance credits.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Thompson, Siegel & Walmsley, Inc. (the "Adviser"), a wholly-owned subsidiary
of United Asset Management Corporation (UAM), provides investment advisory
services to the Portfolios for a fee calculated at an annual rate of average
daily net assets, as follows:
<TABLE>
<CAPTION>
TS&W PORTFOLIOS RATE
- --------------- -----
<S> <C>
Equity.................................................................... .75%
Fixed Income.............................................................. .45%
International Equity...................................................... 1.00%
</TABLE>
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% of the combined
aggregate net assets in excess of $3 billion. The fees are
27
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
allocated among the portfolios of 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 0.06%, 0.04% and
0.06% of average daily net assets for the TS&W Equity Portfolio, TS&W Fixed
Income Portfolio and TS&W International Equity Portfolio, respectively. Also
effective April 15, 1996, the Administrator has entered into a Mutual Funds
Service Agreement with Chase Global Funds Services Company ("CGFSC"), a
wholly-owned subsidiary of The Chase Manhattan Bank, N.A., 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.
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 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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $4,995, $3,917 and $6,416 from TS&W Equity Portfolio, TS&W Fixed Income
Portfolio and TS&W International Equity Portfolio, respectively, as
Administrator.
D. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
E. PURCHASES AND SALES: For the period ended April 30, 1996, purchases and
sales of investment securities other than long-term U.S. Government and agency
securities and short-term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
TS&W PORTFOLIOS (000) (000)
- --------------- --------- -------
<S> <C> <C>
Equity........................................................ $24,714 $12,378
Fixed Income.................................................. 2,094 748
International Equity.......................................... 22,715 9,651
</TABLE>
Purchases and sales of long-term U.S. Government and agency securities were
approximately $24,044,000 and $14,269,000, respectively, for the TS&W Fixed
Income Portfolio. There were no purchases or sales of U.S. Government and
Agency securities for the TS&W Equity Portfolio and the TS&W International
Portfolio.
F. 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.
28
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
G. LINE OF CREDIT: The Portfolios, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, the percentage of total shares outstanding held
by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF
TS&W PORTFOLIOS SHAREHOLDERS % OWNERSHIP
- --------------- ------------ -----------
<S> <C> <C>
Equity................................................. 2 28.4%
Fixed Income........................................... 1 15.3
</TABLE>
At April 30, 1996, the net assets of the TS&W International Equity Portfolio
was substantially comprised of foreign denominated securities and/or currency.
Changes in currency exchange rates will affect the value of and investment
income from such securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
governmental supervision and regulation of foreign securities markets and the
possibility of political or economic instability.
29
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
MCKEE PORTFOLIOS
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Mary Rudie Barneby Peter M. Whitman, Jr.
Director and Director
Executive Vice President
John T. Bennett, Jr. William H. Park
Director Vice President and
Assistant Treasurer
J. Edward Day Karl O. Hartmann
Director Secretary
Philip D. English Robert R. Flaherty
Director Treasurer
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
C.S. McKee & Co., Inc.
One Gateway Center
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
MCKEE PORTFOLIOS
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
UAM FUNDS MCKEE PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
U.S. Government........................................................... 8
Domestic Equity........................................................... 11
International Equity...................................................... 15
Statements of Operations.................................................... 21
Statement of Changes in Net Assets
U.S. Government........................................................... 22
Domestic Equity........................................................... 23
International Equity...................................................... 24
Financial Highlights
U.S. Government........................................................... 25
Domestic Equity........................................................... 26
International Equity...................................................... 27
Notes to Financial Statements............................................... 28
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
The first quarter saw Gross Domestic Product expand 2.3%, faster than most
people anticipated. The four main areas of strength that accounted for the
gain were consumer spending, housing, durable goods and government
expenditures. Going forward, we believe growth will wane allowing interest
rates to eventually decline in response to lower inflation.
Consumer spending was up 3.5% during the first quarter from a very weak fourth
quarter. However, several things happened that will affect spending for the
balance of the year. First, tax refunds received and spent during this time
period will not be repeated. Second, Easter was early this year, increasing
first quarter consumer spending. Third, consumers were reacting to the
positive impact of lower monthly payments resulting from refinancing their
mortgages. Fourth, consumer debt surged during the first quarter at the very
time interest rates climbed over 100 basis point.
Housing should also slow after a robust first quarter. Thirty-year fixed rate
mortgages soared from a low of 6.9% at year end to a rate of over 8%. This
increase should negatively influence the rate of home sales. Evidence of this
was seen on April 29th when the government announced that new housing sales
for March fell 7.6% from February's revision of a negative 0.3%. The durable
goods sector were also strong in the first quarter. The primary driver was the
sale of aircraft. Certain other items, such as the sale of computers, were
also strong but foreign trade weakened due to a stronger dollar. Finally,
government spending should be stronger going forward since 1996 is an election
year. Prior to the signing of the budget, some Federal Government departments
were spending only 75% of their allocations. In coming months they will be
permitted to increase their spending.
PERFORMANCE
For the six months ended April 30, 1996, the Portfolio had a return of -1.28%
versus 0.04% for the Lehman Brothers Government/Corporate Index. The primary
factor hurting results was that the Portfolio's duration was longer than the
Index. Agency issues also contributed to the negative performance while
mortgage securities helped performance as higher rates diminished the threat
of prepayments.
PORTFOLIO STRUCTURE
The Portfolio maintained a large holding in domestic treasury securities with
a weighting of over 58% at April 30, 1996 versus 66% for the Lehman Brothers
Government/Corporate Index. To achieve a higher yield, the Portfolio held
various federal agency issues resulting in a weighting of about 11% compared
to 10% for the Index. The remaining 31% was distributed as follows: 20% in
mortgages, 6% in corporates, 3% in Asset-Backed, and 2% in cash. The Index
does not hold mortgages or cash while corporates account for 24%.
The following is a breakdown of the Portfolio by category as of April 30,
1996.
MCKEE U.S. GOVERNMENT PORTFOLIO
APRIL 30, 1996
<TABLE>
<S> <C>
Treasuries.......................................................... 58.3%
Mortgages........................................................... 20.4%
Corporates.......................................................... 5.8%
Agencies............................................................ 10.9%
Asset Backed........................................................ 2.6%
Cash................................................................ 2.0%
</TABLE>
1
<PAGE>
At the end of the quarter the Portfolio held 44 individual securities. The top
ten holdings on that date are shown below
MCKEE U.S. GOVERNMENT PORTFOLIO
TOP TEN HOLDINGS
APRIL 30, 1996
<TABLE>
<CAPTION>
%OF
SECURITY COUPON DUE PORTFOLIO
-------- ------ -------- ---------
<S> <C> <C> <C>
US Treasury Bond................................ 7.875% 2/15//21 14.8%
US Treasury Note................................ 7.250% 8/15/04 11.0%
US Treasury Note................................ 7.125% 9/30/99 8.9%
US Treasury Note................................ 6.250% 2/15/03 6.4%
FHLMC Gold Pool #D61891 ........................ 7.500% 7/01/25 5.7%
US Treasury Note................................ 4.750% 10/31/98 5.1%
US Treasury Note................................ 7.500% 2/15/05 3.8%
US Treasury Bond................................ 7.125% 2/15/23 3.7%
FHLMC Gold Pool #D63857......................... 6.500% 9/01/25 3.3%
US Treasury Note ............................... 6.750% 6/30/99 2.6%
</TABLE>
FIXED INCOME STRATEGY
The Portfolio continues to be structured to benefit from lower interest rates.
During the second quarter we significantly increased the duration of the
Portfolio. This lengthening was based on the belief that interest rates are
eventually headed lower as consumer spending slows due to rising consumer debt
levels, weakening housing sales and continuing signs of low inflation.
2
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
Equities continued to perform well during the first quarter. From an
historical perspective, the current bull market is now one of the longest and
strongest of this century, exceeded only in the 1920s and 1950s. The ongoing
advance has also been remarkably steady as indicated by the fact that there
has not been a correction of 10% or more since 1990, a record for the U.S.
market. With volatility so limited, and performance so outstanding, many
investors have become complacent with respect to the risks of equity
investing. In our judgment, this is a mistake. Volatility has always been a
part of the investment process and should not be underestimated. Indeed, we
would not be surprised if it increased significantly over the next several
years.
PERFORMANCE
During the six months ended April 30, 1996, the Portfolio return was 14.24%
versus 13.76% for the S&P 500 Index. Results were positively influenced by
large weightings in some of the better performing industries such as
healthcare, regional banks, computer software and specialty retailing as well
as by a significant underweighting in electric utilities which were extremely
weak during the period. On the minus side, positions in poor performing groups
such as electronics, insurance, paper and forest products penalized
performance. Results earlier in the period were hurt by the Portfolio's
exposure to smaller and middle capitalization stocks as well as by its
emphasis on cyclically sensitive issues. More recently, these same exposures
have begun to contribute meaningfully to the Portfolio's performance.
On an individual stock basis, the Portfolio benefited substantially from the
strong performance exhibited by Sterling Software, Dayton Hudson, American
Home Products, Becton Dickinson and CIGNA. Results were negatively affected by
positions in Avid Technology, FTP Software, GAP Inc., Advanced Micro Devices
and Systems and Computer Technology which were poor performers during the six
months.
PORTFOLIO STRUCTURE
The Portfolio remains invested in all economic sectors and capitalization
segments of the U.S. market. It also has a representation in international
stocks in the form of American Depositary Receipts which are traded in U.S.
dollars. Within this diversified context, the Portfolio has a meaningful
position in stocks characterized by consumer and industrial cyclicality. This
strategy is based on the attractive value and earnings momentum features of
these securities in addition to their superior relative performance prospects
if the economy continues to expand in the coming year.
With regard to industry positions, the Portfolio has large holdings in
telecommunications, computer software, banks, retailing and producer goods. It
has a low representation in services, electric utilities, chemicals,
construction and transportation. The following table lists the ten largest
industry positions as of April 30, 1996.
3
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
TOP TEN INDUSTRY POSITIONS
APRIL 30, 1996
<TABLE>
<S> <C>
Technology........................................................... 17.6%
Retail............................................................... 9.5%
Energy............................................................... 9.4%
Telecommunications .................................................. 8.8%
Pharmaceuticals...................................................... 6.3%
Paper & Packaging.................................................... 5.9%
Banks................................................................ 5.6%
Capital Equipment.................................................... 4.9%
Beverages, Food & Tobacco............................................ 4.6%
Multi-Industry....................................................... 3.4%
</TABLE>
As of April 30, 1996, the Portfolio held 68 companies. The top ten holdings on
that date are shown below.
MCKEE DOMESTIC EQUITY PORTFOLIO
TOP TEN STOCK POSITIONS
APRIL 30, 1996
<TABLE>
<S> <C>
Willamette Industries................................................. 3.1%
Akzo Nobel............................................................ 2.9%
Sprint................................................................ 2.7%
Dillard Dept. Stores.................................................. 2.7%
Ingersoll-Rand........................................................ 2.5%
Pacific Telesis....................................................... 2.4%
Ultramar.............................................................. 2.3%
American Home Products................................................ 2.3%
Nokia Corporation..................................................... 2.2%
</TABLE>
OUTLOOK
Even though we believe at least one meaningful market decline is probable
during 1996-1997, we expect a favorable equity environment over the next 12 to
18 months. This is in line with our forecasts for continued growth in
corporate earnings, cash flows and dividends. It also reflects our belief that
stocks are reasonably valued at the present time. From a stock selection
standpoint, we continue to emphasize statistically cheap securities with
improving earnings momentum. In our judgment, many of the most attractive
current investment opportunities are in small and middle capitalization stocks
as well as in the basic industry, consumer cyclical, and technology sectors of
the market.
4
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
Moderate global economic expansion is likely to continue over the coming year.
By the second half of 1997, worldwide growth should become increasingly
synchronous with the world economy showing its greatest strength since 1988.
Indeed, we expect 2.5% to 3% GDP growth next year for both Europe and Japan
while non-Japan Asia and Latin America should achieve vigorous expansions of
7% to 8% and 4% to 5%, respectively. Despite this transition to more rapid
growth, global inflation rates are expected to remain relatively low in
industrialized nations with Europe averaging under 3% and Japan staying below
1%. In non-Japan Asia, inflation should range between 6% and 12% again next
year. In Latin America, inflation should improve but still run at
unsatisfactory rates in countries such as Venezuela, Mexico and Brazil. Given
this environment, we expect interest rates to remain stable, or even decline
somewhat, in most major world markets.
PERFORMANCE
For the six months ended April 30, 1996, the Portfolio achieved a return of
9.72% compared with 13.21% for the Morgan Stanley Capital International
Europe, Australia and Far East Index (EAFE Index).
Results were helped by large weightings in France, Spain, Ireland and Hong
Kong, all of which performed very well. On the negative side, results were
hurt by positions in Finland, Germany and the United Kingdom which generated
below-average performance.
On an industry basis, the Portfolio benefited from significant positions in
energy, industrial components, data processing, chemicals and metals. In
contrast, performance was negatively affected by holdings in certain weaker
industries including insurance, food, household products and utilities.
With regard to stock selection, the Portfolio was helped significantly by
excellent performance from Elan Corporation (Ireland), Coflexip (France),
Mitsui Fire and Marine (Japan), Sony (Japan) and Bayer (Germany). It was hurt
by several positions in underperforming issues including Carlton
Communications, (United Kingdom), Pohang Iron and Steel (Korea), Nokia
(Finland), LG Electronics (Korea) and Montedison (Italy).
PORTFOLIO STRUCTURE
Our disciplined equity selection process continues to focus on stocks with low
price-earnings ratios, low price-cash flow ratios and low price-book value
ratios as well as on securities with improving earnings momentum. This
combination of attributes has historically produced strong investment
performance, and we firmly believe it may generate excellent results in future
years.
As of April 30, 1996, the Portfolio was invested in 19 countries with
especially large positions relative to the EAFE Index in Canada, Korea, Spain,
Mexico, China and Argentina. Japan remains the largest country position even
though the Portfolio is significantly underweighted in Japan versus the EAFE
Index. Other substantially underweighted countries include Switzerland,
Malaysia and Sweden. The table below lists the top ten holdings by country.
5
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
TOP TEN HOLDINGS BY COUNTRY
APRIL 30, 1996
<TABLE>
<S> <C>
Japan................................................................ 20.6%
United Kingdom....................................................... 14.5%
Hong Kong............................................................ 7.1%
France............................................................... 6.9%
Canada............................................................... 5.4%
Korea................................................................ 4.7%
Germany.............................................................. 4.7%
Spain................................................................ 4.5%
Netherlands.......................................................... 4.4%
Ireland.............................................................. 3.8%
</TABLE>
While structured to benefit from a gradual strengthening in the global
economy, the Portfolio remains broadly diversified. It is invested in all
economic sectors and most major industries with the largest positions relative
to the EAFE Index in energy, metals, chemicals, electronics, food, healthcare
and services. Underweighted industries include utilities, building materials,
construction, banking and insurance.
As of April 30, 1996, the Portfolio held 49 companies. The ten largest
holdings on that date are shown below:
MCKEE INTERNATIONAL EQUITY PORTFOLIO
TOP TEN STOCK POSITIONS
APRIL 30, 1996
<TABLE>
<S> <C>
Elan (Ireland)........................................................ 3.8%
Nestle Nom (Switzerland).............................................. 3.2%
Waste Management Intl. (United Kingdom)............................... 3.1%
British Steel (United Kingdom)........................................ 2.7%
Bayer (Germany)....................................................... 2.7%
Repsol (Spain)........................................................ 2.6%
Pohang Iron & Steel (Korea)........................................... 2.6%
Nokia (Finland)....................................................... 2.6%
YPF S.A. (Argentina).................................................. 2.6%
Carlton Communications (United Kingdom)............................... 2.4%
</TABLE>
6
<PAGE>
OUTLOOK
Although global stock market performance was uneven across countries in the
past six months, international equity results were reasonably strong. Over the
next year, we expect international equities to achieve continued favorable
performance as corporate earnings accelerate in most counties while inflation
and interest rates stay at low levels. The Portfolio, with its participation
in 19 worldwide markets, is well positioned to benefit from this favorable
environment.
Sincerely yours,
C.S. McKee & Co., Inc.
DEFINITION OF THE COMPARATIVE INDICES
-------------------------------------
The Lehman Brothers Government/Corporate Index is an unmanaged index composed
of a combination of the Government and Corporate Bond Indices. The Government
Index includes public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The Corporate Bond
Index includes fixed-rate nonconvertible corporate debt. Also included are
Yankee bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. All issues are investment grade (BBB)
or higher, with maturities of at least one year and outstanding par value of
at least $100 million for U.S. Government issues and $25 million for others.
Any security downgraded during the month is held in the index until month-end
and then removed. All returns are market value weighted inclusive of accrued
income.
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Morgan Stanley Capital International EAFE Index is an unmanaged index
composed of 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.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Total returns would have been lower had certain fees not been waived or
expenses assumed by the Adviser for the McKee U.S. Government and McKee
Domestic Equity Portfolios. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. For a complete discussion of the
risks associated with international investing, please refer to the McKee
International Equity Portfolio's Prospectus.
7
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- --------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY SECURITIES (69.9%)
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
5.95%, 1/19/06................................................ $ 415 $ 384
6.785%, 9/21/05............................................... 140 135
6.89%, 10/3/05................................................ 140 136
6.97%, 10/3/05................................................ 140 137
7.03%, 11/17/05............................................... 205 200
7.12%, 9/30/05................................................ 140 137
7.13%, 9/15/05................................................ 140 135
7.225%, 5/17/05............................................... 145 145
7.65%, 5/10/05................................................ 85 87
7.974%, 4/20/05............................................... 60 61
-------
1,557
- --------------------------------------------------------------------------------
Federal National Mortgage Association
6.70%, 11/10/05............................................... 205 196
7.15%, 9/15/05................................................ 140 135
7.20%, 10/5/05................................................ 140 138
7.37%, 4/14/04................................................ 140 140
8.00%, 4/13/05................................................ 70 71
-------
680
- --------------------------------------------------------------------------------
U.S. Treasury Bonds
7.125%, 2/15/23............................................... 750 754
7.875%, 2/15/21............................................... 2,745 2,989
-------
3,743
- --------------------------------------------------------------------------------
U.S. Treasury Notes
4.75%, 10/31/98............................................... 1,070 1,036
6.25%, 2/15/03................................................ 1,315 1,293
6.375%, 8/15/02............................................... 500 495
6.75%, 6/30/99................................................ 515 522
7.125%, 9/30/99............................................... 1,763 1,806
7.25%, 8/15/04................................................ 2,145 2,220
7.50%, 2/15/05................................................ 740 778
-------
8,150
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES (COST $14,443)........ 14,130
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
MORTGAGE OBLIGATIONS (20.4%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (20.4%)
Federal Home Loan Mortage Corp.
1552 E, CMO, 6.00%, 1/15/17.................................. $ 185 $ 182
1552 EA, CMO, 5.85%, 1/15/17................................. 269 263
Gold Pool #C80328, 7.50%, 7/1/25............................. 222 219
Gold Pool #C80370, 6.50%, 12/1/25............................ 68 64
Gold Pool #D61891, 7.50%, 7/1/25............................. 1,172 1,160
Gold Pool #D63857, 6.50%, 9/1/25............................. 701 658
Gold Pool #D66220, 6.50%, 12/1/25............................ 468 439
-------
2,985
- -------------------------------------------------------------------------------
Federal National Mortgage Association Series:
93-87 H, CMO, 6.50%, 10/25/21................................ 259 246
93-136 PD, CMO, 6.25%, 11/25/21.............................. 206 192
93-139 E, CMO, 5.85%, 1/25/17................................ 527 514
93-139 H, CMO, 6.75%, 12/25/21............................... 186 179
-------
1,131
- -------------------------------------------------------------------------------
TOTAL MORTGAGE OBLIGATIONS (COST $4,175)....................... 4,116
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (2.6%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (2.6%)
Advanta Mortgage Loan Trust, Series 94-1 A1 6.30%, 7/25/25.... 127 121
World Financial Network Credit Card, Series 96-B A 6.95%,
5/15/06...................................................... 405 404
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $526)...................... 525
- -------------------------------------------------------------------------------
CORPORATE BONDS (5.6%)
- -------------------------------------------------------------------------------
BANKS (0.7%)
NationsBank Corp. 5.125%, 9/15/98............................. 150 146
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (0.7%)
U.S. West Cap Funding, Inc. 6.75%, 10/1/05.................... 140 134
- -------------------------------------------------------------------------------
RETAIL (0.5%)
J.C. Penney & Co. 5.375%, 11/15/98............................ 15 15
May Department Stores 7.15%, 8/15/04.......................... 70 69
Walmart Stores 5.50%, 9/15/97................................. 15 15
-------
99
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
UTILITIES (2.3%)
Pacific Bell Telephone 6.25%, 3/1/05......................... $ 255 $ 241
Pacific Gas & Electric 5.875%, 10/1/05....................... 260 234
-------
475
- -------------------------------------------------------------------------------
YANKEE BONDS (1.4%)
Province of Ontario
7.00%, 8/4/05............................................... 145 143
7.625%, 6/22/04............................................. 145 150
-------
293
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $1,172)........................... 1,147
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.3%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $465, collateralized by $331
U.S. Treasury Bonds, 12.00%, due 8/15/13, valued at $475
(COST $465)................................................. 465 465
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%) (COST $20,781)..................... 20,383
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.8%)
- -------------------------------------------------------------------------------
Cash......................................................... 1
Interest Receivable.......................................... 253
Other Assets................................................. 1
Payable for Investments Purchased............................ (404)
Payable for Advisory Fees.................................... (7)
Payable for Administrative Fees.............................. (5)
Payable for Directors' Fees.................................. (1)
Other Liabilities............................................ (3)
-------
(165)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,956,668 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)... $20,218
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE...... $ 10.33
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements
CMO--Collateralized Mortgage Obligation
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (98.8%)
- -------------------------------------------------------------------------------
AUTOMOTIVE (1.7%)
General Motors Corp. ......................................... 16,600 $ 901
- -------------------------------------------------------------------------------
BANKS (5.6%)
Bank of Boston Corp........................................... 11,050 535
Bankers Trust New York Corp................................... 7,300 506
First Commerce Corp........................................... 13,274 451
First Union Corp.............................................. 8,800 541
Mellon Bank Corp. ............................................ 15,700 844
-------
2,877
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.6%)
Philip Morris Cos., Inc....................................... 11,600 1,045
Pioneer Hi-Bred International, Inc. .......................... 15,500 864
*Ryan's Family Steak House, Inc............................... 51,100 492
-------
2,401
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (4.9%)
Aviall, Inc. ................................................. 35,300 318
*IMO Industries, Inc.......................................... 49,200 332
Ingersoll-Rand Co............................................. 33,500 1,298
Magna International, Inc., Class A............................ 12,300 570
-------
2,518
- -------------------------------------------------------------------------------
CHEMICALS (2.9%)
Akzo N.V., ADR................................................ 25,400 1,476
- -------------------------------------------------------------------------------
CONSTRUCTION (1.2%)
*Owens-Corning Fiberglass Corp................................ 15,000 604
- -------------------------------------------------------------------------------
ENERGY (9.4%)
Mitchell Energy & Development Corp., Class B.................. 56,170 920
Occidental Petroleum Corp. ................................... 26,700 688
Repsol S.A. ADR............................................... 13,300 492
*Stone Energy Corp............................................ 37,200 670
Ultramar Corp................................................. 37,100 1,164
YPF S.A. ADR.................................................. 42,700 934
-------
4,868
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (3.2%)
Dean Witter Discover and Co................................... 14,700 $ 801
Lehman Brothers Holdings...................................... 34,600 878
-------
1,679
- -------------------------------------------------------------------------------
HEALTH CARE (3.2%)
*Foundation Health Corp. ..................................... 15,600 610
*Humana, Inc. ................................................ 41,400 1,019
-------
1,629
- -------------------------------------------------------------------------------
INDUSTRIAL (1.9%)
*Global Industrial Technologies, Inc. ........................ 54,090 994
- -------------------------------------------------------------------------------
INSURANCE (1.0%)
CIGNA Corp.................................................... 4,500 510
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (3.4%)
GATX Corp. ................................................... 18,370 827
Loews Corp.................................................... 5,200 396
Whitman Corp. ................................................ 20,400 515
-------
1,738
- -------------------------------------------------------------------------------
PAPER & PACKAGING (5.9%)
Rayonier, Inc................................................. 16,212 582
*Shorewood Packaging Corp..................................... 52,190 887
Willamette Industries......................................... 25,700 1,580
-------
3,049
- -------------------------------------------------------------------------------
PHARMACEUTICALS (6.3%)
American Home Products Corp. ................................. 11,100 1,171
Becton, Dickinson & Co. ...................................... 10,500 847
Mylan Laboratories, Inc....................................... 24,700 482
SmithKline Beecham plc ADR.................................... 13,600 734
-------
3,234
- -------------------------------------------------------------------------------
RETAIL (9.5%)
American Stores Co............................................ 30,800 1,028
Dayton-Hudson Corp............................................ 9,750 931
Dillard Department Stores, Class A............................ 34,500 1,384
Gap, Inc...................................................... 17,300 521
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
RETAIL--(CONTINUED)
Venture Stores, Inc........................................... 49,400 $ 309
*Waban, Inc. ................................................. 30,200 740
-------
4,913
- -------------------------------------------------------------------------------
SERVICES (1.8%)
Bowne & Co., Inc.............................................. 51,900 934
- -------------------------------------------------------------------------------
TECHNOLOGY (17.6%)
*Adaptec, Inc. ............................................... 9,600 552
Advanced Micro Devices, Inc................................... 42,100 790
*Avid Technology, Inc. ....................................... 40,000 775
*Black Box Corp. ............................................. 18,400 363
*Cheyenne Software, Inc....................................... 32,200 733
*Computer Network Technology Corp. ........................... 48,000 336
*Compuware Corp. ............................................. 19,800 564
*FTP Software, Inc. .......................................... 38,500 371
Intelligent Electronics, Inc.................................. 101,500 622
*Planar Systems, Inc. ........................................ 34,400 490
*Policy Management Systems.................................... 13,000 611
*Sequent Computer Systems, Inc................................ 75,500 1,104
*Sterling Software, Inc....................................... 9,800 762
*Systems & Computer Technology Corp........................... 49,900 711
*3D Systems Corp. ............................................ 13,900 280
-------
9,064
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (8.8%)
NYNEX Corp. .................................................. 16,200 796
Nokia Corp. ADR............................................... 31,200 1,135
Pacific Telesis Group......................................... 36,500 1,250
Sprint Corp. ................................................. 32,700 1,377
-------
4,558
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (0.8%)
Delta Woodside Industries, Inc................................ 70,200 395
- -------------------------------------------------------------------------------
TRANSPORTATION (2.0%)
American President Cos. Ltd. ................................. 44,400 1,060
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES (3.1%)
General Public Utilities Corp................................ 18,700 $ 594
Illinova Corp. .............................................. 18,300 467
Southern New England Telecommunications Corp................. 11,800 525
-------
1,586
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $48,659)............................ 50,988
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.1%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.1%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $553, collateralized by $393
U.S. Treasury Bonds, 12.00%, due 8/15/13, valued at $564
(COST $553)................................................. $553 553
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%) (COST $49,212)...................... 51,541
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
- -------------------------------------------------------------------------------
Cash......................................................... 1
Dividends Receivable......................................... 89
Other Assets................................................. 1
Payable for Investment Advisory Fees......................... (26)
Payable for Administrative Fees.............................. (6)
Payable for Directors' Fees.................................. (1)
Other Liabilities............................................ (4)
-------
54
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 4,009,952 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)... $51,595
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE...... $ 12.87
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (95.7%)
- -------------------------------------------------------------------------------
ARGENTINA (2.6%)
YPF S.A. ADR................................................ 109,700 $ 2,400
- -------------------------------------------------------------------------------
AUSTRALIA (2.2%)
Westpac Banking Corp........................................ 312,000 1,515
Westpac Banking Corp. ADR................................... 20,100 482
-------
1,997
- -------------------------------------------------------------------------------
CANADA (5.4%)
Alcan Aluminium Ltd......................................... 33,700 1,072
Canadian Imperial Bank of Commerce.......................... 38,240 1,188
Seagram Co., Ltd............................................ 44,830 1,511
West Coast Energy, Inc...................................... 25,000 385
West Coast Energy, Inc. ADR................................. 52,600 815
-------
4,971
- -------------------------------------------------------------------------------
CHINA (2.0%)
*Huaneng Power International, Inc. ADR...................... 118,000 1,844
- -------------------------------------------------------------------------------
FINLAND (2.6%)
Nokia AB.................................................... 56,800 2,017
Nokia AB, Series A.......................................... 11,100 397
-------
2,414
- -------------------------------------------------------------------------------
FRANCE (6.9%)
Alcatel Alsthom............................................. 18,615 1,751
Alcatel Alsthom ADR......................................... 22,926 436
Coflexip.................................................... 23,000 890
Coflexip ADR................................................ 44,334 854
PSA Peugeot S.A............................................. 11,665 1,630
Total S.A., Class B......................................... 11,850 804
-------
6,365
- -------------------------------------------------------------------------------
GERMANY (4.6%)
Bayer AG.................................................... 4,765 1,533
Bayer AG ADR................................................ 29,900 961
Commerzbank AG.............................................. 4,000 868
Commerzbank AG ADR.......................................... 21,600 934
-------
4,296
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
HONG KONG (7.1%)
Cathay Pacific Airways Ltd. ................................ 835,000 $ 1,457
Cathay Pacific Airways Ltd. ADR............................. 67,800 592
*DSG International Ltd...................................... 71,916 1,043
Hong Kong Electric Holdings................................. 240,000 763
Hong Kong Electric Holdings ADR............................. 244,800 779
HSBC Holdings plc........................................... 108,000 1,613
HSBC Holdings plc (75p)..................................... 23,100 342
-------
6,589
- -------------------------------------------------------------------------------
IRELAND (3.8%)
*Elan Corp. plc ADR......................................... 53,410 3,532
- -------------------------------------------------------------------------------
ISRAEL (1.0%)
Teva Pharmaceutical Industries Ltd. ADR..................... 20,000 895
- -------------------------------------------------------------------------------
ITALY (1.4%)
*Montedison SPA............................................. 1,717,000 1,041
*Montedison SPA ADR......................................... 44,100 270
-------
1,311
- -------------------------------------------------------------------------------
JAPAN (20.5%)
Amada Co., Ltd.............................................. 78,000 909
Amada Co., Ltd. ADR......................................... 21,350 994
Credit Saison Co. .......................................... 79,500 1,967
Hitachi Ltd................................................. 108,000 1,166
Hitachi Ltd. ADR............................................ 8,100 872
Ito-Yokado Co., Ltd......................................... 17,000 1,002
Ito-Yokado Co., Ltd. ADR.................................... 4,700 1,101
Kao Corp.................................................... 34,000 455
Kao Corp. ADR............................................... 6,428 859
Mitsubishi Electric Corp.................................... 55,000 433
Mitsubishi Electric Corp. ADR............................... 14,400 1,133
Mitsui & Co., Ltd. ADR...................................... 4,900 928
Mitsui Fire & Marine Insurance.............................. 82,000 695
Mitsui Fire & Marine Insurance ADR.......................... 10,630 900
Nissan Motor Co., Ltd....................................... 52,000 439
Nissan Motor Co., Ltd. ADR.................................. 34,200 569
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
Sanwa Bank Ltd.............................................. 13,000 $ 263
Sanwa Bank Ltd. ADR......................................... 4,000 810
Sony Corp. ADR.............................................. 19,320 1,246
Toyota Motor Corp........................................... 51,000 1,164
Toyota Motor Corp. ADR...................................... 23,584 1,073
-------
18,978
- -------------------------------------------------------------------------------
KOREA (4.7%)
L.G. Electronics, Inc....................................... 60,936 1,895
Pohang Iron & Steel Co., Ltd................................ 13,700 1,272
Pohang Iron & Steel Co., Ltd. ADR........................... 42,000 1,155
-------
4,322
- -------------------------------------------------------------------------------
MEXICO (3.6%)
*Grupo Industrial Durango ADR............................... 257,000 1,992
Telefonos de Mexico S.A. ADR, Class L....................... 39,800 1,353
-------
3,345
- -------------------------------------------------------------------------------
NETHERLANDS (4.3%)
Akzo Nobel N.V. ............................................ 15,775 1,833
Akzo Nobel N.V. ADR......................................... 2,500 145
Philips Electronics N.V..................................... 58,200 2,055
-------
4,033
- -------------------------------------------------------------------------------
PORTUGAL (1.0%)
Banco Comercial Portugues S.A. ............................. 34,900 400
Banco Comercial Portugues S.A. ADR.......................... 42,820 487
-------
887
- -------------------------------------------------------------------------------
SPAIN (4.4%)
Banco Santander S.A......................................... 20,400 949
Banco Santander S.A. ADR.................................... 15,900 745
Repsol S.A.................................................. 64,230 2,357
Repsol S.A. ADR............................................. 2,000 74
-------
4,125
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SWITZERLAND (3.2%)
Nestle S.A. (Registered).................................... 1,835 $ 2,041
Nestle S.A. ADR............................................. 17,000 943
-------
2,984
- -------------------------------------------------------------------------------
UNITED KINGDOM (14.4%)
British Steel plc........................................... 751,300 2,242
British Steel plc ADR....................................... 8,500 257
Carlton Communications plc.................................. 170,787 1,197
Carlton Communications plc ADR.............................. 29,500 1,044
Grand Metropolitan plc...................................... 156,270 1,027
Grand Metropolitan plc ADR.................................. 21,300 567
RTZ Corp. plc (Registered).................................. 79,780 1,253
RTZ Corp. plc ADR........................................... 14,600 936
SmithKline Beecham plc ADR.................................. 37,390 2,019
*Waste Management International plc......................... 417,500 2,310
*Waste Management International plc ADR..................... 43,900 499
-------
13,351
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $82,409)........................... 88,639
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.9%)
J.P. Morgan Securities, Inc. 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $ 3,593, collateralized by
$2,551 U.S. Treasury Bonds, 12.00%, due 8/15/13, valued at
$3,664 (COST $3,592)....................................... $3,592 3,592
- -------------------------------------------------------------------------------
TOTAL INVESMENTS (99.6%) (COST $86,001)...................... 92,231
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
<S> <C>
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.4%)
- -------------------------------------------------------------------------------
Cash................................................................. $ 1
Dividends Receivable................................................. 334
Foreign Withholding Tax Reclaim Receivable........................... 66
Foreign Currency (Cost $52 )......................................... 52
Receivable for Investments Sold...................................... 11
Interest Receivable.................................................. 1
Other Assets......................................................... 8
Payable for Investment Advisory Fees................................. (52)
Payable for Administrative Fees...................................... (12)
Payable for Directors' Fees.......................................... (1)
Other Liabilities.................................................... (29)
-------
379
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 8,595,891 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)......................... $92,610
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 10.77
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
At April 30, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Automotive..................................................... 3.5% $ 3,272
Banks.......................................................... 5.7 5,251
Basic Resources................................................ 10.6 9,807
Beverages, Food & Tobacco...................................... 3.7 3,396
Broadcasting & Publishing...................................... 1.1 1,044
Capital Equipment.............................................. 13.2 12,238
Chemicals...................................................... 3.2 2,939
Consumer Durables.............................................. 10.2 9,459
Electronics.................................................... 3.6 3,323
Energy......................................................... 9.3 8,627
Financial Services............................................. 7.9 7,311
Health Care.................................................... 8.1 7,488
Home Furnishings & Appliances.................................. 1.3 1,246
Insurance...................................................... 0.7 695
Metals......................................................... 2.2 2,008
Multi-Industry................................................. 1.4 1,310
Retail......................................................... 1.2 1,102
Repurchase Agreement........................................... 3.9 3,592
Services....................................................... 2.1 1,930
Telecommunications............................................. 2.8 2,550
Transportation................................................. 2.2 2,049
Utilities...................................................... 1.7 1,594
- -------------------------------------------------------------------------------
Total Investments............................................ 99.6% $92,231
Other Assets and Liabilities (Net)............................. 0.4 379
----- -------
Net Assets................................................... 100.0% $92,610
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
MCKEE PORTFOLIOS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL
U.S. GOVERNMENT EQUITY EQUITY
(In Thousands) PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends......................... $ -- $ 205 $ 943
Interest.......................... 262 31 92
Less: Foreign Taxes Withheld -- -- (71)
- ---------------------------------------------------------------------------------
Total Income..................... 262 236 964
- ---------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees....................... $ 18 $ 63 297
Less: Fees Waived................ (18) -- (17) 46 --
------ ----
Administrative Fees--Note C....... 26 28 58
Custodian Fees.................... 1 4 31
Audit Fees........................ 6 6 7
Legal Fees........................ 1 1 3
Directors' Fees--Note F........... 1 1 2
Registration and Filing Fees...... 3 5 14
Printing Fees..................... 4 4 4
Other Expenses.................... 1 1 7
- ---------------------------------------------------------------------------------
Total Expenses 43 96 423
- ---------------------------------------------------------------------------------
Expense Offset--Note A............ --@ (1) (2)
- ---------------------------------------------------------------------------------
Net Expenses..................... 43 95 421
- ---------------------------------------------------------------------------------
NET INVESTMENT INCOME.............. 219 141 543
- ---------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments....................... 48 527 1,056
Foreign Exchange Transactions..... -- -- (22)
- ---------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS...................... 48 527 1,034
- ---------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION ON:
Investments....................... (507) 2,181 6,223
Foreign Exchange Translation...... -- -- (3)
- ---------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION......... (507) 2,181 6,220
- ---------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND
FOREIGN EXCHANGE TRANSACTIONS..... (459) 2,708 7,254
- ---------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS.. $ (240) $2,849 $7,797
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
@Amount represents Custodian balance credits of $400.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 2, 1995** APRIL 30,
TO 1996
(In Thousands) OCTOBER 31, 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 109 $ 219
Net Realized Gain.................................. 74 48
Net Change in Unrealized Appreciation/Depreciation. 109 (507)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. 292 (240)
- ----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (81) (137)
Net Realized Gain.................................. -- (73)
- ----------------------------------------------------------------------------------
Total Distributions............................... (81) (210)
- ----------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 6,209 14,584
--In Lieu of Cash Distributions.................. 79 209
Redeemed........................................... (430) (194)
- ----------------------------------------------------------------------------------
Net Increase from Capital Share Transactions...... 5,858 14,599
- ----------------------------------------------------------------------------------
Total Increase..................................... 6,069 14,149
Net Assets:
Beginning of Period................................ -- 6,069
- ----------------------------------------------------------------------------------
End of Period (2).................................. $6,069 $20,218
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued...................................... 597 1,391
In Lieu of Cash Distributions...................... 8 20
Shares Redeemed.................................... (41) (18)
- ----------------------------------------------------------------------------------
564 1,393
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital.................................... $5,858 $20,457
Undistributed Net Investment Income................ 28 110
Accumulated Net Realized Gain...................... 74 49
Unrealized Appreciation (Depreciation)............. 109 (398)
- ----------------------------------------------------------------------------------
$6,069 $20,218
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
**Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
MARCH 2, 1995** ENDED
TO APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................. $ 27 $ 141
Net Realized Gain................................. 161 527
Net Change in Unrealized Appreciation............. 148 2,181
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions........................................... 336 2,849
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................. (24) (32)
Net Realized Gain................................. -- (158)
- --------------------------------------------------------------------------------
Total Distributions.............................. (24) (190)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular................................... 6,181 42,557
--In Lieu of Cash Distributions................. 24 190
Redeemed.......................................... (90) (238)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions..... 6,115 42,509
- --------------------------------------------------------------------------------
Total Increase.................................... 6,427 45,168
Net Assets:
Beginning of Period............................... -- 6,427
- --------------------------------------------------------------------------------
End of Period (2)................................. $6,427 $51,595
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued..................................... 568 3,452
In Lieu of Cash Distributions..................... 2 16
Shares Redeemed................................... (8) (20)
------ -------
562 3,448
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital................................... $6,115 $48,624
Undistributed Net Investment Income............... 3 112
Accumulated Net Realized Gain..................... 161 530
Unrealized Appreciation........................... 148 2,329
------ -------
$6,427 $51,595
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
**Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- ----------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net Investment Income...... $ 748 $ 543
Net Realized Gain.......... 1,575 1,034
Net Change in Unrealized
Appreciation/Depreciation. (1,166) 6,220
- ----------------------------------------------------
Net Increase in Net Assets
Resulting from Opera-
tions.................... 1,157 7,797
- ----------------------------------------------------
DISTRIBUTIONS:
Net Investment Income...... (610) (80)
Net Realized Gain.......... -- (1,670)
- ----------------------------------------------------
Total Distributions....... (610) (1,750)
- ----------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1)
Issued--Regular............ 36,598 12,152
--In Lieu of Cash Dis-
tributions.............. 523 1,630
Redeemed................... (32) (2,112)
- ----------------------------------------------------
Net Increase from Capital
Share Transactions....... 37,089 11,670
- ----------------------------------------------------
Total Increase............. 37,636 17,717
Net Assets:
Beginning of Period........ 37,257 74,893
- ----------------------------------------------------
End of Period (2).......... $74,893 $92,610
- ----------------------------------------------------
- ----------------------------------------------------
(1)Shares Issued and Re-
deemed:
Shares Issued.............. 3,831 1,178
In Lieu of Cash Distribu-
tions..................... 52 164
Shares Redeemed............ (3) (210)
------- -------
3,880 1,132
- ----------------------------------------------------
- ----------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital............ $73,198 $84,868
Undistributed Net Invest-
ment Income............... 40 503
Accumulated Net Realized
Gain...................... 1,647 1,011
Unrealized Appreciation.... 8 6,228
------- -------
$74,893 $92,610
- ----------------------------------------------------
- ----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
MARCH 2, ENDED
1995** TO APRIL 30,
OCTOBER 31, 1996
1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $10.00 $ 10.76
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............................... 0.28+ 0.18+
Net Realized and Unrealized Gain (Loss)............. 0.71 (0.31)
- --------------------------------------------------------------------------------
Total From Investment Operations................... 0.99 (0.13)
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (0.23) (0.17)
Net Realized Gain................................... -- (0.13)
- --------------------------------------------------------------------------------
Total Distributions................................ (0.23) (0.30)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD....................... $10.76 $ 10.33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN......................................... 9.96%++ (1.28)%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)................ $6,069 $20,218
Ratio of Expenses to Average Net Assets+............. 0.89%*# 1.02%*#
Ratio of Net Investment Income to Average Net As-
sets+............................................... 5.39%* 5.17%*
Portfolio Turnover Rate.............................. 104% 27%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntary waived fees and expenses assumed by the Adviser of $0.10
and $0.01 per share for the period ended October 31, 1995 and for the six
months ended April 30, 1996, respectively.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# For the period ended October 31, 1995 and for the six months ended April
30, 1996, the Ratio of Expenses to Average Net Assets excludes the effect
of expense offsets. If expense offsets were included, the Ratio of Expenses
to Average Net Assets would be 0.85%* and 1.01%*, respectively.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
MARCH 2, ENDED
1995** TO APRIL 30,
OCTOBER 31, 1996
1995 (UNAUDITED)
- -----------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $10.00 $ 11.44
- -----------------------------------------------------
INCOME FROM INVESTMENT OP-
ERATIONS
Net Investment Income.... 0.08+ 0.05+
Net Realized and
Unrealized Gain......... 1.43 1.56
- -----------------------------------------------------
Total From Investment
Operations............. 1.51 1.61
- -----------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.... (0.07) (0.03)
Net Realized Gain........ -- (0.15)
- -----------------------------------------------------
Total Distributions..... (0.07) (0.18)
- -----------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................... $11.44 $ 12.87
- -----------------------------------------------------
- -----------------------------------------------------
TOTAL RETURN.............. 15.13%++ 14.24%++
- -----------------------------------------------------
- -----------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands).............. $6,427 $51,595
Ratio of Expenses to Aver-
age Net Assets+.......... 1.08%*# 1.00%*#
Ratio of Net Investment
Income to Average Net As-
sets+.................... 1.12%* 1.45%*
Portfolio Turnover Rate... 27% 15%
Average Commission Rate
##....................... N/A $0.0500
- -----------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntary waived fees and expenses assumed by the Adviser of $0.11
and $0.01 per share for the period ended October 31, 1995 and for the six
months ended April 30, 1996, repectively.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# For the period ended October 31, 1995 and for the six months ended April
30, 1996, the Ratio of Expenses to Average Net Assets excludes the effect
of expense offsets. If expense offsets were included, the Ratio of
Expenses to Average Net Assets would be 1.00%* and 0.98%*, respectivley.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
MAY 26, ENDED
1994** TO YEAR ENDED APRIL 30,
OCTOBER 31, OCTOBER 31, 1996
1994 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 10.00 $ 10.40 $ 10.03
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................... 0.04 0.11 0.06+
Net Realized and Unrealized Gain (Loss).. 0.39 (0.39)+ 0.90
- -------------------------------------------------------------------------------
Total From Investment Operations........ 0.43 (0.28) 0.96
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.................... (0.03) (0.09) (0.01)
Net Realized Gain........................ -- -- (0.21)
- -------------------------------------------------------------------------------
Total Distributions..................... (0.03) (0.09) (0.22)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............ $ 10.40 $ 10.03 $ 10.77
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN.............................. 4.31% (2.69)% 9.72%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)..... $37,257 $74,893 $92,610
Ratio of Expenses to Average Net Assets... 1.12%* 0.97%# 0.99%*#
Ratio of Net Investment Income to Average
Net Assets............................... 0.97%* 1.16% 1.27%*
Portfolio Turnover Rate................... 11% 7% 7%
Average Commission Rate ##................ N/A N/A $0.0492
- -------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ The amount shown for the year ended October 31, 1995, 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 value of
the investments of the portfolio.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expenses offsets were included, the Ratio of Expenses
to Average Net Assets would be 0.96% and 0.99%*, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The McKee U.S. Government Portfolio, McKee
Domestic Equity Portfolio and McKee International Equity Portfolio (the
"Portfolios"), portfolios of UAM Funds, Inc., began operations on March 2,
1995, March 2, 1995 and May 26, 1994, respectively. At April 30, 1996, the UAM
Funds were comprised of thirty-seven active portfolios. The financial
statements of the remaining portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the
Portfolios in the preparation of their 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: Equity securities listed on a United States
securities exchange for which market quotations are readily available are
valued at the last quoted sales price as of the close of the exchange on
the day the valuation is made or, if no sale occurred on such day, at the
bid price on such day. Securities listed on a foreign exchange are valued
at their closing price. Price information on listed securities is taken
from the exchange where the security is primarily traded. Over-the-counter
and unlisted equity securities are valued at the current bid price. Fixed
income securities are stated on the basis of valuations provided by brokers
and/or a pricing service which uses information with respect to
transactions in fixed income securities, quotations from dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments that have remaining
maturities of sixty days or less at the 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 is determined
in good faith at fair value using methods determined by the Board of
Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue 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. The McKee International Equity Portfolio may be
subject to taxes imposed by countries in which it invests. Such taxes are
generally based on either income or gains earned or repatriated. The McKee
International Equity Portfolio accrues such taxes when related income is
earned.
Undistributed net investment income and accumulated net realized gain have
been adjusted for the McKee International Equity Portfolio for prior year
permanent book-tax differences. Reclassifications arose principally from
differing book and tax treatments for foreign currency transactions.
28
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
At April 30, 1996, cost of investment and unrealized appreciation
(depreciation) of investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
MCKEE PORTFOLIOS (000) (000) (000) (000)
---------------- ------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
U.S. Government............ $20,781 $ 3 $ (401) $ (398)
Domestic Equity............ 49,212 3,080 (751) 2,329
International Equity....... 86,001 10,083 (3,853) 6,230
</TABLE>
For the year ended October 31, 1995, the McKee International Equity
Portfolio utilized capital loss carryforwards for Federal income tax
purposes of approximately $23,000.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolios' 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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolios have 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.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Mckee
International Equity Portfolio are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the bid prices of such
currencies against U.S. dollars last quoted by a major bank. The McKee
International Equity Portfolio does not isolate that portion of realized or
unrealized gains and losses resulting from changes in the foreign exchange
rate from fluctuations arising from changes in the market prices of the
securities. Net realized gains and losses on foreign currency transactions
represent net foreign exchange gains or losses from forward foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between trade and settlement dates on securities
transactions and the difference between the amount of the investment income
and foreign withholding taxes recorded on the McKee International Equity
Portfolio's books and the U.S. dollar equivalent amounts actually received
or paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The McKee International
Equity Portfolio may enter into forward foreign currency exchange contracts
to protect the value of securities held and related receivables and
payables against changes in future foreign exchange rates. A forward
currency contract is an agreement between two parties to buy or sell
currency at a set price on a future date. The market value of the contract
will fluctuate with changes in currency exchange rates. The contract is
marked-to-market daily using the forward rate and the change in market
value is recorded by the McKee International Equity Portfolio as unrealized
gain or loss. The McKee International Equity Portfolio recognizes realized
gain or loss, when the contract is closed, equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and are generally limited to the
29
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
amount of unrealized gain on the contracts, if any, at the date of default.
Risks may also arise from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly.
Any realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of losses on securities; for the McKee International Equity
Portfolio, the reclassification of permanent differences as presented in
Note A2.
7. 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,
except that certain dividends from foreign securities are recorded as soon
as the McKee International Equity Portfolio is informed of 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 each Portfolio have been increased
to include expense offsets for custodian balance credits.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
C.S. McKee & Co., Inc. (the "Adviser"), a wholly-owned subsidiary of United
Asset Management Corporation (UAM), provides investment advisory services to
the Portfolios for a fee calculated at an annual rate of 0.45%, 0.65% and
0.70% of average daily net assets for the McKee U.S. Government, Domestic
Equity and International Equity Portfolios, respectively. Effective March 1,
1996, the Adviser has discontinued waiving a portion of its advisory fees and
assuming expenses for the McKee U.S. Government and McKee Domestic Equity
Portfolios. Prior to March 1, 1996, the Adviser had voluntarily agreed to
waive a portion of its advisory fees and to assume expenses, if necessary, in
order to keep the Portfolios' total annual operating expenses, after the
effect of expense offset arrangements, from exceeding 0.85% and 1.00% of
average daily net assets for the McKee U.S. Government and McKee Domestic
Equity Portfolios, respectively.
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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined
30
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
aggregate net assets; plus 0.05% 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%, 0.04%, and 0.06% of average daily net assets
for the McKee U.S. Government Portfolio, McKee Domestic Equity Portfolio, and
McKee International Equity Portfolio, respectively. Also effective April 15,
1996, the Administrator has entered into a Mutual Funds Service Agreement with
Chase Global Funds Services Company ("CGFSC"), a wholly-owned subsidiary of
The Chase Manhattan Bank, N.A., 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.
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned the following amounts from the Portfolios as Administrator:
<TABLE>
<CAPTION>
ADMINISTRATION
MCKEE PORTFOLIOS FEES
- ---------------- --------------
<S> <C>
U.S. Government.................................................. $2,855
Domestic Equity.................................................. 3,393
International Equity............................................. 6,054
</TABLE>
D. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the purchases and
sales of investment securities other than long-term U.S. Government and agency
securities and short-term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
MCKEE PORTFOLIOS (000) (000)
- ---------------- --------- ------
<S> <C> <C>
U.S. Government................................................ $ 888 $ 46
Domestic Equity................................................ 45,346 3,280
International Equity........................................... 12,887 5,915
</TABLE>
31
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
Purchases and sales of long-term U.S. Government and agency securities were
$16,437,000 and $2,054,000, respectively, for the McKee U.S. Government
Portfolio. There were no purchases and sales of long-term U.S. Government and
agency securities for the McKee Domestic Equity and the McKee International
Equity Portfolios.
F. 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.
G. LINE OF CREDIT: The McKee International Equity Portfolio, along with
certain other portfolios of UAM Funds, collectively entered into an agreement
which enables them to participate in a $100 million unsecured line of credit
with several banks. Borrowings will be made solely to temporarily finance the
repurchase of portfolio shares. Interest is charged to each participating
portfolio based on its borrowings at a rate per annum equal to the Federal
Funds Rate plus 0.75%. In addition, a commitment fee of 1/10th of 1% per
annum, payable at the end of each calendar quarter, is accrued by each
participating portfolio based on their average daily unused portion of the
line of credit. During the period ended April 30, 1996, there were no
borrowings under the agreement.
H. OTHER: At April 30, 1996, the percentage of total shares outstanding held
by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF %
MCKEE PORTFOLIOS SHAREHOLDERS OWNERSHIP
- ---------------- ------------ ---------
<S> <C> <C>
U.S. Government.......................................... 1 70.0%
Domestic Equity.......................................... 1 70.4
International Equity..................................... 2 28.4
</TABLE>
At April 30, 1996, the net assets of the McKee International Equity Portfolio
was substantially comprised of foreign denominated securities and/or currency.
Changes in currency exchange rates will affect the value of and investment
income from such securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
governmental supervision and regulation of foreign securities markets and the
possibility of political or economic instability.
32
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
NWQ PORTFOLIOS
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Mary Rudie Barneby Peter M. Whitman, Jr.
Director and Director
Executive Vice President
John T. Bennett, Jr. William H. Park
Director Vice President and
Assistant Treasurer
J. Edward Day Karl O. Hartmann
Director Secretary
Philip D. English Robert R. Flaherty
Director Treasurer
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
NWQ Investment Management Company
655 South Hope Street, 11th Floor
Los Angeles, CA 90017
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
NWQ
PORTFOLIOS
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
UAM FUNDS NWQ PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Balanced.................................................................. 5
Value Equity.............................................................. 10
Statements of Operations.................................................... 14
Statement of Changes in Net Assets
Balanced.................................................................. 15
Value Equity.............................................................. 16
Financial Highlights
Balanced.................................................................. 17
Value Equity.............................................................. 18
Notes to Financial Statements............................................... 19
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
May, 1996
Dear Shareholders:
During the six months ended April 30, 1996 the U.S. stock market continued to
set new highs, and both the NWQ Balanced and NWQ Value Equity Portfolios
produced strongly positive results. We appreciate the confidence that all of
our shareholders have placed in us and will continue to work to justify that
confidence.
BALANCED PORTFOLIO PERFORMANCE
During the six months ended April 30, 1996, the NWQ Balanced Portfolio
Institutional Class Shares gained 8.13%, including 20.5 cents of dividends
paid, and the Institutional Service Class Shares gained 3.54% (since inception
on January 22, 1996) including 5 cents of dividend income paid. This
performance was slightly above that of the Lipper Balanced Funds Index which
rose 7.78% for the six months and 3.36% since January 23, 1996. The composite
balanced index composed of 60% S&P 500 Index, 30% Lehman Brothers
Government/Corporate Index, and 10% Salomon Brothers 3-month Treasury Bill
Average was up 8.53% for the six months and 3.64% since January 23, 1996. The
individual benchmark returns, for the six months and since January 23, 1996,
respectively, were S&P 500 Index 13.76% and 7.42%, Lehman Brothers
Government/Corporate Index 0.04% and-3.06%, and Salomon Brothers 3-month
Treasury Bill Average 2.62% and 1.37%.
Performance results for the NWQ Balanced Portfolio benefited from the strong
overall stock market. NWQ's common stock holdings, which emphasize industrial
and capital spending industries, responded favorably to signs of greater
economic growth and fading recession fears. The strong equity results were
offset partially by the weaker bond market. The signs of stronger economic
growth, which helped equity holdings, have negatively impacted the bond market
over the last several months. NWQ had reduced the maturity of the portfolio's
bond holdings in September of 1995, thereby reducing the potential negative
impact of the recent rise of interest rates. Currently, the Portfolio has
approximately 15% in cash and equivalents which we intend to selectively
invest as opportunities present themselves.
VALUE EQUITY PORTFOLIO PERFORMANCE
For the six months ended April 30, 1996, the NWQ Value Equity Portfolio had a
total return of 15.93% versus 13.76% for the S&P 500. Performance results also
exceeded those of the Lipper Equity Income Funds Index which rose 12.42%
during the same period.
Boosted by an avalanche of dollars flowing into equity mutual funds, the major
stock market averages continue to rise strongly. 1996 has seen a dramatic
increase in the level of stock investment, with the three highest months ever
of mutual fund contributions occurring in January, February, and March of
1996. When combined with the strong merger activity and share repurchases by
corporations, the result has been a very favorable supply/demand relationship
for common stocks. This has allowed stocks to de-couple from long-term bonds
which suffered one of their worst declines in nearly a decade as investors
began to discount both a less favorable political outcome for the budget
battle and a surprisingly sharp improvement in 1996's economic outlook.
Performance results for the Portfolio benefited from the strong overall equity
market and the improved economic outlook which favored the capital
goods/export orientation of NWQ's equity holdings.
1
<PAGE>
ECONOMIC OUTLOOK
For the past two years the outlook for the U.S. economy has called for a "soft
landing," wherein the pace of business would slow just enough to keep
inflation in check while expanding fast enough to avoid recession and keep
profits at high and growing levels. Evidence confirming this outlook has been
well received by investors, prompting stellar returns for both stock and bond
markets in 1995. More recent data seem to have called into question the
accuracy of this long held view. Six months ago the general debate was, at
most, a soft landing versus a modest, short and shallow recession. More recent
data have served only to widen the divergence between forecasters. Depending
upon the pundit selected, the economy is now heading into sharp recession or
on the verge of an expansion boom. The recession camp had been gaining support
with commodity pricing weak, industrial production declining, auto sales
sluggish, consumer installment debt mounting, retail department store sales
faltering and inventories mounting. The release of the February employment
report, showing the economy adding 705,000 new jobs and unemployment falling
to 5.5%, created tremendous confusion about the direction of the economy. It
has also reverberated through the financial markets, prompting a rapid rise in
long term interest rates.
There may be a tendency to overreact to each new bit of economic data that
emerges from government reports. While the recession/boom debate may continue
for some time, the suddenly "old" forecast of a soft landing remains the most
proper one, given the overall picture. Central banks have been gradually
relaxing monetary policy around the world, even if the pace has been too slow
for some critics. Incomes and profits continue to rise, albeit slowly.
Productivity improvements remain in evidence throughout the economy. The U.S.
trade picture is improving. All these factors suggest that recession will be
avoided. At the same time, the chance of an economic boom emerging soon, with
attendant inflation pressures and sharply rising interest rates, seems remote.
The U.S. remains in the midst of an inventory cycle. In prior cycles the
inventory destocking process has always continued until short term interest
rates have fallen by at least 200 basis points (a basis point is .01%). In the
current cycle short rates have fallen by only 75 basis points. Inflation fears
are perpetual but the reality is that inflation remains subdued. The CPI is
widely acknowledged to overstate inflation. However, even by this measure
inflation has been under 3% for the last four years. It may take some time for
recession fears and "growth scares" to diminish. On balance we expect growth
will accelerate modestly over the last half of 1996. Should inflation remain
in check, both short and long term interest notes will decline again in due
course.
FINANCIAL MARKETS
Financial markets appear to have entered a more turbulent phase. Fixed income
markets are clearly in correction. Equity markets, boosted by the continued
avalanche of dollars into mutual funds, have rallied to new highs. The
strength of the stock market in 1996 has caught many by surprise after the
large gains posted in 1995. At some point the stock market will also enter a
correction/consolidation phase, although the timing is clearly impossible to
predict. Given the magnitude of the market's rise over the past 2-3 years,
investors should not be surprised if a correction appears at any moment.
Provided that the inflation remains under control, however, any overall market
correction is unlikely to surpass the 7%-10% range. The longer term outlook
for financial assets remains generally favorable. While the long term picture
is benign there may be increased volatility in the short run. This has the
potential to unnerve some investors, particularly those who have only been in
the stock market for a few years. Over the past three years the U.S. stock
market has been notable not only for rising to record heights, but also for
demonstrating little volatility. For much of its history, during each year the
market has typically experienced 10%-15% swings between its high and low
marks. Only a decade ago a 10% correction was considered "normal". Not
pleasant, of course, but surely not unusual. The stability of prices over the
past few
2
<PAGE>
years may represent the beginning of a new trend, or it may also be an
anomaly. Without a crystal ball one cannot predict things of this nature, but
prudence and respect for history suggests to us that investors should be
prepared for a more volatile market over the next few years, with 5%-15%
swings becoming more common.
Within the structure of the equity market there is another powerful trend in
evidence. It has received less media coverage but merits the attention of long
term investors. Something is happening in the mid 1990s that did not happen
during comparable periods in the mid 1960s and mid 1980s. Industrial and
producer cyclical stocks are outperforming consumer cyclical stocks. This
recent outperformance has persisted both during the period of Federal Reserve
tightening starting in early 1994 and during the more recent period of Fed
easing in 1995-96. The primary reason for this trend is that capital is being
substituted for labor at an increasing rate. We believe this trend will
continue for some time. The reason for the trend is simple. Capital is cheap
and labor is expensive.
Since 1986 labor wages in the U.S. have risen 4% and associated benefit costs
have climbed more than 5% annually. The figures are generally higher for
industrialized Europe and Japan. Capital goods costs have risen only 2%
annually over this same period. The price of technological capital goods has
been in an outright decline, as any computer buyer well knows. The ongoing
shift in relative costs has prompted business to make the logical decision. In
manufacturing, the capital-stock-to-labor has been rising at a 3.1% since
1988, up from 2% over the prior two decades. In retail trade, the rate has
climbed to 3.7% from 1.4%.
As long as this trend remains in place it has several reinforcing aspects in
the economy. Job and wage growth tend to fall below trend. Consumption growth
is subdued. Consumers are resistant to higher prices. Companies closest to the
consumer have little pricing power and hence will not grant large wage gains.
Seeking growth with stagnant revenues, cost cutting becomes a management
obsession. The major cost for most companies is, of course, labor, which
accounts for about 65% of the total cost of production. At the same time,
productivity improves. This allows for modest overall GDP growth, rising
exports and subdues inflation.
No trend can last forever, but we believe the current capital for labor trend
still has a long way to go. So long as it persists, and we believe it will
until the cost of capital at least approaches the cost of labor at the margin,
industrial and capital goods companies in general will enjoy better pricing
flexibility, higher margins, better returns on investment and better earnings
growth than consumer oriented companies. Over time this should be noticed by
investors, who should respond accordingly.
Sincerely,
NWQ Investment Management Company
3
<PAGE>
DEFINITIONS OF COMPARATIVE INDICES
----------------------------------
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Lehman Brothers Government/Corporate Index is an unmanaged index composed
of a combination of the Government and Corporate Bond Indices. The Government
Index includes public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The Corporate Bond
Index includes fixed-rate nonconvertible corporate debt. Also included are
Yankee Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. All issues are investment grade (BBB)
or higher, with maturities of at least one year and outstanding par value of
at least $100 million for U.S. Government issues and $25 million for others.
Any security downgraded during the month is held in the index until month-end
and then removed. All returns are market value weighted inclusive of accrued
income.
Lipper Equity Income Funds Index is comprised of the 30 largest funds, in
terms of total net assets, which seeks relatively high current income and
growth of income through investing 60% or more of its portfolio in equities.
The Lipper Balanced Funds Average is a non-weighted index of the 30 largest
mutual funds within the balanced fund investment objective. It is calculated
daily with adjustment's for income dividends and capital gains distributions
as of the ex-dividend date.
The Balanced Index, a hypothetical combination of unmanaged indices, reflects
the Portfolio's neutral mix of 60% stocks, 30% bonds, and 10% short-term
instruments. This index combines returns from the S&P 500, Lehman Brothers
Government/Corporate Index and the Salomon Brothers 3 Month T-Bill Average.
The Salomon Brothers 3 Month T-Bill Average--The average return for all
Treasury bills for the previous three month period.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers and did not assume expenses on
behalf of the Portfolios, total returns for the Portfolios would have been
lower. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
4
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (51.5%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.9%)
Boeing Co. .................................................... 2,100 $ 172
Sundstrand Corp. .............................................. 3,300 121
United Technologies Corp. ..................................... 600 66
-------
359
- -------------------------------------------------------------------------------
BASIC RESOURCES (3.8%)
Champion International Corp. .................................. 1,600 77
Cyprus Amax Minerals Co. ...................................... 3,850 104
IMC Global, Inc. .............................................. 4,800 177
Weyerhaeuser Co. .............................................. 2,150 106
-------
464
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (1.0%)
Dun & Bradstreet Corp. ........................................ 2,100 128
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (10.4%)
BW/IP, Inc. ................................................... 925 19
Case Corp. .................................................... 2,600 131
Caterpillar, Inc. ............................................. 5,950 381
Cooper Industries, Inc. ....................................... 3,400 144
Deere & Co. ................................................... 5,000 194
Foster Wheeler Corp. .......................................... 1,700 79
Ingersoll-Rand Co. ............................................ 3,700 143
Kennametal, Inc. .............................................. 3,000 114
Trinity Industries, Inc. ...................................... 1,000 35
York International Corp. ...................................... 750 36
-------
1,276
- -------------------------------------------------------------------------------
CHEMICALS (3.8%)
Air Products & Chemical, Inc. ................................. 2,650 152
Dow Chemical Co. .............................................. 800 71
Du Pont (E.I.) de Nemours & Co. ............................... 2,100 169
Grace (W.R.) & Co. ............................................ 800 62
Morton International, Inc. .................................... 575 20
-------
474
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER DURABLES (3.8%)
Black & Decker Corp. .......................................... 3,000 $ 121
Echlin, Inc. .................................................. 3,300 113
Exide Corp. ................................................... 3,050 86
General Motors Corp. .......................................... 1,850 100
Maytag Corp. .................................................. 2,500 54
------
474
- -------------------------------------------------------------------------------
ELECTRONICS (2.0%)
Emerson Electric Co. .......................................... 900 75
General Electric Co. .......................................... 600 47
General Signal Corp. .......................................... 1,700 65
Grainger (W.W.), Inc. ......................................... 800 55
------
242
- -------------------------------------------------------------------------------
ENERGY (4.3%)
Coastal Corp. ................................................. 1,050 42
Diamond Shamrock, Inc. ........................................ 1,200 41
Dresser Industries, Inc. ...................................... 2,100 67
*Ensco International, Inc. ..................................... 4,600 138
Halliburton Co. ............................................... 1,450 83
*McDermott (J. Ray) S.A. ....................................... 3,900 95
Tidewater, Inc. ............................................... 1,400 59
------
525
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (8.6%)
Allstate Corp. ................................................ 1,500 58
American International Group, Inc. ............................ 1,250 114
Bank of New York Co., Inc. .................................... 3,000 145
Comerica, Inc. ................................................ 2,800 122
General RE Corp. .............................................. 1,250 179
Highlands Insurance Group...................................... 145 3
ITT Hartford Group, Inc. ...................................... 1,800 88
Integra Financial Corp. ....................................... 500 37
National City Corp. ........................................... 3,925 145
Norwest Corp. ................................................. 4,700 170
------
1,061
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
METALS (1.7%)
*Alumax, Inc. .................................................. 1,900 $ 64
*Bethlehem Steel Corp. ......................................... 3,200 44
Reynolds Metals Co. ........................................... 1,100 59
USX-US Steel Group, Inc. ...................................... 1,250 41
------
208
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (1.6%)
Minnesota Mining & Manufacturing Co. .......................... 2,550 168
Service Corp. International.................................... 450 24
------
192
- -------------------------------------------------------------------------------
TECHNOLOGY (4.5%)
AMP, Inc. ..................................................... 2,850 128
Intel Corp. ................................................... 1,800 122
Texas Instruments, Inc. ....................................... 3,450 195
Thomas & Betts Corp. .......................................... 2,700 106
------
551
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.7%)
AT&T Corp. .................................................... 2,900 178
GTE Corp. ..................................................... 250 11
Lucent Technologies, Inc. ..................................... 700 24
------
213
- -------------------------------------------------------------------------------
TRANSPORTATION (1.4%)
Burlington Northern, Inc. ..................................... 1,400 123
CSX Corp. ..................................................... 1,000 51
------
174
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $5,638)............................... 6,341
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (32.3%)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (15.4%)
10.375%, 11/15/12.............................................. $ 300 $ 381
7.50%, 11/15/16................................................ 1,195 1,249
7.875%, 2/15/21................................................ 250 272
-------
1,902
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (16.9%)
6.125%, 5/31/97................................................ 600 603
8.00%, 8/15/99................................................. 25 26
6.375%, 8/15/02................................................ 200 198
5.875%, 2/15/04................................................ 500 477
7.25%, 5/15/04................................................. 750 777
-------
2,081
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $4,054).................. 3,983
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (15.4%)
- -------------------------------------------------------------------------------
U.S. TREASURY BILLS (8.8%)
5.19%, 6/6/96.................................................. 100 100
4.90%, 8/1/96.................................................. 1,000 987
-------
1,087
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.6%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due 5/1/96,
to be repurchased at $813, collateralized by $553 U.S.
Treasury Bonds 12.50%, due 8/15/14, valued at $830 ........... 813 813
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,900)...................... 1,900
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.2%) (COST $11,592)........................ 12,224
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.8%)
- -------------------------------------------------------------------------------
Cash........................................................... 1
Interest Receivable............................................ 109
Receivable for Portfolio Shares Sold........................... 44
Dividends Receivable........................................... 8
Receivable from Investment Adviser............................. 2
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
<S> <C>
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Other Assets......................................................... $ 1
Payable for Investments Purchased.................................... (50)
Payable for Administrative Fees...................................... (8)
Payable for Portfolio Shares Redeemed................................ (6)
Payable for Directors' Fees.......................................... (1)
Distribution & Service Fees Payable.................................. (4)
-------
96
- -------------------------------------------------------------------------------
NET ASSETS (100%)..................................................... $12,320
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES:
Net Assets........................................................... $ 7,486
Applicable to 626,902 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 11.94
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES:
Net Assets........................................................... $ 4,834
Applicable to 405,297 outstanding $0.001 par value Institutional
Service Class shares
(authorized 10,000,000 shares)
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 11.93
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
Interest rates disclosed for U.S. Treasury Bills represent effective yield at
April 30, 1996.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (92.7%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (6.3%)
Boeing Co....................................................... 800 $ 66
Sundstrand Corp................................................. 1,700 62
United Technologies Corp........................................ 650 72
------
200
- -------------------------------------------------------------------------------
BASIC RESOURCES (6.0%)
Champion International Corp. ................................... 1,200 58
Cyprus Amax Minerals Co. ....................................... 1,750 47
IMC Global, Inc. ............................................... 1,050 39
Weyerhaeuser Co. ............................................... 950 47
------
191
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (16.4%)
BW/IP, Inc. .................................................... 225 5
Case Corp. ..................................................... 300 15
Caterpillar, Inc. .............................................. 2,025 130
Cooper Industries, Inc. ........................................ 1,450 62
Deere & Co. .................................................... 3,300 128
Foster Wheeler Corp. ........................................... 300 14
Ingersoll-Rand Co. ............................................. 1,750 68
Kennametal, Inc. ............................................... 1,100 42
Trinity Industries, Inc. ....................................... 625 22
York International Corp. ....................................... 800 38
------
524
- -------------------------------------------------------------------------------
CHEMICALS (7.4%)
Air Products & Chemical, Inc. .................................. 1,650 94
Dow Chemical Co. ............................................... 600 53
Du Pont (E.I.) de Nemours & Co. ................................ 900 72
Grace (W.R.) & Co. ............................................. 225 17
------
236
- -------------------------------------------------------------------------------
CONSUMER DURABLES (8.5%)
Black & Decker Corp. ........................................... 1,000 40
Echlin, Inc. ................................................... 1,600 55
Exide Corp. .................................................... 1,450 41
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER DURABLES--(CONTINUED)
General Motors Corp. .......................................... 1,675 $ 91
Maytag Corp. .................................................. 2,000 43
------
270
- -------------------------------------------------------------------------------
ELECTRONICS (4.9%)
Emerson Electric Co. .......................................... 850 71
General Electric Co. .......................................... 175 14
General Signal Corp. .......................................... 1,500 57
Grainger (W.W.), Inc. ......................................... 200 14
------
156
- -------------------------------------------------------------------------------
ENERGY (9.9%)
Coastal Corp. ................................................. 875 35
Diamond Shamrock, Inc. ........................................ 1,900 64
Dresser Industries, Inc. ...................................... 2,025 65
*Ensco International, Inc. ..................................... 1,400 42
Halliburton Co. ............................................... 575 33
*McDermott (J. Ray) S.A. ....................................... 1,600 39
Tidewater, Inc. ............................................... 900 38
------
316
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (14.2%)
Allstate Corp. ................................................ 900 35
American International Group, Inc. ............................ 800 73
Comerica, Inc. ................................................ 1,375 60
General RE Corp. .............................................. 375 54
Highlands Insurance Group...................................... 57 1
ITT Hartford Group, Inc. ...................................... 1,300 64
Integra Financial Corp. ....................................... 700 52
National City Corp. ........................................... 675 25
Norwest Corp. ................................................. 2,450 89
------
453
- -------------------------------------------------------------------------------
METALS (5.7%)
*Alumax, Inc. .................................................. 1,775 59
*Bethlehem Steel Corp. ......................................... 3,100 42
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
METALS--(CONTINUED)
Reynolds Metals Co. ............................................ 900 $ 48
USX-US Steel Group, Inc. ....................................... 975 32
------
181
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (2.2%)
Minnesota Mining & Manufacturing Co. ........................... 925 61
Service Corp., International.................................... 150 8
------
69
- -------------------------------------------------------------------------------
TECHNOLOGY (7.6%)
AMP, Inc. ...................................................... 1,100 49
Intel Corp. .................................................... 1,000 68
Texas Instruments, Inc. ........................................ 1,400 79
Thomas & Betts Corp. ........................................... 1,200 47
------
243
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.2%)
AT&T Corp. ..................................................... 925 57
GTE Corp. ...................................................... 50 2
Lucent Technologies, Inc. ...................................... 300 10
------
69
- -------------------------------------------------------------------------------
TRANSPORTATION (1.4%)
Burlington Northern, Inc. ...................................... 325 28
CSX Corp. ...................................................... 350 18
------
46
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $2,572)................................ 2,954
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (7.0%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.0%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due 5/1/96,
to be repurchased at $223, collateralized by $173 U.S.
Treausury Bonds 10.375%,
due 11/15/12, valued at $227 (COST $223)....................... $ 223 223
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%) (COST $2,795).......................... 3,177
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
<S> <C>
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)
- -------------------------------------------------------------------------------
Cash.................................................................. $ 1
Receivable from Investment Adviser.................................... 7
Dividends Receivable.................................................. 3
Receivable for Portfolio Shares Sold.................................. 1
Other Assets.......................................................... 19
Payable for Administrative Fees....................................... (6)
Payable for Directors' Fees........................................... (1)
Other Liabilities..................................................... (15)
------
9
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 237,376 outstanding $0.001 par value Institutional Class
shares
(authorized 25,000,000 shares)....................................... $3,186
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE............... $13.42
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
NWQ PORTFOLIOS
STATEMENTS OF OPERATIONS
For the Six Months Ended April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NWQ NWQ
BALANCED VALUE EQUITY
(In Thousands) PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends............................. $ 43 $ 26
Interest.............................. 109 3
- -----------------------------------------------------------------------------
Total Income......................... 152 29
- -----------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees...................... $ 28 $ 10
Less: Fees Waived............... (28) -- (10) --
---- ----
Administrative Fees--Note C........... 43 35
Audit Fees............................ 6 6
Printing Fees......................... 6 5
Custodian Fees........................ 4 3
Directors' Fees--Note F............... 1 1
Service Fees--Note D:
Institutional Service Class.......... 3 --
Distribution Fees--Note D:
Institutional Service Class.......... 1 --
Other Expenses........................ 5 4
Expenses Assumed by Adviser--Note B... (24) (39)
- -----------------------------------------------------------------------------
Total Expenses....................... 45 15
Expense Offset--Note A................ (1) (1)
- -----------------------------------------------------------------------------
Net Expenses......................... 44 14
- -----------------------------------------------------------------------------
NET INVESTMENT INCOME.................. 108 15
- -----------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS....... 47 26
NET CHANGE IN UNREALIZED APPRECIATION
ON INVESTMENTS........................ 382 366
- -----------------------------------------------------------------------------
TOTAL NET REALIZED GAIN AND NET CHANGE
IN UNREALIZED APPRECIATION............ 429 392
- -----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $537 $407
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
NWQ BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 91 $ 108
Net Realized Gain.................................. 30 47
Net Change in Unrealized Appreciation.............. 268 382
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Opera-
tions............................................ 389 537
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class............................... (80) (71)
Institutional Service Class....................... -- (20)
Net Realized Gain--Institutional Class............. -- (30)
- --------------------------------------------------------------------------------
Total Distributions............................... (80) (121)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE H:
Institutional Class:
-------------------
Issued--Regular................................... 6,275 3,753
--In Lieu of Cash Distributions................. 80 101
Redeemed.......................................... (2,914) (2,054)
- --------------------------------------------------------------------------------
Net Increase from Institutional Class Shares....... 3,441 1,800
- --------------------------------------------------------------------------------
Institutional Service Class*:
----------------------------
Issued--Regular................................... -- 5,554
--In Lieu of Cash Distributions................. -- 20
Redeemed.......................................... -- (804)
- --------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares............................................ -- 4,770
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions...... 3,441 6,570
- --------------------------------------------------------------------------------
Total Increase..................................... 3,750 6,986
Net Assets:
Beginning of Period................................ 1,584 5,334
- --------------------------------------------------------------------------------
End of Period (1).................................. $ 5,334 $12,320
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Net Assets Consist of:
Paid in Capital.................................... $ 5,037 $11,607
Undistributed Net Investment Income................ 16 33
Accumulated Net Realized Gain...................... 31 48
Unrealized Appreciation............................ 250 632
- --------------------------------------------------------------------------------
$ 5,334 $12,320
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on January 22,
1996.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30, 1996
(In Thousands) OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income......................... $ 11 $ 15
Net Realized Gain............................. 3 26
Net Change in Unrealized Appreciation......... 17 366
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Op-
erations.................................... 31 407
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income......................... (7) (16)
Net Realized Gain............................. -- (2)
- --------------------------------------------------------------------------------
Total Distributions.......................... (7) (18)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS--NOTE H:
Issued--Regular............................... 2,266 610
--In Lieu of Cash Distributions............. 7 18
Redeemed...................................... (86) (295)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions. 2,187 333
- --------------------------------------------------------------------------------
Total Increase................................ 2,211 722
Net Assets:
Beginning of Period........................... 253 2,464
- --------------------------------------------------------------------------------
End of Period (1)............................. $2,464 $3,186
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Net Assets Consist of:
Paid in Capital............................... $2,441 $2,774
Undistributed Net Investment Income........... 4 3
Accumulated Net Realized Gain................. 3 27
Unrealized Appreciation....................... 16 382
- --------------------------------------------------------------------------------
$2,464 $3,186
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE
INSTITUTIONAL CLASS SHARES CLASS SHARES
------------------------------------------------ ---------------------
SIX MONTHS JANUARY 22, 1996***
AUGUST 2, 1994** ENDED TO
TO YEAR ENDED APRIL 30, 1996 APRIL 30, 1996
OCTOBER 31, 1994 OCTOBER 31, 1995 (UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $ 9.84 $ 11.24 $ 11.54
- ------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.06 0.32 0.15 0.06
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.19) 1.40 0.76 0.38
- ------------------------------------------------------------------------------------------------
Total from Investment
Operations........... (0.13) 1.72 0.91 0.44
- ------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.03) (0.32) (0.14) (0.05)
Net Realized Gain...... -- -- (0.07) --
- ------------------------------------------------------------------------------------------------
Total Distributions... (0.03) (0.32) (0.21) (0.05)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 9.84 $11.24 $ 11.94 $ 11.93
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
TOTAL RETURN+........... (1.30)% 17.80% 8.13% 3.54%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $1,584 $5,334 $ 7,486 $ 4,834
Ratio of Expenses to
Average Net Assets..... 1.00%* 1.04% 1.02%* 1.42%*
Ratio of Net Investment
Income to Average Net
Assets................. 3.59%* 3.30% 2.83%* 2.42%*
Portfolio Turnover Rate. 1% 31% 7% 7%
Average Commission Rate
#...................... N/A N/A $0.0783 $0.0783
- ------------------------------------------------------------------------------------------------
Net Investment Income
Per Share Net of
Voluntary Waived Fees
and Expenses Assumed by
the Adviser............ $ 0.21 $ 0.26 $ 0.07 $ 0.03
Ratio of Expenses to
Average Net Assets
Including Expense
Offsets................ N/A 1.00% 1.00%* 1.40%*
- ------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
*** Initial offering of Institutional Service Class Shares
+ Total return would have been lower had the Adviser not waived and assumed
certain expenses during the period.
# For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
SEPTEMBER 21, 1994** ENDED
TO YEAR ENDED APRIL 30, 1996
OCTOBER 31, 1994 OCTOBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $10.00 $ 9.98 $ 11.65
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OP-
ERATIONS
Net Investment Income+... 0.01 0.12 0.07
Net Realized and
Unrealized Gain (Loss)
on Investments.......... (0.03) 1.65## 1.78
- --------------------------------------------------------------------------------
Total from Investment
Operations............. (0.02) 1.77 1.85
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.... -- (0.10) (0.07)
Net Realized Gain........ -- -- (0.01)
- --------------------------------------------------------------------------------
Total Distributions..... -- (0.10) (0.08)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................... $ 9.98 $11.65 $ 13.42
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN++............ (0.20)% 17.84% 15.93%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands).............. $ 253 $2,464 $ 3,186
Ratio of Expenses to Aver-
age Net Assets+.......... 1.00%* 1.21%# 1.05%*#
Ratio of Net Investment
Income to Average Net As-
sets+.................... 1.36%* 1.39% 1.09%*
Portfolio Turnover Rate... 0% 4% 7%
Average Commission Rate
###...................... N/A N/A $0.0754
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of
$1.06, $0.82 and $0.21 per share for the period ended October 31, 1994,
for the year ended October 31, 1995 and for the six months ended April 30,
1996, respectively.
++ Total return would have been lower had the Adviser not waived and assumed
certain expenses during the period.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 1.00% for the year ended October 31, 1995 and
1.00%* for the six months ended April 30, 1996.
## The amount shown for the year ended October 31, 1995 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
repurchase of Portfolio shares in relation to fluctuating market value of
the investments of the Portfolio.
### For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The NWQ Balanced Portfolio and NWQ Value
Equity Portfolio (the "Portfolios"), portfolios of UAM Funds, Inc., began
operations on August 2, 1994 and September 21, 1994, respectively. The
Portfolios are authorized to offer two separate classes of shares--
Institutional Class Shares and Institutional Service Class Shares. As of the
date of this report, only the NWQ Balanced Portfolio has issued Institutional
Service Class Shares. At April 30, 1996, the UAM Funds were comprised of
thirty-seven active portfolios. The financial statements of the remaining
portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the
Portfolios in the preparation of their 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: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid price on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid price. Fixed income securities are stated on the
basis of valuations provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities,
quotations from dealers, market transactions in comparable securities and
various relationships between securities in determining values. 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 is determined in good faith at fair value using methods
determined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue 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 April 30, 1996, cost of investments and unrealized appreciation
(depreciation) of investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
NWQ PORTFOLIOS (000) (000) (000) (000)
-------------- ------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Balanced.................... $11,592 $784 $(152) $632
Value Equity................ 2,795 414 (32) 382
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolios' 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
19
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the
Portfolios have 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.
4. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distribute
substantially all of its net investment income monthly. Any realized net
capital gains will normally 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.
5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Discounts and premiums
on securities purchased are amortized over their respective lives. Most
expenses of the UAM Funds can be directly attributed to a particular
portfolio. Expenses which cannot be directly attributed are apportioned
among the portfolios of the UAM Funds based on their relative net assets.
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 each Portfolio have been increased
to include expense offsets for custodian balance credits. Income expenses
(other than class specific expenses) and realized and unrealized gains and
losses are allocated to each class of shares based upon their relative net
assets.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement, NWQ
Investment Management Company (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolios at a fee calculated at an annual rate of 0.70% of
each Portfolio's 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 Portfolios' total annual operating expenses, after the
effect of expense offset arrangements, from exceeding 1.00% of average daily
net assets for the Portfolios' Institutional Class Shares and 1.40% of average
daily net assets for the NWQ Balanced Portfolio's Institutional Service Class
Shares until February 28, 1997.
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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% of the combined
aggregate net assets in excess of $3 billion.
20
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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 0.06% and 0.04%
of average daily net assets for the NWQ Balanced Portfolio and NWQ Value
Equity Portfolio, respectively. Also effective April 15, 1996, the
Administrator has entered into a Mutual Funds Service Agreement with Chase
Global Funds Services Company ("CGFSC"), a wholly-owned subsidiary of The
Chase Manhattan Bank, N.A., 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.
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $4,067 and $2,971 from NWQ Balanced Portfolio and NWQ Value Equity
Portfolio, respectively, as Administrator.
D. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc., (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
NWQ Balanced Portfolio has adopted a Distribution and Service Plan (the
"Plans") on behalf of the Institutional Service Class Shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. Under the Plans, the NWQ
Balanced Portfolio may not incur distribution or service costs which exceed an
annual rate of 0.75% of the NWQ Balanced Portfolio's net assets. The Board has
currently limited aggregate payments under the Plans to 0.50% per annum of the
NWQ Balanced Portfolio's net assets. Under the Service Plan, the NWQ Balanced
Portfolio reimburses the Distributor or the Service Agent for payments made at
an annual rate of up to 0.25% of the average daily net assets of the
Institutional Service Class Shares owned by clients of such Service Agents.
The Distributor does not receive any fee or other compensation with respect to
the Value Equity Portfolio.
E. PURCHASES AND SALES: For the period ended April 30, 1996, purchases and
sales of investment securities other than long-term U.S. Government and short-
term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
NWQ PORTFOLIOS (000) (000)
- -------------- --------- -----
<S> <C> <C>
Balanced........................................................ $3,023 $210
Value Equity.................................................... 498 183
</TABLE>
Purchases and sales of long-term U.S. Government securities were approximately
$2,404,000 and $253,000, respectively, for NWQ Balanced Portfolio. There were
no purchases or sales of U.S. Government securities for NWQ Value Equity
Portfolio.
21
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
F. 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 the 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.
G. LINE OF CREDIT: The Portfolios, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: Transactions in capital shares for the Portfolios, by class, were as
follows:
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE
INSTITUTIONAL CLASS SHARES CLASS SHARES
---------------------------- --------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED JANUARY 22, 1996* TO
OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
1995 1996 1995 1996
(000) (000) (000) (000)
----------- ---------------- ----------- --------------------
<S> <C> <C> <C> <C>
NWQ Balanced Portfolio:
Shares Issued........... 578 319 -- 471
In Lieu of Cash Distri-
butions................ 8 9 -- 2
Shares Redeemed......... (272) (176) -- (67)
---- ---- --- ---
Net Increase (Decrease)
from Capital Share
Transactions........... 314 152 -- 406
==== ==== === ===
NWQ Value Equity Portfo-
lio:
Shares Issued........... 193 48
In Lieu of Cash Distri-
butions................ 1 1
Shares Redeemed......... (7) (23)
---- ----
Net Increase (Decrease)
from Capital Share
Transactions........... 187 26
==== ====
</TABLE>
At April 30, 1996, the percentage of total shares outstanding held by record
shareholders owning 10% or greater of the aggregate total shares outstanding
for each Portfolio were:
<TABLE>
<CAPTION>
NO. OF
NWQ PORTFOLIOS SHAREHOLDERS % OWNERSHIP
- -------------- ------------ -----------
<S> <C> <C>
Balanced--Institutional Class.......................... 2 74.6%
Balanced--Institutional Service Class.................. 2 83.3%
Value Equity........................................... 2 75.3%
</TABLE>
- --------
* Initial offering of Institutional Service Class Shares.
22
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
STERLING PARTNERS' PORTFOLIOS
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and
Executive Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Sterling Capital Management Company
One First Union Center, 301 S. College Street, Suite 3200
Charlotte, NC 28202
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square, Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
STERLING PARTNERS' PORTFOLIOS
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
UAM FUNDS STERLING PARTNERS' PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Balanced.................................................................. 5
Equity.................................................................... 10
Short-Term Fixed Income................................................... 14
Statements of Operations.................................................... 18
Statement of Changes in Net Assets
Balanced.................................................................. 19
Equity.................................................................... 20
Short-Term Fixed Income................................................... 21
Financial Highlights
Balanced.................................................................. 22
Equity.................................................................... 23
Short-Term Fixed Income................................................... 24
Notes to the Financial Statements........................................... 25
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
To Our Shareholders:
OVERVIEW OF ECONOMIC AND MARKET CONDITIONS
The most notable change over the past six months in the financial market
environment has been the "de-coupling" of the stock and bond markets. Both
markets surged strongly upward for most of 1995. But more recently, the bond
market has weakened substantially while the stock market has continued to post
attractive returns, albeit not quite as strong as the returns of 1995. Though
this is somewhat unusual, it is not unprecedented. Sometimes the promise of
stronger corporate earnings causes investors to ignore rising interest rates
and continue to pour money into stock purchases. That is certainly the case
now. In spite of a sharp 100 basis point rise in long-term interest rates
since January 1, 1996, cash flowing into stock mutual funds continues to set
records. As a result, stocks, as measured by the S&P 500 Index, have posted a
very attractive 13.76% return over the six months ended April 30, 1996. This
compares to a roughly zero percent return for bonds as measured by the Lehman
Brothers Government/Corporate Index.
We have been surprised by the resiliency of corporate profits to date. Through
cost cutting, corporations in aggregate have been able to offset the effects
of a sluggish economy. However, there is a limit to how long this phenomenon
can last. Rising interest rates have a negative effect on economic activity
and, thus, corporate profits. The higher interest rates rise, the more one has
to question the sustainability of corporate profitability, particularly since
the current level of profitability is near record highs. Something has to
give. Either the bond market has to stabilize and begin to move up again
(i.e., interest rates begin to move back down), or the stock market will begin
to move down.
Our position is one of modest caution. We take comfort in the fact that
inflation remains under control. As long as this holds true, we don't expect
interest rates to rise much further.
We do believe, however, that careful security selection is very important in
this uncertain environment. Not all companies and industries will weather this
storm equally well. As a result, we are focusing on quality in our stock and
bond selections.
FIXED INCOME OVERVIEW
In response to a weak economic environment in the fourth quarter of 1995, the
Federal Reserve lowered the overnight borrowing cost in late January for the
second time in two months to a level of 5.25%. Chairman Greenspan termed this
lowering of rates "preventative insurance" for the economy. This accommodation
was initially greeted with enthusiasm by the financial markets as both the
stock and bond markets rose to new highs in early February. Since that time,
however, the bond market has been under constant pressure.
In mid-February the bond market became deluged with a steady stream of
negative events. First, the deficit reduction talks were postponed by Congress
and the Administration until after the fall elections. Next, the markets were
hit with a significant rise in most agricultural prices due to a very poor
winter growing season. Higher grain prices coupled with intentionally low oil
inventories by the refiners have resulted in a significant rise in most of the
major commodity indices. Heightened inflationary concerns and a firming of
personal
1
<PAGE>
consumption in the first quarter of this year have resulted in a substantial
rise of approximately 100 basis points in interest rates on bonds with
maturities ranging from two to thirty years.
We are mindful of the challenging events described above but believe that the
negative reaction in the bond market has been overblown. While there is little
doubt that the economy is growing at a stronger pace compared to a very slow
1995, we expect that on balance the Gross Domestic Product this year will
increase at a rate of 2.5% to 3.0%. Gauges of future inflation such as
precious metals prices and the Columbia Business School's leading inflation
index have actually been declining in recent months.
Looking forward, we are cautiously optimistic that interest rates should peak
near current levels and decline in the second half of this year. We believe
the sharp rise in interest rates and commodity prices should have a dampening
impact upon economic activity. A great deal of negative news has been factored
into interest rates and as such we believe that bonds represent an attractive
investment at current yields.
BALANCED PORTFOLIO REVIEW
Our strategy over the past six months has been to gradually raise equity
exposure in the Sterling Partners' Balanced Portfolio, and we are now close to
our 60% target. Importantly, we accomplished this without "throwing caution to
the wind." Rather, we were very methodical and careful. We raised equity
exposure by investing in carefully-selected, high-quality companies which we
hope will do well in the currently unsettled market environment. Examples of
recent additions include Tyson Foods, St. Jude Medical, Ingersoll-Rand,
Russell Corporation, and Silicon Graphics.
As noted earlier, inflation remains under control. As long as this remains
true, we believe bonds will offer reasonably attractive returns. Thus, in the
fixed income portion of the Portfolio, we currently have an average duration
of 5.7 years, which is roughly in line with that of the Lehman Brothers
Government/Corporate Index. Bond selection is heavily slanted toward
government issues and high-quality corporate bonds.
Our focus on quality in both stock and bond selections is beginning to pay
off. For the six month period ended April 30, 1996, the Portfolio's return was
7.83%. This modestly exceeded the 7.53% return of the Balanced Index (50% S&P
500 Index with income, 45% Lehman Brothers Intermediate Government/Corporate
Index, and 5% Salomon Brothers 3-month Treasury bills). Individually, the S&P
500 Index had a total return during this period of 13.76%, the Lehman Brothers
Intermediate Government/Corporate Index had a total return of 1.16% and the
Salomon Brothers 3-month Treasury Bills had a total return of 2.62%.
EQUITY PORTFOLIO REVIEW
For the six months ended April 30, 1996, the performance of the S&P 500 Index
was led by the retail sector which rebounded sharply after several years of
underperformance. Also, the manufacturing sector did well, especially the
auto-related companies within the sector. Both autos and retailers are
generally considered to be "early-cycle" stocks which typically do well in the
early stage of an economic recovery. As such, the strong performance of these
groups is confirmation of our view that a full-blown recession may be avoided.
2
<PAGE>
While there is no recession in sight and inflation remains under control,
there is still reason to be cautious. Interest rates have been rising, and
valuation levels are not compelling by historical standards.
Our view is that there continue to be attractive investment opportunities, but
that careful and diligent research is required to distinguish between the
opportunities and the traps. As we move forward, we fully expect the market to
pay an increasing premium for companies that offer strong fundamental
characteristics. Extensive company analysis will prove critical as earnings
disappointments are not likely to be tolerated. This environment plays into
our strength. Our approach to stock selection is based on rigorous fundamental
analysis.
Recall that last year we initiated some significant changes among the people
responsible for managing the Sterling Partners' Equity Portfolio. Since the
new equity team took over, we have been gradually restructuring the Portfolio.
Our emphasis throughout this process has been on quality. With the transition
now complete, we believe the Portfolio is very well-positioned for the
currently unsettled and uncertain market environment. Examples of recent
additions to the Portfolio include Tyson Foods, St. Jude Medical, Ingersoll-
Rand, Russell Corporation, and Silicon Graphics.
Importantly, our approach is beginning to pay off. For the six months ended
April 30, 1996, the Sterling Partners' Equity Portfolio posted a return of
14.95%. This exceeded the 13.76% return of the S&P 500 Index.
SHORT-TERM FIXED INCOME PORTFOLIO REVIEW
The negative factors facing the fixed income market have depressed the returns
of the Sterling Partners' Short-Term Fixed Income Portfolio as well, but to a
slightly lesser degree. The total return of this Portfolio for the six months
ended April 30, 1996 has been 1.94% compared to a return of 2.10% for the
Lehman Brothers 1-3 Year Government Bond Index. The average duration of this
Portfolio has averaged approximately 1.8 years for the same six month period,
which is in line with the benchmark.
Incremental spreads related to non-U.S. Treasury securities continue to be
quite small. As a result, 60% of this Portfolio is invested in Treasury and
Agency securities, 36% in high grade corporate bonds and 4% in cash
equivalents and other net assets. Recently, we have begun to see an increasing
amount of new corporate issuance and anticipate adding more high-grade
corporate bonds to this Portfolio as incremental spreads widen in the future.
Looking forward, the yield on the two year Treasury note at 6.20% is
approximately 100 basis points higher than overnight money market rates. Given
our expectations of moderate economic growth and manageable inflation we
believe that the current level of interest rates is attractive. If interest
rates stabilize and commodity prices begin to decline, you should expect us to
begin to slightly extend the average duration of this Portfolio.
In closing, we would like to thank you for your continued confidence in
Sterling Capital Management.
Sincerely,
STERLING CAPITAL MANAGEMENT
May 9, 1996
3
<PAGE>
DEFINITIONS OF THE COMPARATIVE INDICES
--------------------------------------
The Lehman Brothers Intermediate Government/Corporate Index is an unmanaged
index composed of a combination of the Government and Corporate Bond Indices.
All issues are investment grade (BBB) or higher, with maturities of one to ten
years and an outstanding par value of at least $100 million for U.S.
Government issues and $25 million for others. The Government Index includes
public obligations of the U.S. Treasury, issues of Government agencies, and
corporate debt backed by the U.S. Government. The Corporate Bond Index
includes fixed-rate nonconvertible corporate debt. Also included are Yankee
Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. Any security down-graded during the
month is held in the index until month-end and then removed. All returns are
market value weighted inclusive of accrued income.
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Balanced Index, a hypothetical combination of unmanaged indices, reflects
the Portfolio's neutral mix of 50% stocks, 45% bonds, and 5% short-term
instruments. This index combines returns from the S&P 500, Lehman Brothers
Intermediate Government/Corporate Index and the Salomon Brothers 3-month
Treasury Bill.
The Lehman Brothers 1-3 Year Government Bond Index is an unmanaged index
composed of agency and Treasury securities with maturities of one to three
years.
The Salomon Brothers 3 Month T-Bill Average--The average return for all
Treasury bills for the previous three month period.
The Lehman Brothers Government/Corporate Index is an unmanaged index composed
of a combination of the Government and Corporate Bond Indices. The Government
Index includes public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The Corporate Bond
Index includes fixed-rate nonconvertible corporate debt. Also included are
Yankee Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. All issues are investment grade (BBB)
or higher, with maturities of at least one year and outstanding par value of
at least $100 million for U.S. Government issues and $25 million for others.
Any security downgraded during the month is held in the index until month-end
and then removed. All returns are market value weighted inclusive of accrued
income.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers on behalf of the Portfolio,
total return for the Sterling Partners' Equity and Sterling Partners' Short-
Term Fixed Income Portfolios would have been lower. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
4
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (57.5%)
- -------------------------------------------------------------------------------
BANKS (1.1%)
Bankers Trust New York Corp. ................................. 10,650 $ 739
- -------------------------------------------------------------------------------
BASIC RESOURCES (1.3%)
*Destec Energy, Inc. .......................................... 22,300 262
Rayonier, Inc. ............................................... 15,375 552
-------
814
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.7%)
Hershey Foods Corp. .......................................... 8,300 630
Interstate Bakeries Corp. .................................... 29,800 708
Tyson Foods, Inc., Class A.................................... 15,000 373
-------
1,711
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (2.4%)
Knight-Ridder, Inc. .......................................... 11,175 809
Scripps Co. (E.W.)............................................ 17,000 722
-------
1,531
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (4.2%)
Ingersoll-Rand Co. ........................................... 31,500 1,220
Keystone International, Inc. ................................. 22,300 488
Stewart & Stevenson Services, Inc. ........................... 32,800 964
-------
2,672
- -------------------------------------------------------------------------------
CHEMICALS (1.1%)
*Cytec Industries, Inc. ....................................... 8,200 680
- -------------------------------------------------------------------------------
CONSTRUCTION (1.1%)
*USG Corp. .................................................... 26,275 686
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (4.0%)
First Brands Corp. ........................................... 31,300 829
Hasbro, Inc. ................................................. 15,100 555
Philip Morris Cos., Inc. ..................................... 12,958 1,168
-------
2,552
- -------------------------------------------------------------------------------
ELECTRONICS (1.4%)
*Amphenol Corp., Class A....................................... 33,400 881
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ENERGY (4.5%)
Chevron Corp. ................................................ 13,800 $ 800
Exxon Corp. .................................................. 4,175 355
Mobil Corp. .................................................. 7,700 886
Schlumberger Ltd. ............................................ 9,950 878
-------
2,919
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (1.9%)
J.P. Morgan & Co. ............................................ 6,350 534
Paine Webber Group............................................ 34,000 710
-------
1,244
- -------------------------------------------------------------------------------
HEALTH CARE (5.2%)
*Acuson Corp. ................................................. 52,100 990
*Magellan Health Services, Inc. ............................... 21,850 470
*St. Jude Medical, Inc. ....................................... 18,300 668
U.S. Surgical Corp. .......................................... 33,500 1,239
-------
3,367
- -------------------------------------------------------------------------------
INSURANCE (2.7%)
Chubb Corp. .................................................. 7,175 679
Prudential Reinsurance Holdings, Inc. ........................ 25,650 583
UNUM Corp. ................................................... 8,200 488
-------
1,750
- -------------------------------------------------------------------------------
MANUFACTURING (4.2%)
Bandag, Inc. ................................................. 7,675 385
Snap-On Tools Corp. .......................................... 18,150 871
Tyco International Ltd. ...................................... 14,800 572
United Dominion Industries.................................... 37,200 893
-------
2,721
- -------------------------------------------------------------------------------
MINING (0.7%)
Potash Corp. of Saskatchewan, Inc. ........................... 6,800 479
- -------------------------------------------------------------------------------
PHARMACEUTICALS (2.9%)
Pharmacia & Upjohn, Inc. ..................................... 22,000 841
Rhone-Poulenc Rorer, Inc. .................................... 16,900 1,048
-------
1,889
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
RETAIL (2.8%)
*Federated Department Stores, Inc. ............................. 16,200 $ 540
Home Depot, Inc. .............................................. 10,300 488
*Price/Costco, Inc. ............................................ 42,300 804
-------
1,832
- --------------------------------------------------------------------------------
SERVICES (1.2%)
FlightSafety International, Inc. .............................. 10,525 583
*Rexel, Inc. ................................................... 14,200 190
-------
773
- --------------------------------------------------------------------------------
TECHNOLOGY (3.3%)
*Sequent Computer Systems, Inc. ................................ 32,900 481
*Silicon Graphics, Inc. ........................................ 20,100 595
Hewlett-Packard Co. ........................................... 9,800 1,038
-------
2,114
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.2%)
Ameritech Corp. ............................................... 13,150 768
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (2.0%)
Russell Corp. ................................................. 18,200 473
Unifi, Inc. ................................................... 29,400 790
-------
1,263
- --------------------------------------------------------------------------------
TRANSPORTATION (1.3%)
Canadian National Railway...................................... 45,750 869
- --------------------------------------------------------------------------------
UTILITIES (4.3%)
AT&T Corp. .................................................... 10,350 634
CMS Energy Corp. .............................................. 20,800 606
Illinova Corp. ................................................ 28,400 724
Portland General Corp. ........................................ 27,400 805
-------
2,769
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $31,098).............................. 37,023
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (5.2%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (2.2%)
Paccar Financial Corp.
6.31%, 7/15/98................................................ $1,425 $ 1,423
- -------------------------------------------------------------------------------
TRANSPORTATION (3.0%)
Southern Railway Corp.
10.00%, 7/15/00............................................... 1,710 1,917
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $3,360)............................. 3,340
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (33.4%)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (22.7%)
5.50%, 11/15/98............................................... 1,350 1,329
5.00%, 2/15/99................................................ 100 97
6.50%, 4/30/99................................................ 2,625 2,646
6.25%, 5/31/00................................................ 875 871
5.50%, 12/31/00............................................... 1,000 964
5.25%, 1/31/01................................................ 1,200 1,146
5.625%, 2/28/01............................................... 1,330 1,287
7.50%, 11/15/01............................................... 2,230 2,334
6.50%, 8/15/05................................................ 4,020 3,965
-------
14,639
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (7.5%)
6.25%, 8/15/23................................................ 1,350 1,218
7.625%, 2/15/25............................................... 2,700 2,898
6.875%, 8/15/25............................................... 700 691
-------
4,807
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (3.2%)
Federal Home Loan Mortgage Corp.
REMIC Series 1311G
7.50%, 5/15/19
Estimated Average Life 12/98................................... 2,050 2,072
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $21,808)................. 21,518
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.3%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $2,132, collateralized by $2,077
U.S. Treasury Notes 7.25%, due 8/15/04, valued at $2,176
(COST $2,132)................................................ $2,132 $ 2,132
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.4%) (COST $58,398)....................... 64,013
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.6%)
- -------------------------------------------------------------------------------
Cash.......................................................... 1
Interest Receivable........................................... 381
Dividends Receivable.......................................... 41
Receivable for Portfolio Shares Sold.......................... 1
Other Assets.................................................. 6
Payable for Investment Advisory Fees.......................... (39)
Payable for Administrative Fees............................... (9)
Payable for Portfolio Shares Redeemed......................... (1)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (15)
-------
365
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 5,422,560 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $64,378
===============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 11.87
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.4%)
- -------------------------------------------------------------------------------
BANKS (2.0%)
Bankers Trust New York Corp. ................................. 10,125 $ 702
- -------------------------------------------------------------------------------
BASIC RESOURCES (2.2%)
*Destec Energy, Inc. .......................................... 21,200 249
Rayonier, Inc. ............................................... 14,000 502
-------
751
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.6%)
Hershey Foods Corp. .......................................... 7,300 554
Interstate Bakeries Corp. .................................... 29,800 708
Tyson Foods, Inc., Class A.................................... 14,400 358
-------
1,620
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (4.3%)
Knight-Ridder, Inc. .......................................... 11,500 832
Scripps Co. (E.W.)............................................ 16,000 680
-------
1,512
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (6.8%)
Keystone International, Inc. ................................. 21,000 459
Ingersoll-Rand Co. ........................................... 27,800 1,077
Stewart & Stevenson Services, Inc. ........................... 29,000 852
-------
2,388
- -------------------------------------------------------------------------------
CHEMICALS (1.8%)
*Cytec Industries, Inc. ....................................... 7,500 622
- -------------------------------------------------------------------------------
CONSTRUCTION (1.8%)
*USG Corp. .................................................... 24,600 643
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (7.0%)
First Brands Corp. ........................................... 29,700 787
Hasbro, Inc. ................................................. 14,100 518
Philip Morris Cos., Inc. ..................................... 12,500 1,127
-------
2,432
- -------------------------------------------------------------------------------
ELECTRONICS (2.4%)
*Amphenol Corp., Class A....................................... 31,300 826
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (7.6%)
Chevron Corp. ................................................. 13,000 $ 754
Exxon Corp. ................................................... 3,300 281
Mobil Corp. ................................................... 7,225 831
Schlumberger Ltd. ............................................. 8,900 785
-------
2,651
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (3.4%)
J.P. Morgan & Co. ............................................. 6,100 513
Paine Webber Group............................................. 32,775 684
-------
1,197
- --------------------------------------------------------------------------------
HEALTH CARE (8.9%)
*Acuson Corp. .................................................. 50,500 960
*Magellan Health Services, Inc. ................................ 19,450 418
*St. Jude Medical, Inc. ........................................ 15,900 580
U.S. Surgical Corp. ........................................... 31,200 1,154
-------
3,112
- --------------------------------------------------------------------------------
INSURANCE (4.4%)
Chubb Corp. ................................................... 7,000 662
Prudential Reinsurance Holdings, Inc. ......................... 20,600 469
UNUM Corp. .................................................... 7,000 416
-------
1,547
- --------------------------------------------------------------------------------
MANUFACTURING (7.3%)
Bandag, Inc. .................................................. 6,575 329
Snap-On Tools Corp. ........................................... 17,325 832
Tyco International Ltd. ....................................... 14,100 545
United Dominion Industries..................................... 34,900 838
-------
2,544
- --------------------------------------------------------------------------------
MINING (1.3%)
Potash Corp. of Saskatchewan, Inc. ............................ 6,400 451
- --------------------------------------------------------------------------------
PHARMACEUTICALS (4.9%)
Pharmacia & Upjohn, Inc. ...................................... 21,000 803
Rhone-Poulenc Rorer, Inc. ..................................... 14,700 912
-------
1,715
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
RETAIL (4.9%)
*Federated Department Stores, Inc. ............................. 15,325 $ 512
Home Depot, Inc. .............................................. 9,100 431
*Price/Costco, Inc. ............................................ 40,000 760
-------
1,703
- --------------------------------------------------------------------------------
SERVICES (1.9%)
FlightSafety International, Inc. .............................. 9,150 507
*Rexel, Inc. ................................................... 12,600 168
-------
675
- --------------------------------------------------------------------------------
TECHNOLOGY (5.7%)
Hewlett-Packard Co. ........................................... 9,300 985
*Silicon Graphics, Inc. ........................................ 19,000 563
*Sequent Computer Systems, Inc. ................................ 30,950 453
-------
2,001
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.0%)
Ameritech Corp. ............................................... 12,200 712
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (3.3%)
Russell Corp. ................................................. 16,000 416
Unifi, Inc. ................................................... 27,500 739
-------
1,155
- --------------------------------------------------------------------------------
TRANSPORTATION (2.4%)
Canadian National Railway...................................... 43,500 826
- --------------------------------------------------------------------------------
UTILITIES (7.5%)
AT&T Corp. .................................................... 9,700 594
CMS Energy Corp. .............................................. 19,900 580
Illinova Corp. ................................................ 27,000 688
Portland General Corp. ........................................ 26,300 773
-------
2,635
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $29,009).............................. 34,420
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.4%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $504, collateralized by $491
U.S. Treasury Notes 7.25%, due 8/15/04, valued at $514 (COST
$504)........................................................ $504 $ 504
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%) (COST $29,513)....................... 34,924
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- -------------------------------------------------------------------------------
Receivable for Portfolio Shares Sold.......................... 52
Dividends Receivable.......................................... 38
Other Assets.................................................. 6
Payable for Investment Advisory Fees.......................... (14)
Payable for Administrative Fees............................... (7)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (17)
-------
57
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 2,402,788 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $34,981
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 14.56
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (35.7%)
- -------------------------------------------------------------------------------
AUTO-LOAN PASS THROUGH (1.6%)
Chase Manhattan Grantor Trust, Series 1995A A
6.00%, 9/17/01 Estimated Average Life 7/97................... $ 384 $ 384
- -------------------------------------------------------------------------------
BANKS (3.8%)
Irving Bank Corp.
8.50%, 6/1/02, Callable 6/1/96............................... 405 408
NationsBank Corp.
6.625%, 1/15/98.............................................. 500 503
-------
911
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (8.2%)
*Ford Motor Credit Corp.-Medium Term Note
5.676%, 2/1/99, Callable 2/1/98............................... 1,000 1,002
Grand Metropolitan Investment Corp.-Medium Term Note
6.186%, 8/3/99............................................... 1,000 988
-------
1,990
- -------------------------------------------------------------------------------
INDUSTRIAL (15.7%)
B.P. America, Inc.
9.50%, 1/1/98................................................ 1,000 1,049
Cooper Industries, Inc.
7.76%, 11/5/97............................................... 1,000 1,022
Du Pont (E.I) de Nemours-Medium Term Note
8.35%, 5/15/98............................................... 1,000 1,038
Johnson & Johnson
8.00%, 9/1/98, Callable 9/1/96............................... 200 202
PHH Group, Inc.
8.00%, 1/1/97................................................ 500 507
-------
3,818
- -------------------------------------------------------------------------------
TRANSPORTATION (2.1%)
Seaboard System, Series 6
10.00%, 5/15/97.............................................. 500 520
- -------------------------------------------------------------------------------
UTILITIES (4.3%)
Louisville Gas & Electric Co.
5.625%, 6/1/96............................................... 1,050 1,050
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $8,645) 8,673
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (60.3%)
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (41.4%)
6.75%, 5/31/97................................................. $ 300 $ 303
5.875%, 7/31/97................................................ 1,000 1,000
6.50%, 8/15/97................................................. 500 504
5.50%, 9/30/97................................................. 400 398
6.125%, 5/15/98................................................ 1,000 1,001
5.875%, 8/15/98................................................ 1,900 1,890
5.00%, 2/15/99................................................. 750 728
6.875%, 8/31/99................................................ 1,000 1,017
7.125%, 9/30/99................................................ 1,000 1,025
6.25%, 5/31/00................................................. 1,250 1,244
5.50%, 12/31/00................................................ 500 482
5.25%, 1/31/01................................................. 500 478
-------
10,070
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY SECURITIES (9.0%)
Federal Farm Credit Bank
*5.91%, 6/24/96................................................. 500 500
*5.81%, 8/26/96................................................. 500 500
Federal Home Loan Bank
6.34%, 4/6/98.................................................. 150 150
7.76%, 9/19/01, Callable 9/19/97............................... 500 508
Guaranteed Trade Trust, Series 93-A
4.86%, 4/1/98 Estimated Average Life 7/97...................... 40 40
Tennessee Valley Authority
5.98%, 4/1/36, Putable 4/1/98.................................. 500 501
-------
2,199
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (3.6%)
Federal Home Loan Mortgage Corporation
REMIC Series 1484Q
5.00%, 1/15/23
Estimated Average Life 1/14.................................... 79 56
Federal National Mortgage Association
REMIC Series G-93 2D
6.00%, 10/25/12
Estimated Average Life 7/97.................................... 225 224
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(CONTINUED)
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED)
REMIC Series 90-4E
8.95%, 7/25/15
Estimated Average Life 6/96.................................. $ 120 $ 119
REMIC Series 92-49 E
7.00%, 7/25/17
Estimated Average Life 12/96................................. 112 112
REMIC Series 92-150G
6.75%, 9/25/18
Estimated Average Life 6/97.................................. 370 370
-------
881
- --------------------------------------------------------------------------------
MORTGAGE PASS-THROUGH (6.3%)
Federal Home Loan Mortgage Corp. Pool #G50213
6.50%, 11/1/99
Estimated Average Life 11/98................................ 1,539 1,528
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $14,736)................ 14,678
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.7%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.7%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $653, collateralized by $636
U.S. Treasury Notes
7.25%, due 8/15/04, valued at $666 (COST $653).............. 653 653
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.7%) (COST $24,034)....................... 24,004
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.3%)
- --------------------------------------------------------------------------------
Interest Receivable........................................... 392
Receivable from Investment Adviser............................ 1
Other Assets.................................................. 5
Payable for Portfolio Shares Redeemed......................... (37)
Dividends Payable............................................. (15)
Payable for Administrative Fees............................... (7)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (15)
-------
323
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
NET ASSETS (100%)
- -------------------------------------------------------------------------------
Applicable to 2,464,694 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)...................... $24,327
===============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE........... $ 9.87
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
* Variable/Floating rate security--rate disclose is as of April 30, 1996.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STERLING PARTNERS' PORTFOLIOS
STATEMENTS OF OPERATIONS
Six Months Ended April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
STERLING
STERLING STERLING PARTNERS'
PARTNERS' PARTNERS' SHORT-TERM
BALANCED EQUITY FIXED INCOME
(In Thousands) PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends........................... $ 336 $ 317 $ --
Interest............................ 908 30 773
- --------------------------------------------------------------------------------
Total Income....................... 1,244 347 773
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B....
Basic Fee.......................... $235 $125 $ 62
Less: Fees Waived.................. -- 235 (30) 95 (62) --
---- ---- -----
Administrative Fees--Note C......... 42 39 41
Audit Fees.......................... 7 7 7
Custodian Fees...................... 11 6 5
Registration and Filing Fees........ 4 8 7
Directors' Fees--Note F............. 2 1 1
Other Expenses...................... 11 10 9
- --------------------------------------------------------------------------------
Total Expenses..................... 312 166 70
Expense Offset--Note A.............. (3) (1) (1)
- --------------------------------------------------------------------------------
Net Expenses....................... 309 165 69
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME................ 935 182 704
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON INVEST-
MENTS............................... 1,809 1,430 (16)
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS....... 2,076 3,038 (220)
- --------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS....... 3,885 4,468 (236)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................... $4,820 $4,650 $ 468
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 2,584 $ 935
Net Realized Gain.................................. 3,427 1,809
Net Change in Unrealized Appreciation ............. 2,718 2,076
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 8,729 4,820
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (2,533) (1,039)
Net Realized Gain.................................. (1,844) (3,418)
- --------------------------------------------------------------------------------
Total Distributions............................... (4,377) (4,457)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 20,678 3,797
--In Lieu of Cash Distributions.................. 4,260 4,404
Redeemed........................................... (29,030) (9,119)
- --------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions...... (4,092) (918)
- --------------------------------------------------------------------------------
Total Increase (Decrease).......................... 260 (555)
Net Assets:
Beginning of Period................................ 64,673 64,933
- --------------------------------------------------------------------------------
End of Period (2).................................. $64,933 $64,378
================================================================================
(1)Shares Issued and Redeemed:
Shares Issued...................................... 1,856 322
In Lieu of Cash Distributions...................... 391 389
Shares Redeemed.................................... (2,580) (766)
- --------------------------------------------------------------------------------
(333) (55)
================================================================================
(2)Net Assets Consist of:
Paid in Capital.................................... $57,718 $56,800
Undistributed Net Investment Income................ 274 170
Accumulated Realized Net Gain...................... 3,402 1,793
Unrealized Appreciation............................ 3,539 5,615
- --------------------------------------------------------------------------------
$64,933 $64,378
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 430 $ 182
Net Realized Gain.................................. 2,238 1,430
Net Change in Unrealized Appreciation ............. 1,464 3,038
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 4,132 4,650
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (412) (190)
Net Realized Gain.................................. (1,076) (2,252)
- --------------------------------------------------------------------------------
Total Distributions............................... (1,488) (2,442)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 8,462 2,948
--In Lieu of Cash Distributions.................. 1,472 2,387
Redeemed........................................... (3,961) (4,531)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions...... 5,973 804
- --------------------------------------------------------------------------------
Total Increase..................................... 8,617 3,012
Net Assets:
Beginning of Period................................ 23,352 31,969
- --------------------------------------------------------------------------------
End of Period (2).................................. $31,969 $34,981
================================================================================
(1)Shares Issued and Redeemed:
Shares Issued...................................... 665 214
In Lieu of Cash Distributions...................... 125 183
Shares Redeemed.................................... (318) (329)
- --------------------------------------------------------------------------------
472 68
================================================================================
(2)Net Assets Consist of:
Paid in Capital.................................... $27,315 $28,119
Undistributed Net Investment Income................ 44 36
Accumulated Realized Net Gain...................... 2,237 1,415
Unrealized Appreciation............................ 2,373 5,411
- --------------------------------------------------------------------------------
$31,969 $34,981
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 1,335 $ 704
Net Realized Loss.................................. (146) (16)
Net Change in Unrealized Appreciation (Deprecia-
tion)............................................. 695 (220)
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 1,884 468
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (1,347) (704)
In Excess of Net Investment Income................. (7) --
- --------------------------------------------------------------------------------
Total Distributions............................... (1,354) (704)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 6,891 3,238
--In Lieu of Cash Distributions.................. 1,252 597
Redeemed........................................... (8,333) (3,994)
- --------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions...... (190) (159)
- --------------------------------------------------------------------------------
Total Increase (Decrease).......................... 340 (395)
Net Assets:
Beginning of Period................................ 24,382 24,722
- --------------------------------------------------------------------------------
End of Period (2).................................. $24,722 $24,327
================================================================================
(1)Shares Issued and Redeemed:
Shares Issued...................................... 701 325
In Lieu of Cash Distributions...................... 127 60
Shares Redeemed.................................... (850) (401)
- --------------------------------------------------------------------------------
(22) (16)
================================================================================
(2)Net Assets Consist of:
Paid in Capital.................................... $24,924 $24,765
Distributions in Excess of Net Investment Income... (7) (7)
Accumulated Realized Net Loss...................... (385) (401)
Unrealized Appreciation (Depreciation)............. 190 (30)
- --------------------------------------------------------------------------------
$24,722 $24,327
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
MARCH 15, YEARS ENDED SIX MONTHS
1991** TO OCTOBER 31, ENDED
OCTOBER 31, ---------------------------------- APRIL 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 10.26 $ 10.71 $ 11.51 $ 11.13 $ 11.86
- ------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.22+ 0.37 0.34 0.32 0.46 0.18
Net Realized &
Unrealized Gain
(Loss)................ 0.23 0.50 0.94 (0.25) 1.04 0.70
- ------------------------------------------------------------------------------------------
Total From Investment
Operations........... 0.45 0.87 1.28 0.07 1.50 0.88
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.19) (0.37) (0.32) (0.32) (0.45) (0.20)
Net Realized Gain...... (0.00) (0.05) (0.16) (0.13) (0.32) (0.67)
- ------------------------------------------------------------------------------------------
Total Distributions... (0.19) (0.42) (0.48) (0.45) (0.77) (0.87)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 10.26 $ 10.71 $ 11.51 $ 11.13 $ 11.86 $ 11.87
==========================================================================================
TOTAL RETURN............ 4.54%++ 8.65% 12.23% 0.66% 14.23% 7.83%
==========================================================================================
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $19,501 $39,129 $47,016 $64,673 $64,933 $64,378
Ratio of Expenses to
Average Net Assets..... 1.11%*+ 1.09% 0.99% 1.01% 0.96%# 0.99%*#
Ratio of Net Investment
Income to Average Net
Assets................. 3.85%*+ 3.52% 3.08% 3.05% 3.96% 2.99%*
Portfolio Turnover Rate. 40% 80% 49% 70% 130% 39%
Average Commission Rate
##..................... N/A N/A N/A N/A N/A $0.0725
- ------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $0.03
per share for the period ended October 31, 1991.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the period indicated.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be 0.96% and 0.98%* for the year ended October 31, 1995
and the six months ended April 30, 1996, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission per share it paid for trades on
which commissions were charged.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
MAY 15, 1991** OCTOBER 31, ENDED
TO OCTOBER 31, --------------------------------- APRIL 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.00 $10.29 $ 11.01 $ 12.39 $ 12.54 $ 13.69
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income+. 0.06 0.17 0.15 0.16 0.21 0.07
Net Realized &
Unrealized Gain....... 0.29 0.75 1.53 0.27 1.73 1.85
- -------------------------------------------------------------------------------------------
Total From Investment
Operations........... 0.35 0.92 1.68 0.43 1.94 1.92
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.06) (0.16) (0.16) (0.15) (0.20) (0.08)
Net Realized Gain...... -- (0.04) (0.14) (0.13) (0.59) (0.97)
- -------------------------------------------------------------------------------------------
Total Distributions... (0.06) (0.20) (0.30) (0.28) (0.79) (1.05)
- -------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $10.29 $11.01 $ 12.39 $ 12.54 $ 13.69 $ 14.56
===========================================================================================
TOTAL RETURN++.......... 3.51% 9.01% 15.46% 3.50% 16.61% 14.95%
===========================================================================================
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $2,515 $9,725 $15,982 $23,352 $31,969 $34,981
Ratio of Expenses to
Average Net Assets +... 1.11%* 1.04% 0.93% 0.99% 1.00%# 0.99%*#
Ratio of Net Investment
Income to Average Net
Assets +............... 1.43%* 1.73% 1.30% 1.34% 1.64% 1.09%*
Portfolio Turnover Rate. 24% 84% 55% 73% 135% 43%
Average Commission Rate
##..................... N/A N/A N/A N/A N/A $0.0696
- -------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser for the
period ended October 31, 1991, and the years ended October 31, 1992, 1993,
1994, 1995 and the six months ended April 30, 1996 of $0.18, $0.09, $0.06,
$0.04, $0.03 and $0.01 per share, respectively.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be 0.99% and 0.99%* for the year ended October 31, 1995
and the six months ended April 30, 1996, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FEBRUARY 10, YEARS ENDED SIX MONTHS
1992** TO OCTOBER 31, ENDED
OCTOBER 31, --------------------------- APRIL 30, 1996
1992 1993 1994 1995 (UNAUDITED)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 10.07 $ 10.12 $ 9.74 $ 9.96
- -----------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income+. 0.30 0.53 0.49 0.54 0.28
Net Realized &
Unrealized Gain (Loss)
on Investments........ 0.07 0.06 (0.38) 0.23 (0.09)
- -----------------------------------------------------------------------------------
Total From Investment
Operations........... 0.37 0.59 0.11 0.77 0.19
- -----------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.30) (0.53)++ (0.48) (0.55) (0.28)
In Excess of Net
Investment Income..... -- -- -- -- ## --
Net Realized Gain...... -- (0.01) -- -- --
Return of Capital...... -- -- (0.01) -- --
- -----------------------------------------------------------------------------------
Total Distributions... (0.30) (0.54) (0.49) (0.55) (0.28)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 10.07 $ 10.12 $ 9.74 $ 9.96 $ 9.87
===================================================================================
TOTAL RETURN+++......... 3.75% 5.98% 1.16% 8.16% 1.94%
===================================================================================
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $12,101 $20,256 $24,382 $24,722 $24,327
Ratio of Expenses to
Average Net Assets+.... 0.50%* 0.50% 0.53% 0.55%# 0.55%*#
Ratio of Net Investment
Income to Average Net
Assets+................ 5.00%* 5.24% 5.00% 5.55% 5.67%*
Portfolio Turnover Rate. 122% 78% 100% 58% 24%
- -----------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser for the
period ended October 31, 1992, and the years ended October 31, 1993, 1994,
1995 and the six months ended April 30, 1996 of $0.03, $0.05, $0.05, $0.04
and $0.02 per share, respectively.
++ Because of the differences between book and tax basis accounting,
approximately $0.025 of the Portfolio's distributions for the year ended
October 31, 1993 were return of capital for Federal income tax purposes.
+++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.55% and 0.54%* for the year ended October
31, 1995 and the six months ended April 30, 1996, respectively.
## Value is less than $0.01 per share.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The Sterling Partners' Balanced Portfolio,
Sterling Partners' Equity Portfolio and Sterling Partners' Short-Term Fixed
Income Portfolio (the "Portfolios"), portfolios of UAM Funds, Inc., began
operations on March 15, 1991, May 15, 1991 and February 10, 1992,
respectively. (The Portfolios are authorized to offer two separate classes of
shares--Institutional Class Shares and Institutional Service Class Shares. No
shares of the Portfolios' Institutional Service Class have been issued as of
the date of this report.) At April 30, 1996, the UAM Funds were comprised of
thirty-seven active portfolios. The financial statements of the remaining
portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the
Portfolios in the preparation of their 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: Equity securities listed on a securities exchange,
over-the-counter and unlisted securities for which market quotations are
readily available are valued at the last quoted sales price as of the close
of the exchange on the day the valuation is made or, if no sale occurred on
such day, at the mean of the bid and asked prices on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Fixed income securities are stated on the
basis of valuations provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities,
quotations from dealers, market transactions in comparable securities and
various relationships between securities in determining value. Short-term
investments that have remaining maturities of sixty days or less at time of
purchase are valued at amortized cost, if it approximates market value. The
value of other assets and securities for which no quotations are readily
available is determined in good faith at fair value using methods
determined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue 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.
Paid in capital and undistributed net investment income have been adjusted
for prior year permanent book-tax differences. Reclassifications arose
principally from differing book and tax treatments for paydown losses on
mortgage backed securities.
At April 30, 1996, cost of investments and unrealized appreciation
(depreciation) of investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
STERLING PARTNERS' PORTFOLIOS (000) (000) (000) (000)
----------------------------- ------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Balanced.................. $58,398 $6,422 $(807) $5,615
Equity.................... 29,513 5,718 (307) 5,411
Short-Term Fixed Income... 24,034 123 (153) (30)
</TABLE>
25
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
At October 31, 1995, the following Portfolio had available an approximate
capital loss carryover for Federal income tax purposes, which will expire
on the dates indicated:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------------
STERLING PARTNERS' PORTFOLIO 2002 2003 TOTAL
---------------------------- -------- -------- --------
<S> <C> <C> <C>
Short-Term Fixed Income........................... $239,000 $145,000 $384,000
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolios' 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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolios have 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.
4. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly
for the Sterling Partners' Equity and Sterling Partners' Balanced
Portfolios, and monthly for the Sterling Partners' Short-Term Fixed Income
Portfolio. Any realized net capital gains will normally be distributed
annually. All distributions are recorded on the ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments and permanent differences as
presented in Note A2.
5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Discounts and premiums
on securities purchased are amortized over their respective lives. Most
expenses of the UAM Funds can be directly attributed to a particular
portfolio. Expenses which cannot be directly attributed are apportioned
among the portfolios of the UAM Funds based on their relative net assets.
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 each Portfolio have been increased
to include expense offsets for custodian balance credits.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Sterling Capital Management Company (the "Adviser"), a wholly-owned subsidiary
of United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolios at a fee calculated at an annual rate of 0.75% of
average
26
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
daily net assets for the Sterling Partners' Balanced and Sterling Partners'
Equity Portfolios and 0.50% of average daily net assets for the Sterling
Partners' Short-Term Fixed Income Portfolio. The Adviser has voluntarily
agreed to waive a portion of its advisory fees and to assume expenses, if
necessary, in order to keep the Portfolios' total annual operating expenses,
after the effect of expense offset arrangements, from exceeding 1.11%, 0.99%
and 0.55% of average daily net assets, respectively.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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 0.06%, 0.06% and 0.04% of average
daily net assets for Sterling Partners' Balanced Portfolio, Sterling Partners'
Equity Portfolio and Sterling Partners' Short-Term Fixed Portfolio,
respectively. Also effective April 15, 1996, the Administrator has entered
into a Mutual Funds Service Agreement with Chase Global Funds Services Company
("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank, N.A., 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.
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $4,576, $3,831 and $3,341 from Sterling Partners' Balanced Portfolio,
Sterling Partners' Equity Portfolio and Sterling Partners' Short-Term Fixed
Portfolio, respectively, as Administrator.
D. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
27
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONCLUDED)
E. PURCHASES AND SALES: For the period ended April 30, 1996, purchases and
sales of investment securities other than long-term U.S. Government and Agency
securities and short-term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
STERLING PARTNERS' PORTFOLIOS (000) (000)
- ----------------------------- --------- -------
<S> <C> <C>
Balanced..................................................... $15,606 $19,044
Equity....................................................... 13,926 14,228
Short-Term Fixed Income...................................... 3,567 4,199
</TABLE>
Purchases and sales of long-term U.S. Government and Agency securities were
approximately $8,210,000 and $8,892,000, respectively, for the Sterling
Partners' Balanced Portfolio, and $3,861,000 and $1,504,000, respectively, for
the Sterling Partners' Short-Term Fixed Income Portfolio. There were no
purchases and sales of long-term U.S. Government securities for the Sterling
Partners' Equity Portfolio.
F. 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.
G. LINE OF CREDIT: The Portfolios, along with certain other portfolios of the
UAM Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, the percentage of total shares outstanding held
by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio were:
<TABLE>
<CAPTION>
NO. OF %
STERLING PARTNERS' PORTFOLIOS SHAREHOLDERS OWNERSHIP
- ----------------------------- ------------ ---------
<S> <C> <C>
Equity................................................... 2 25.9%
Short-Term Fixed Income.................................. 1 10.9%
</TABLE>
28
<PAGE>
- ------------------------------------------------------
UAM FUNDS
FMA SMALL COMPANY PORTFOLIO
- ------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer Peter M. Whitman, Jr.
Director, President Director
and Chairman
William H. Park
Mary Rudie Barneby Vice President and
Director and Assistant Treasurer
Executive Vice President
Karl O. Hartmann
John T. Bennett, Jr. Secretary
Director
Robert R. Flaherty
J. Edward Day Treasurer
Director
Harvey M. Rosen
Philip D. English Assistant Secretary
Director
William A. Humenuk
Director
- ------------------------------------------------------
INVESTMENT ADVISER
Fiduciary Management Associates, Inc.
55 West Monroe Street, Suite 2550
Chicago, IL 60603-5093
- ------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- ------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- ------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- ------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
This report has been prepared for shareholders and
may be distributed to others only if preceded or
accompanied by a current prospectus.
- ------------------------------------------------------
UAM FUNDS
FMA SMALL
COMPANY
PORTFOLIO
- ------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
May 8, 1996
Dear Shareholder:
During the six month period ended April 30, 1996, the FMA Small Company
Portfolio returned 15.23% versus the equivalent return of 18.42% by the
Russell 2000 Index.
Sentiment shifted rather dramatically during this time period. Initially,
large capitalization stocks outperformed the small sector. However, by April,
small issues were outdistancing large ones, as the markets began to turn
towards economy sensitive areas of the economy. Financials and interest
sensitive stocks were outpaced by cyclicals and commodity related sectors of
the market. Interestingly, the Russell 2000 Index is more leveraged to an
economy sensitive environment since it includes low weightings in consumer
staples and utilities stocks. Alternatively, the Russell 2000 Index has
material exposure to consumer cyclics, technology, and commodity basics,
groups that have been strong.
The Portfolio has been underweighted in technology during this time period,
which has contributed to performance pressures. However, buying points are
beginning to develop in companies that have strong franchises and earnings
power. We anticipate moving to a heavier investment in this sector in the
months ahead. We have increased our participation in the energy sector and
have reduced positions in interest sensitive stocks. These shifts over the
past two months have contributed to better tracking with the Russell 2000
Index. We anticipate further investment in consumer cyclics as buying
opportunities develop.
We believe the small issues will provide very competitive returns relative to
the large capitalization sector of the market over coming months. We are
positioned to participate in the upswing enjoyed by economy sensitive
industries. Our focus remains on the fundamental strength of each company's
earnings stream. We look forward to selecting stocks based on these
parameters.
Yours truly,
/s/ Patricia A. Falkowski (ART)
Patricia A. Falkowski Albert W. Gustafson
President & Chief Investment Officer Portfolio Manager
and Portfolio Manager
DEFINITION OF THE COMPARATIVE INDEX
The Russell 2000 Index is an unmanaged index composed of the 2000 smallest
stocks in the Russell 3000, a market value weighted index of the 3,000 largest
U.S. publicly traded companies.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers, total return for the Portfolio
would have been lower. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
1
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION> VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.9%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (7.2%)
*Litton Industries, Inc. ....................................... 14,200 $ 644
*Rohr, Inc. .................................................... 57,500 1,049
-------
1,693
- --------------------------------------------------------------------------------
AUTOMOTIVE (5.5%)
Borg-Warner Automotive, Inc. .................................. 25,000 953
Walbro Corp. .................................................. 16,400 353
-------
1,306
- --------------------------------------------------------------------------------
BANKS (10.1%)
First Commerce Corp. .......................................... 20,700 704
First Financial Corp. ......................................... 20,600 484
Regions Financial Corp. ....................................... 16,100 743
Southern National Corp. ....................................... 16,300 454
-------
2,385
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.4%)
J.M. Smucker, Co., Class B..................................... 28,700 574
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (5.8%)
Eagle River Interactive, Inc. ................................. 31,000 666
Meredith Corp. ................................................ 15,700 712
-------
1,378
- --------------------------------------------------------------------------------
BUILDING MATERIALS (5.4%)
*Nortek, Inc. .................................................. 50,000 738
Butler Manufacturing Co. ...................................... 15,100 544
-------
1,282
- --------------------------------------------------------------------------------
CHEMICALS (1.6%)
Arcadian Corp. ................................................ 19,200 384
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.2%)
*International Family Entertainment, Class B.................... 50,000 762
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (1.6%)
Diebold, Inc. ................................................. 10,000 385
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ENERGY (6.5%)
*Santa Fe Energy Resources, Inc. ............................. 92,100 $ 1,105
USX-Delhi Group.............................................. 30,000 416
--------
1,521
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (3.7%)
Investors Financial Services Corp. .......................... 40,500 866
- -------------------------------------------------------------------------------
HEALTH CARE (7.8%)
*Health Management Associates, Inc., Class A.................. 25,000 800
*Universal Health Services, Inc., Class B..................... 18,700 1,038
--------
1,838
- -------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (6.5%)
Falcon Products, Inc. ....................................... 35,000 569
Legget & Platt, Inc. ........................................ 37,400 963
--------
1,532
- -------------------------------------------------------------------------------
INSURANCE (5.1%)
SunAmerica, Inc. ............................................ 13,650 744
*Triad Guaranty, Inc. ........................................ 14,800 474
--------
1,218
- -------------------------------------------------------------------------------
MANUFACTURING (8.7%)
Bucyrus-Erie Co. ............................................ 24,000 237
Cincinnati Milacron, Inc. ................................... 15,000 396
Giddings & Lewis, Inc. ...................................... 45,000 827
Measurex Corp. .............................................. 20,400 592
--------
2,052
- -------------------------------------------------------------------------------
MINING (1.1%)
Battle Mountain Gold Co. .................................... 30,000 266
- -------------------------------------------------------------------------------
SAVINGS & LOAN (6.9%)
Greenpoint Financial Corp. .................................. 10,000 289
Leader Financial Corp. ...................................... 19,100 838
Standard Federal Bancorporation.............................. 12,600 499
--------
1,626
- -------------------------------------------------------------------------------
UTILITIES (3.8%)
Southwest Gas Corp. ......................................... 54,200 901
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $17,936)............................ 21,969
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION> FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (6.1%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.1%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $1,431, collateralized by $916
U.S. Treasury Bonds, 13.25%, due 5/15/14, valued at $1,460
(COST $1,431)................................................ $1,431 $ 1,431
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.0%) (COST $19,367)....................... 23,400
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.0%)
- -------------------------------------------------------------------------------
Cash.......................................................... 1
Receivable for Investments Sold............................... 538
Dividends Receivable.......................................... 24
Other Assets.................................................. 5
Payable for Investments Purchased............................. (292)
Payable for Investment Advisory Fees.......................... (7)
Payable for Administrative Fees............................... (6)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (22)
-------
240
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,777,432 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $23,640
===============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 13.30
===============================================================================
+ See Note A to Financial Statements.
* Non-Income Producing Security.
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
FMA SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
(In Thousands) 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends...................................................... $ 196
Interest....................................................... 46
- --------------------------------------------------------------------------------
Total Income.................................................. 242
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee..................................................... $81
Less: Fees Waived............................................. (34) 47
---
Administrative Fees--Note C.................................... 38
Printing Fees.................................................. 8
Custodian Fees................................................. 6
Directors' Fees--Note F........................................ 2
Other Expenses................................................. 15
- --------------------------------------------------------------------------------
Total Expenses................................................ 116
Expense Offset--Note A......................................... (1)
- --------------------------------------------------------------------------------
Net Expenses.................................................. 115
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME........................................... 127
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS................................ 1,143
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS............ 1,900
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS......................................... 3,043
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $3,170
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
FMA SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED
ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 135 $ 127
Net Realized Gain..................................... 2,532 1,143
Net Change in Unrealized Appreciation................. 121 1,900
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 2,788 3,170
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (133) (108)
Net Realized Gain..................................... (664) (2,530)
- -------------------------------------------------------------------------------
Total Distributions.................................. (797) (2,638)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 1,692 720
--In Lieu of Cash Distributions.................... 765 2,620
Redeemed.............................................. (3,162) (1,079)
- -------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions................................................ (705) 2,261
- -------------------------------------------------------------------------------
Total Increase........................................ 1,286 2,793
Net Assets:
Beginning of Period................................... 19,561 20,847
- -------------------------------------------------------------------------------
End of Period (2)..................................... $ 20,847 $ 23,640
===============================================================================
(1) Shares Issued and Redeemed:
Shares Issued......................................... 137 58
In Lieu of Cash Distributions......................... 69 224
Shares Redeemed....................................... (239) (85)
- -------------------------------------------------------------------------------
(33) 197
===============================================================================
(2) Net Assets Consist of:
Paid in Capital....................................... $ 16,172 $ 18,433
Undistributed Net Investment Income................... 10 29
Accumulated Net Realized Gain......................... 2,532 1,145
Unrealized Appreciation............................... 2,133 4,033
- -------------------------------------------------------------------------------
$ 20,847 $ 23,640
===============================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
JULY 31, ENDED
1991** TO YEARS ENDED OCTOBER 31, APRIL 30,
OCTOBER 31, ----------------------------------- 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $10.00 $ 10.54 $ 10.36 $ 14.24 $ 12.13 $ 13.19
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)+............... 0.04 (0.01) 0.02 0.01 0.08 0.07
Net Realized &
Unrealized Gain
(Loss)................ 0.53 (0.14) 3.88 0.50 1.47 1.70
- ----------------------------------------------------------------------------------------
Total From Investment
Operations........... 0.57 (0.15) 3.90 0.51 1.55 1.77
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.. (0.03) (0.01) (0.02) -- (0.08) (0.06)
Net Realized Gain...... -- (0.01) -- (2.62) (0.41) (1.60)
Return of Capital...... -- (0.01) -- -- -- --
- ----------------------------------------------------------------------------------------
Total Distributions... (0.03) (0.03) (0.02) (2.62) (0.49) (1.66)
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $10.54 $ 10.36 $ 14.24 $ 12.13 $ 13.19 $ 13.30
========================================================================================
TOTAL RETURN++.......... 5.71% (1.48)% 37.65% 4.54% 13.57% 15.23%
========================================================================================
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $9,834 $18,071 $18,569 $19,561 $20,847 $23,640
Ratio of Expenses to
Average Net Assets+.... 1.03%* 1.03% 1.03% 1.03% 1.03%# 1.04%*#
Ratio of Net Investment
Income (Loss) to
Average Net Assets+.... 2.14%* (0.07)% 0.14% 0.06% 0.66% 1.14%*
Portfolio Turnover Rate. 7% 134% 163% 121% 170% 58%
Average Commission
Rate ##................ N/A N/A N/A N/A N/A $0.0600
- ----------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser for the
period ended October 31, 1991, for the years ended October 31, 1992, 1993,
1994, 1995 and for the six months ended April 30, 1996 of $0.04, $0.003,
$0.03, $0.03, $0.04 and $0.02 per share, respectively.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 1.03% and 1.03*%, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds"), were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The FMA Small Company Portfolio (the
"Portfolio"), a portfolio of UAM Funds, Inc., began operations on July 31,
1991. At April 30, 1996, the UAM Funds were comprised of thirty-seven active
portfolios. The financial statements of the remaining portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid price on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid price. 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 is 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 continue 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.
Paid in capital, undistributed net investment income and accumulated net
realized gain have been adjusted for prior year permanent book-tax
differences.
At April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $19,366,000. Net unrealized appreciation for
Federal income tax purposes aggregated approximately $4,033,000, of which
$4,143,000 related to appreciated securities and $110,000 related to
depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market 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.
8
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly.
Any realized net capital gains will normally be distributed annually. All
distributions are recorded on the 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.
5. OTHER: Security transactions are accounted for on the 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.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Fiduciary Management Associates, Inc. (the "Adviser"), a wholly-owned
subsidiary of United Asset Management Corporation ("UAM"), provides investment
advisory services to the Portfolio for a fee calculated at an annual rate of
0.75% 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 1.03% of average daily net assets.
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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
9
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $3,320 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases and sales of approximately $12,109,000 and $12,410,000,
respectively, of investment securities other than long-term U.S. Government
and Agency securities and short-term securities. There were no purchases and
sales of long-term U.S. Government and Agency securities.
F. 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 UAM Funds and AEW, and reimbursement of expenses
incurred in attending Board meetings.
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, 45.3% of total shares outstanding were held by
three record shareholders owning 10% or greater of the aggregate total shares
outstanding.
10
<PAGE>
- --------------------------------------------------------------------------------
UAM FUNDS
SIRACH PORTFOLIOS
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Mary Rudie Barneby Peter M. Whitman, Jr.
Director and Director
Executive Vice
President
John T. Bennett, Jr. William H. Park
Director Vice President and
Assistant Treasurer
J. Edward Day Karl O. Hartmann
Director Secretary
Philip D. English Robert R. Flaherty
Director Treasurer
Harvey M. Rosen
Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Sirach Capital Management, Inc.
3323 One Union Square
Seattle, Washington 98101
- --------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- --------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
UAM FUNDS
SIRACH
PORTFOLIOS
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
UAM FUNDS SIRACH PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Sirach Special Equity Portfolio........................................... 5
Sirach Growth Portfolio................................................... 10
Sirach Strategic Balanced Portfolio....................................... 15
Sirach Fixed Income Portfolio............................................. 22
Sirach Short-Term Reserves Portfolio...................................... 25
Statements of Operations.................................................... 27
Statement of Changes in Net Assets
Sirach Special Equity Portfolio........................................... 28
Sirach Growth Portfolio................................................... 29
Sirach Strategic Balanced Portfolio....................................... 30
Sirach Fixed Income Portfolio............................................. 31
Sirach Short-Term Reserves Portfolio...................................... 32
Financial Highlights
Sirach Special Equity Portfolio........................................... 33
Sirach Growth Portfolio................................................... 34
Sirach Strategic Balanced Portfolio....................................... 35
Sirach Fixed Income Portfolio............................................. 36
Sirach Short-Term Reserves Portfolio...................................... 37
Notes to Financial Statements............................................... 38
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholders:
The first six months of fiscal 1996, ending April 30, 1996 provided mixed
results for participants in the capital markets. While equity markets were
experiencing broad strength, fixed income markets had a more difficult time.
There was much consternation regarding the economy during the period, with
market participants' expectations waffling between clear signs of softness and
impending strength. Though the GDP Price Deflator and CPI have remained
relatively subdued, strength in key commodity indexes and strong job growth in
early 1996 have caused inflation fears to rise and thus impacted interest
rates negatively.
Money flows into equity mutual fund remain strong (at record levels),
providing demand for stocks and helping to provide fuel for the stock market.
First quarter operating earnings for the S&P 500 are up 9% with 85% of
companies having reported. While this is a respectable showing, it appears
earnings peaked in the second quarter of 1995. We believe this slowdown in
corporate earnings will make those companies able to deliver on earnings
expectations more attractive. Our equity selection process seeks out such
companies.
SIRACH SPECIAL EQUITY PORTFOLIO
Small capitalization stocks have finally started to outperform after nearly
two years of relative underperformance. In the first half of fiscal 1996 the
small cap Russell 2000 Index returned 18.42% versus the S&P 500 ("S&P 500")
Index return of 13.76%. The S&P 400 Midcap Index lagged up 13.89% with the
main challenge to small cap outperformance surprisingly coming from the Dow
Industrials, which returned 18.46%. The Sirach Special Equity Portfolio
(Institutional Class Shares) ended the first half of fiscal 1996 up a healthy
23.62%. The Sirach Special Equity Portfolio (Institutional Service Class
Shares) had a total return of 8.71% for the period since inception (March 22,
1996) through April 30, 1996. The classes had a total of $542 million in net
assets as of April 30, 1996.
Technology (which includes Computer Software, Electronics, Office Equipment,
Technology and Tele-communications) continues to be one of the Portfolio's
largest sectors and the biggest contributor to the Portfolio's relative
outperformance. Though Technology as a percent of the Portfolio's total
holdings tends to remain at about the same level, major industry changes
within Technology occurred over the past six months. We recognized early that
supply was catching up with demand in several commodity areas of Technology
and shifted out of those companies and into more value added, true secular
growth technology companies, which dramatically helped the Portfolio's
performance.
Our allocation to the Healthcare sector (which includes Healthcare and
Pharmaceuticals) has steadily increased, and has had a major positive impact
on the Portfolio's performance. We have focused on smaller companies that are
bringing exciting new products to the marketplace.
After hurting performance in the first quarter, the Consumer Cyclical sector
(which includes Lodging & Restaurants, Retail and Services) rebounded sharply
in April on strong earnings reports and economic reports suggesting a pickup
in the U.S. economy. News of a stronger economy helped the Portfolio's Capital
Equipment sector and several stocks in the Services sector. The Portfolio's
low weightings in Finance and Utilities, after
1
<PAGE>
hurting performance in 1995, actually helped performance towards the end of
the first half with the reversal in the generally downward trend of interest
rates.
The tremendous volatility and quick sector rotation witnessed in the first
quarter continued in the second quarter and have emphasized the importance of
selective stock picking. Sirach's strong quantitative and technical
disciplines include focusing on only those companies with superior earnings
growth characteristics.
The not uncommon mid cycle correction in the small/mid cap performance cycle
we have experienced since the beginning of 1994 appears to have ended. If this
cycle is similar to past small/midcap performance cycles the strongest period
of relative outperformance is close at hand.
SIRACH GROWTH PORTFOLIO
The Sirach Growth Portfolio ended the first six months of fiscal 1996 with net
assets of $128.3 million. This was a strong period for equities all along the
capitalization spectrum. The Sirach Growth Portfolio (Institutional Class
Shares) had a solid return of 14.76%, comparing nicely with the large cap S&P
500 which returned 13.76%. The Sirach Growth Portfolio (Institutional Service
Class Shares) had a total return of 1.41% for the period since inception
(March 22, 1996) through April 30, 1996. Mid cap and small cap stocks,
represented here by the S&P 400 Midcap Index and the Russell 2000 Index,
returned 13.89% and 18.42% respectively. Small and mid cap stocks were
especially strong the last three months and may be ending a nearly two year
period of weaker relative performance versus large cap companies.
The Healthcare sector supplanted Finance (which includes Banks, Financial
Services, and Insurance) as the largest weighting in the Portfolio during the
period. We were attracted to several companies that provide medical supplies
and specialty medical products. Additionally, we identified medical care
providers that are benefiting from a consolidating industry. Each of these
companies is medium sized and offers dynamic earnings prospects. Though
Finance remains highly weighted in the Portfolio, we did slightly reduce
weightings by selling the Portfolio's weaker holdings in the regional bank and
insurance groups. These were companies with declining likelihood for positive
earnings surprises and lagging earnings growth prospects relative to other
financial holdings. The recent rise in interest rates has caused some pressure
on this sector. We continue to monitor the progress of the Portfolio's
holdings and seek to own those companies exhibiting the strongest earnings
prospects. Along with Capital Goods (which includes Aerospace & Defense and
Capital Equipment) and Technology, Finance was one of the strongest
contributors to first half performance.
We have been pleased with the contribution from the Portfolio's holdings in
Technology. We have concentrated the Portfolio's positions in software and
computer services throughout the six month period and have increased exposure
to semiconductors only more recently. The first three months of the period
were quite difficult for technology companies, especially the semiconductor
group as they faced supply/demand pressures which raised pricing and margin
issues. The Portfolio's holdings performed well relative to the S&P 500. We
have identified certain semiconductor firms filling special niches that are
not currently faced with supply/demand concerns.
In terms of reductions in allocation within the Portfolio during the past six
months, Consumer Cyclicals and Energy received the most attention. In the
Consumer Cyclical sector we reduced the Portfolio's holdings in the retailing
area, taking profits in most cases and concentrating the Portfolio's remaining
positions in retailers in which we have higher confidence of their ability to
deliver earnings. In the Energy area we moved away from
2
<PAGE>
large oil refiners to more specialized oil service companies which are less
reliant on cost-cutting and the price of oil to show solid earnings gains.
We continue to apply our stock selection disciplines to identify companies
offering strong earnings dynamics.
SIRACH STRATEGIC BALANCED PORTFOLIO
The Sirach Strategic Balanced Portfolio had net assets of $91 million on April
30, 1996. Asset allocation was 46% common stocks, 48% fixed income and the
remainder in cash equivalents.
The common stock characteristics for the Sirach Strategic Balanced Portfolio
are identical to the Sirach Growth Portfolio, while the bond characteristics
match the Sirach Fixed Income Portfolio.
SIRACH FIXED INCOME PORTFOLIO
The U.S. economy has gradually strengthened in 1996 after a mild slowdown last
year. Labor demand has accelerated with non-farm payrolls up an average
166,000 per month for the first four months of 1996 versus 150,000 per month
for all of 1995. Early signs of wage inflation have surfaced with average
hourly earnings up 7 cents in April versus 2 cents in March. Demand in the
housing and automobile sectors has been strong and consumer confidence surged
in April.
During the past six months, a modest economic rebound was generally expected.
The economy was restrained in late 1995 by two government shutdowns and poor
weather. Indeed, consumer and real government spending did surge 3.5% and
6.7%, respectfully, in the first quarter. Unfortunately for fixed income
investors, the growth has been even more broadly based and potentially
sustainable. The inflation implications of above trend growth have weighed
heavily on the fixed income market as yields or have already risen 100 basis
points in 1996. The Federal Reserve has likely moved to a neutral stance on
short term rates while awaiting more economic data. The Lehman Brothers
Aggregate Bond Index returned 0.53% for the six months ended April 30, 1996.
The Sirach Fixed Income Portfolio ended the same six month period with a
(0.65)% return and net assets of $18.6 million.
Late in the fiscal first quarter, the Portfolio benefited from an overweight
in corporates as spreads in that sector contracted. The Portfolio also
benefited from a longer than market duration as the economy weakened and rates
declined. The excess duration became a drag on performance in the fiscal
second quarter with the strengthening economy and dramatic rise in yields.
Also, weakness in the media/cable sector in late April adversely affected the
Portfolio. The Portfolio has a 7% weighting in this sector. Positions were
maintained in the mortgage and asset-backed sectors to supplement portfolio
yield. A slight underweight in intermediate maturities was a modest benefit to
performance as these securities experienced the greatest increase in yields.
In the current environment, the Portfolio will continue to underweight
intermediate maturities in favor of cash, floating rate notes and long term
bonds. Portfolio duration is currently 110% of the Lehman Brothers Aggregate
Bond Index, down from a high of 120%. Duration will be reduced further on
market strength. The Portfolio will maintain its overweighting in the
corporate and asset-backed sectors and will be adding selectively to
mortgages. We intend to keep the average quality of the Portfolio relatively
high.
3
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
The Sirach Short-Term Reserves Portfolio had net assets of $16 million on
April 30, 1996. This Portfolio is designed to provide a consistent and
conservative return as shown in its total return performance for the six
months ended April 30, 1996, which returned 2.53%.
The quality of the Portfolio was very high throughout the six month period
with an average 95% weighting in U.S. Government and Agency issues. The
average maturity on April 30, 1996 was 100 days, down from a high of 130 days
during the period. We intend to shorten average maturity further given the
stronger economy and the potential change in monetary policy. We intend to
keep the average quality of the Portfolio relatively high.
Sincerely,
SIRACH CAPITAL MANAGEMENT, INC.
DEFINITIONS OF THE COMPARATIVE INDICES
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Russell 2000 Index is an unmanaged index composed of the 2,000 smallest
stocks in the Russell 3000, a market value weighted index of the 3,000 largest
U.S. publicly-traded companies.
The S&P 400 Midcap Index is a capitalization-weighted index that measures the
performance of the mid-range sector of the U.S. stock market where the median
market capitalization is approximately $700 million.
The Lehman Brothers Aggregate Bond Index is an unmanaged fixed income market
value-weighted index that combines the Lehman Brothers Government/Corporate
Index and the Lehman Brothers Mortgage-Backed Securities Index. 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 $100 million for U.S.
Government issues and $25 million for others.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip
stocks that are generally the leaders in their industry and are listed on the
New York Stock Exchange.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the adviser did not have temporary fee waivers and did not assume expenses on
behalf of the Sirach Fixed Income and Short-Term Reserves Portfolios, the
total return for both portfolios would have been lower. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
4
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (90.7%)
- --------------------------------------------------------------------------------
BANKS (0.8%)
Peoples Heritage Financial Group, Inc. ...................... 208,800 $ 4,385
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (0.1%)
Redhook Ale Brewery, Inc. ................................... 11,700 276
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (6.2%)
Duriron Co., Inc. ........................................... 41,600 1,092
*Sanifill, Inc. .............................................. 168,400 7,304
*Tetra Tech, Inc. ............................................ 269,800 5,936
*U.S. Filter Corp. ........................................... 237,000 7,288
United Waste Systems, Inc. .................................. 217,200 12,027
--------
33,647
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE (7.8%)
*Accent Software International Ltd. .......................... 112,100 4,925
Astea International, Inc. ................................... 30,100 888
*Cognos, Inc. ................................................ 146,400 9,864
Excite, Inc. ................................................ 111,800 1,908
GT Interactive Software Corp. ............................... 376,200 7,289
*Inso Corp. .................................................. 10,500 570
*Meridian Data, Inc. ......................................... 139,500 2,415
*Microcom, Inc. .............................................. 17,000 416
Natural Microsystems Corp. .................................. 78,600 2,928
*Structural Dynamics Research Corp. .......................... 252,200 8,039
*TCSI Corp. .................................................. 85,500 2,822
*Tecnomatix Technologies Ltd. ................................ 14,000 257
--------
42,321
- --------------------------------------------------------------------------------
ELECTRONICS (1.9%)
*Adaptec, Inc. ............................................... 65,100 3,751
*International Rectifier Corp. ............................... 280,800 6,318
--------
10,069
- --------------------------------------------------------------------------------
ENERGY (0.8%)
*Input/Output, Inc. .......................................... 131,600 4,574
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (3.8%)
*Envoy Corp. ................................................. 186,300 $ 5,344
Imperial Credit Industries, Inc. ............................ 215,530 5,658
North American Mortgage Co. ................................. 97,900 1,652
The Money Store, Inc. ....................................... 308,100 7,818
--------
20,472
- --------------------------------------------------------------------------------
HEALTH CARE (17.8%)
*Coherent, Inc. .............................................. 176,000 9,449
Curative Technologies, Inc. ................................. 277,400 6,155
Cytyc Corp. ................................................. 62,800 1,370
*Gilead Sciences, Inc. ....................................... 155,400 4,779
*HealthCare COMPARE Corp. .................................... 85,600 4,039
Heartport, Inc. ............................................. 70,000 2,503
Jones Medical Industries, Inc. .............................. 43,200 2,257
MedPartners/Mullikin, Inc. .................................. 264,174 7,628
*Nellcor Puritan Bennett, Inc. ............................... 88,452 4,334
*OrNda Healthcorp. ........................................... 222,200 6,111
*PhyCor, Inc. ................................................ 194,225 9,541
*PhyMatrix Corp. ............................................. 173,400 3,338
*Physician Sales & Service, Inc. ............................. 228,300 6,250
*Renal Treatment Centers, Inc. ............................... 174,600 5,063
*Respironics, Inc. ........................................... 223,900 4,842
*Sofamor Danek Group, Inc. ................................... 148,000 4,847
*Steris Corp. ................................................ 178,900 5,792
Total Renal Care Holdings, Inc. ............................. 210,400 8,048
--------
96,346
- --------------------------------------------------------------------------------
INSURANCE (3.5%)
American Bankers Insurance Group, Inc. ...................... 192,900 7,595
*American Travellers Corp. ................................... 213,750 4,208
Penncorp Financial Group, Inc. .............................. 46,700 1,430
Reliastar Financial Corp. ................................... 56,000 2,443
United Dental Care, Inc. .................................... 20,000 790
Vesta Insurance Group, Inc. ................................. 71,600 2,300
--------
18,766
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (2.8%)
La Quinta Motor Inns, Inc. .................................. 247,600 $ 7,242
*Outback Steakhouse, Inc. .................................... 127,800 5,104
*Papa John's International, Inc. ............................. 64,200 3,162
--------
15,508
- --------------------------------------------------------------------------------
PHARMACEUTICALS (6.1%)
*Biochem Pharmaceuticals, Inc. ............................... 135,600 6,161
*Chronimed, Inc. ............................................. 231,900 5,769
*Dura Pharmaceuticals, Inc. .................................. 75,500 4,068
*Express Scripts, Inc., Class A............................... 111,600 5,454
*Watson Pharmaceuticals, Inc. ................................ 244,600 11,680
--------
33,132
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (0.5%)
Sunstone Hotel Investors, Inc. .............................. 254,400 2,544
- --------------------------------------------------------------------------------
RETAIL (8.8%)
CDW Computer Centers, Inc. .................................. 144,300 11,147
*Corporate Express, Inc. ..................................... 304,400 11,396
Danka Business Systems ADR................................... 75,100 3,605
*Eckerd Corp. ................................................ 109,500 5,229
US Office Products Co. ...................................... 233,600 8,410
*Viking Office Products, Inc. ................................ 134,000 7,981
--------
47,768
- --------------------------------------------------------------------------------
SERVICES (6.0%)
*Accustaff, Inc. ............................................. 139,000 4,144
Data Processing Resources Corp. ............................. 91,600 2,279
*META Group, Inc. ............................................ 132,800 3,918
Paychex, Inc. ............................................... 115,500 7,811
*Robert Half International, Inc. ............................. 214,400 12,327
Sitel Corp. ................................................. 40,800 2,275
--------
32,754
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
TECHNOLOGY (13.0%)
*Auspex Systems, Inc. ........................................ 221,100 $ 4,256
*Cadence Design Systems, Inc. ................................ 152,900 7,989
CBT Group plc ADR............................................ 74,500 5,466
*Computer Horizons Corp. ..................................... 123,300 6,211
Enterprise Systems, Inc. .................................... 112,000 3,738
Linear Technology, Inc. ..................................... 91,700 3,164
*Macromedia, Inc. ............................................ 187,300 7,059
*McAfee Associates, Inc. ..................................... 175,600 10,777
*Medic Computer Systems, Inc. ................................ 71,900 6,732
*Network General Corp. ....................................... 134,900 5,969
*Parametric Technology Co. ................................... 193,800 7,789
Planning Sciences International plc.......................... 1,800 43
*Veritas Software Corp. ...................................... 27,900 1,276
--------
70,469
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (7.6%)
*ADC Telecommunications, Inc. ................................ 178,500 7,452
*Brightpoint, Inc. ........................................... 25,100 590
*Cable Design Technologies Corp. ............................. 134,200 4,395
*Comverse Technology, Inc. ................................... 290,600 6,829
ECI Telecommunications Ltd. ................................. 251,200 6,594
HBO & Co. ................................................... 73,700 8,770
*Network Equipment Technologies, Inc. ........................ 107,000 2,729
Saville Systems Ireland plc.................................. 115,000 3,155
Spectralink Corp. ........................................... 83,600 789
--------
41,303
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (1.5%)
*Nautica Enterprises, Inc. ................................... 178,450 8,253
- --------------------------------------------------------------------------------
TRANSPORTATION (1.7%)
Atlantic Coast Airlines, Inc. ............................... 222,800 3,300
*Mesa Airlines, Inc. ......................................... 279,100 3,436
Reno Air, Inc. .............................................. 204,500 2,595
--------
9,331
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $351,949) 491,918
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (7.7%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.7%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $41,644, collateralized by
$40,545 U.S. Treasury Bonds 7.25%, due 8/15/04, valued at
$42,471 (COST $41,638)..................................... $41,638 $ 41,638
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.4%) (COST $393,587).................... 533,556
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.6%)
- -------------------------------------------------------------------------------
Cash........................................................ 1
Receivable for Investments Sold............................. 14,915
Dividends Receivable........................................ 97
Receivable for Portfolio Shares Sold........................ 38
Interest Receivable......................................... 6
Other Assets................................................ 7
Payable for Investments Purchased........................... (5,946)
Payable for Investment Advisory Fees........................ (299)
Payable for Administrative Fees............................. (55)
Payable for Directors' Fees................................. (2)
Other Liabilities........................................... (82)
--------
8,680
- -------------------------------------------------------------------------------
NET ASSETS (100%)............................................ $542,236
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
Net Assets applicable to 30,156,389 outstanding $0.001 par
value Institutional Class shares (authorized 50,000,000
shares).................................................... $542,231
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE..... $ 17.98
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
- -------------------------------------------------------------------------------
Net Assets applicable to 285 outstanding $0.001 par value
Institutional Service Class shares (authorized 10,000,000
shares).................................................... $ 5
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE..... $ 17.98
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
ADR--American Depositary Receipt.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (79.2%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.2%)
Rockwell International Corp. ................................. 27,400 $ 1,603
- --------------------------------------------------------------------------------
BANKS (5.5%)
BankAmerica Corp. ............................................ 30,500 2,310
Bank of Boston Corp. ......................................... 25,100 1,214
Citicorp Bank................................................. 15,199 1,197
First Bank System, Inc. ...................................... 15,700 946
Washington Federal, Inc. ..................................... 66,284 1,404
--------
7,071
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.0%)
ConAgra, Inc. ................................................ 28,100 1,085
CPC International, Inc. ...................................... 10,500 726
PepsiCo, Inc. ................................................ 33,200 2,108
Sysco Corp. .................................................. 37,100 1,192
--------
5,111
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (1.6%)
AlliedSignal, Inc. ........................................... 17,800 1,035
Case Corp. ................................................... 20,300 1,025
--------
2,060
- --------------------------------------------------------------------------------
CHEMICALS (4.8%)
Eastman Chemical Co. ......................................... 14,300 962
Hercules, Inc. ............................................... 20,000 1,210
IMC Global, Inc. ............................................. 39,700 1,464
Potash Corp. of Saskatchewan, Inc. ........................... 14,200 1,001
Praxair, Inc. ................................................ 39,300 1,518
--------
6,155
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (1.6%)
Rite Aid Corp. ............................................... 70,000 2,074
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.9%)
Gillette Co. ................................................. 13,600 735
Procter & Gamble Co. ......................................... 19,600 1,655
--------
2,390
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ELECTRONICS (5.7%)
*Adaptec, Inc. ............................................... 21,000 $ 1,210
*Analog Devices, Inc. ........................................ 37,500 965
*Atmel Corp. ................................................. 33,000 1,318
General Electric Co. ........................................ 33,300 2,581
Thermo Electron Corp. ....................................... 20,500 1,263
--------
7,337
- --------------------------------------------------------------------------------
ENERGY (3.1%)
Halliburton Co. ............................................. 16,800 964
Tidewater, Inc. ............................................. 26,000 1,105
Williams Cos, Inc. .......................................... 36,300 1,856
--------
3,925
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (4.6%)
Capital One Financial Corp. ................................. 51,300 1,513
MBNA Corp. .................................................. 45,900 1,303
MGIC Investment Corp. ....................................... 27,900 1,514
SunAmerica, Inc. ............................................ 28,500 1,553
--------
5,883
- --------------------------------------------------------------------------------
HEALTH CARE (9.2%)
*Boston Scientific Corp. ..................................... 29,500 1,272
Cardinal Health, Inc. ....................................... 27,200 1,707
Columbia/HCA Healthcare Corp. ............................... 21,800 1,158
Guidant Corp. ............................................... 25,000 1,404
*HealthCare COMPARE Corp. .................................... 18,200 859
*Healthsouth Rehabilitation Corp. ............................ 34,000 1,262
*Nellcor Puritan Bennett, Inc. ............................... 37,000 1,813
*Tenent Healthcare Corp. ..................................... 69,500 1,425
*Vencor, Inc. ................................................ 25,500 861
--------
11,761
- --------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.1%)
Black & Decker Corp. ........................................ 35,400 1,425
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INSURANCE (2.9%)
Aflac, Inc. ................................................. 46,150 $ 1,431
American International Group, Inc. .......................... 25,000 2,284
--------
3,715
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.6%)
Marriott International, Inc. ................................ 27,000 1,316
McDonald's Corp. ............................................ 15,900 761
--------
2,077
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (1.0%)
Hewlett-Packard Co. ......................................... 12,100 1,281
- --------------------------------------------------------------------------------
PHARMACEUTICALS (8.0%)
Abbott Laboratories.......................................... 35,451 1,440
*Amgen, Inc. ................................................. 40,900 2,349
Johnson & Johnson............................................ 17,500 1,619
Merck & Co., Inc. ........................................... 31,800 1,924
Pfizer, Inc. ................................................ 18,900 1,302
Schering-Plough Corp. ....................................... 27,700 1,589
--------
10,223
- --------------------------------------------------------------------------------
RETAIL (6.2%)
*Corporate Express, Inc. ..................................... 24,000 898
*Eckerd Corp. ................................................ 37,300 1,781
*Price/Costco, Inc. .......................................... 106,100 2,009
*Safeway, Inc. ............................................... 70,000 2,363
Walgreen Co. ................................................ 29,500 944
--------
7,995
- --------------------------------------------------------------------------------
SERVICES (3.9%)
Equifax, Inc. ............................................... 54,500 1,335
First Data Corp. ............................................ 14,750 1,121
Paychex, Inc. ............................................... 16,400 1,110
*United Waste Systems, Inc. .................................. 26,500 1,467
--------
5,033
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TECHNOLOGY (4.1%)
General Motors Corp., Class E............................... 13,500 $ 761
*Microsoft Corp., Inc. ...................................... 14,500 1,641
*Oracle Systems Corp. ....................................... 50,250 1,693
*Sun Microsystems, Inc. ..................................... 22,100 1,198
--------
5,293
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.4%)
*WorldCom, Inc. ............................................. 37,300 1,751
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (1.3%)
*Nautica Enterprises, Inc. .................................. 35,500 1,642
- -------------------------------------------------------------------------------
TRANSPORTATION (2.8%)
*AMR Corp. .................................................. 8,000 714
Delta Air Lines, Inc. ...................................... 22,700 1,824
Illinois Central Corp. ..................................... 37,050 1,112
--------
3,650
- -------------------------------------------------------------------------------
UTILITIES (1.7%)
Sprint Corp. ............................................... 50,000 2,106
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $85,857)........................... 101,561
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (19.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (19.8%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96,due
5/1/96, collateralized by $22,085 U.S. Treasury Bonds,
8.50%, due 2/15/20, valued at $25,977 (COST $25,467)....... $25,467 25,467
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.0%) (COST $111,324).................... 127,028
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (1.0%)
- -------------------------------------------------------------------------------
Cash................................................................ $ 1
Receivable for Investments Sold..................................... 3,315
Dividends Receivable................................................ 51
Receivable for Portfolio Shares Sold................................ 15
Interest Receivable................................................. 3
Other Assets........................................................ 2
Payable for Investments Purchased................................... (2,041)
Payable for Investment Advisory Fees................................ (67)
Payable for Administrative Fees..................................... (15)
Payable for Directors' Fees......................................... (1)
Other Liabilities................................................... (6)
--------
1,257
- -------------------------------------------------------------------------------
NET ASSETS (100%).................................................... $128,285
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
- -------------------------------------------------------------------------------
Net Assets applicable to 9,839,111 outstanding $0.001 par value In-
stitutional Class shares (authorized 25,000,000 shares)............ $127,515
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE............. $ 12.96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
- -------------------------------------------------------------------------------
Net Assets applicable to 59,441 outstanding $0.001 par value Insti-
tutional Service Class shares (authorized 10,000,000 shares)....... $ 770
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE............. $ 12.96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Non-Income Producing Security.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (46.0%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.5%)
Rockwell International Corp. ................................... 8,000 $ 468
- --------------------------------------------------------------------------------
BANKS (3.8%)
BankAmerica Corp. .............................................. 13,500 1,023
Bank of Boston Corp. ........................................... 14,400 697
Citicorp Bank................................................... 7,551 595
First Bank System, Inc. ........................................ 8,500 511
Washington Federal, Inc. ....................................... 31,551 668
-------
3,494
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (1.9%)
ConAgra, Inc. .................................................. 11,750 454
CPC International, Inc. ........................................ 4,000 277
PepsiCo, Inc. .................................................. 9,500 603
Sysco Corp. .................................................... 11,000 353
-------
1,687
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (0.9%)
AlliedSignal, Inc. ............................................. 7,500 436
Case Corp. ..................................................... 7,500 379
-------
815
- --------------------------------------------------------------------------------
CHEMICALS (2.9%)
Eastman Chemical Co. ........................................... 6,000 404
Hercules, Inc. ................................................. 9,500 575
IMC Global, Inc. ............................................... 16,600 612
Potash Corp. of Saskatchewan, Inc. ............................. 6,650 469
Praxair, Inc. .................................................. 14,950 577
-------
2,637
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (0.9%)
Rite Aid Corp. ................................................. 29,000 859
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.4%)
Gillette Co. ................................................... 9,600 518
Procter & Gamble Co. ........................................... 8,550 723
-------
1,241
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ELECTRONICS (3.1%)
*Adaptec, Inc. ................................................. 9,000 $ 519
*Analog Devices, Inc. .......................................... 15,600 402
*Atmel Corp. ................................................... 13,500 539
General Electric Co. .......................................... 13,500 1,046
Thermo Electron Corp. ......................................... 6,000 370
-------
2,876
- --------------------------------------------------------------------------------
ENERGY (1.8%)
Halliburton Co. ............................................... 9,500 545
Tidewater, Inc. ............................................... 11,000 467
Williams Cos, Inc. ............................................ 12,000 613
-------
1,625
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (2.6%)
Capital One Financial Corp. ................................... 19,500 575
MBNA Corp. .................................................... 19,250 546
MGIC Investment Corp. ......................................... 8,500 461
SunAmerica, Inc. .............................................. 15,000 818
-------
2,400
- --------------------------------------------------------------------------------
HEALTH CARE (5.0%)
*Boston Scientific Corp. ....................................... 11,500 496
Cardinal Health, Inc. ......................................... 11,300 709
Columbia/HCA Healthcare Corp. ................................. 6,250 332
Guidant Corp. ................................................. 5,900 331
*HealthCare COMPARE Corp. ...................................... 5,300 250
*Healthsouth Rehabilitation Corp. .............................. 16,000 594
*Nellcor Puritan Bennett, Inc. ................................. 16,500 808
*Tenent Healthcare Corp. ....................................... 28,500 584
*Vencor, Inc. .................................................. 14,000 473
-------
4,577
- --------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (0.5%)
Black & Decker Corp. .......................................... 12,400 499
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
INSURANCE (1.4%)
Aflac, Inc. ................................................... 9,000 $ 279
American International Group, Inc. ............................ 11,000 1,005
-------
1,284
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.1%)
Marriott International, Inc. .................................. 11,000 536
McDonald's Corp. .............................................. 8,900 426
-------
962
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (0.6%)
Hewlett-Packard Co. ........................................... 5,400 572
- --------------------------------------------------------------------------------
PHARMACEUTICALS (4.8%)
Abbott Laboratories............................................ 15,049 611
*Amgen, Inc. ................................................... 16,500 948
Johnson & Johnson.............................................. 8,450 782
Merck & Co., Inc. ............................................. 12,950 783
Pfizer, Inc. .................................................. 6,600 455
Schering-Plough Corp. ......................................... 13,800 792
-------
4,371
- --------------------------------------------------------------------------------
RETAIL (3.8%)
*Corporate Express, Inc. ....................................... 11,800 442
*Eckerd Corp. .................................................. 16,500 788
*Price/Costco, Inc. ............................................ 44,400 841
*Safeway, Inc. ................................................. 27,000 911
Walgreen Co. .................................................. 15,500 496
-------
3,478
- --------------------------------------------------------------------------------
SERVICES (2.5%)
Equifax, Inc. ................................................. 13,500 331
First Data Corp. .............................................. 8,400 638
Paychex, Inc. ................................................. 8,900 602
*United Waste Systems, Inc. .................................... 12,600 698
-------
2,269
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
TECHNOLOGY (2.4%)
General Motors Corp., Class E.................................. 5,800 $ 326
*Microsoft Corp., Inc. ......................................... 5,750 651
*Oracle Systems Corp. .......................................... 21,000 707
*Sun Microsystems, Inc. ........................................ 9,000 488
-------
2,172
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.8%)
*WorldCom, Inc. ................................................ 15,000 704
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (0.7%)
*Nautica Enterprises, Inc. ..................................... 12,900 597
- --------------------------------------------------------------------------------
TRANSPORTATION (1.6%)
*AMR Corp. ..................................................... 4,000 357
Delta Air Lines, Inc. ......................................... 9,500 764
Illinois Central Corp. ........................................ 11,000 330
-------
1,451
- --------------------------------------------------------------------------------
UTILITIES (1.0%)
Sprint Corp. .................................................. 20,000 843
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $34,219).............................. 41,881
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (12.2%)
- --------------------------------------------------------------------------------
BANKS (0.7%)
Amsouth Bancorp, 6.75%, 11/1/25................................ $ 625 598
- --------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (1.5%)
Time Warner Entertainment 8.375%, 3/15/23...................... 1,375 1,358
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (5.9%)
Associates Corp. of North America, 8.125%, 1/15/98............. 900 926
Associates Corp. of North America, 6.375%, 8/15/98............. 1,250 1,248
Ford Motor Credit Corp. 6.85%, 8/15/00......................... 700 700
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS--(CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES--(CONTINUED)
General Motors Acceptance Corp., 6.75%, 3/15/03................. $ 875 $ 861
General Motors Corp., 7.70%, 4/15/16............................ 650 646
Smurfit Capital Funding, 7.50%, 11/20/25........................ 1,075 988
-------
5,369
- --------------------------------------------------------------------------------
INDUSTRIAL (1.9%)
News America Holdings, 7.75%, 12/1/45........................... 950 850
Occidential Petroleum Corp., 11.125%, 6/1/19.................... 750 863
-------
1,713
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.2%)
GTE Corp., 8.85%, 3/1/98........................................ 1,050 1,089
TCI Communications, Inc., 7.875%, 2/15/26....................... 1,075 934
-------
2,023
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $11,278)............................. 11,061
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (21.1%)
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS (5.1%)
8.125%, 8/15/19................................................. 2,975 3,318
7.625%, 2/15/25................................................. 500 536
6.875%, 8/15/25................................................. 850 839
-------
4,693
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (12.8%)
6.875%, 2/28/97................................................. 6,475 6,539
6.75%, 6/30/99.................................................. 875 887
8.50%, 2/15/00.................................................. 2,650 2,838
7.875%, 11/15/04................................................ 1,275 1,370
-------
11,634
- --------------------------------------------------------------------------------
U.S. TREASURY STRIPS (3.2%)
Zero Coupon, 8/15/03............................................ 4,650 2,893
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $19,585).................. 19,220
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
AGENCY SECURITIES (7.1%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (3.5%)
6.13%, 2/27/06................................................. $1,900 $ 1,781
6.50%, 1/1/26 Pool #D67614..................................... 1,471 1,381
-------
3,162
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (3.0%)
7.00%, 5/15/24 Pool #376510.................................... 2,874 2,768
- -------------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY (0.6%)
7.85%, 6/15/44................................................. 600 578
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $6,498)........................... 6,508
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (4.4%)
- -------------------------------------------------------------------------------
Banc One Auto Grantor Trust, Series 1996-A, Class A, 6.10%,
10/15/02...................................................... 996 995
Chase Manhattan Grantor Trust, 1995-A, Class A 6.00%, 9/17/01.. 1,153 1,150
Fingerhut Financial Services 6.45%, 2/15/25.................... 1,000 998
NationsBank Credit Card Master Trust, 1995-1, Class A, 6.45%,
4/15/03....................................................... 850 849
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $3,994)..................... 3,992
- -------------------------------------------------------------------------------
FLOATING RATE NOTE (1.0%)
- -------------------------------------------------------------------------------
++Airplanes Pass Through Trust, Series 1, Class A4, 6.033%,
3/15/19 (COST $925)............................................ 925 925
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (1.6%)
- -------------------------------------------------------------------------------
Hydro-Quebec, 7.50%, 4/1/16.................................... 600 581
Province of Quebec, 11.00%, 6/15/15............................ 750 878
- -------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $1,508).................... 1,459
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (5.1%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.1%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96 due 5/1/96,
to be repurchased at $4,613, collateralized by $4,341 U.S.
Treasury Notes, 7.50% due 11/15/01, valued at $4,692 (COST
$4,612)....................................................... 4,612 4,612
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.5%) (COST $82,619)........................ 89,658
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (1.5%)
- -------------------------------------------------------------------------------
Cash.......................................................... $ 11
Receivable for Investments Sold............................... 3,693
Interest Receivable........................................... 602
Dividends Receivable.......................................... 21
Receivable for Portfolio Shares Sold.......................... 14
Other Assets.................................................. 2
Payable for Investments Purchased............................. (2,935)
Payable for Investment Advisory Fees.......................... (48)
Payable for Administrative Fees............................... (12)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (3)
-------
1,344
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 8,042,280 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $91,002
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 11.32
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Variable/floating rate security--rate disclosed is as of April 30, 1996.
* Non-Income Producing Security.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (21.4%)
- --------------------------------------------------------------------------------
BANKS (1.2%)
Amsouth Bancorp 6.75%, 11/1/25.................................. $ 225 $ 215
- --------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (3.1%)
Time Warner Entertainment 8.375%, 3/15/23....................... 575 568
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (10.0%)
Associates Corp. of North America 8.125%, 1/15/98............... 350 360
Associates Corp. of North America 6.375%, 8/15/98............... 400 399
Ford Motor Credit Co. 6.85%, 8/15/00............................ 225 225
General Motors Acceptance Corp. 6.75%, 3/15/03.................. 300 296
General Motors Corp. 7.70%, 4/15/16............................. 200 199
Smurfit Capital Funding 7.50%, 11/20/25......................... 425 390
-------
1,869
- --------------------------------------------------------------------------------
INDUSTRIAL (3.5%)
News America Holdings 7.75%, 12/1/45............................ 400 357
Occidential Petroleum Corp. 11.125%, 6/1/19..................... 250 288
-------
645
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (3.6%)
GTE Corp. 8.85%, 3/1/98......................................... 275 285
TCI Communications, Inc. 7.875%, 2/15/26........................ 450 391
-------
676
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $4,054).............................. 3,973
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (47.4%)
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS (13.4%)
8.125%, 8/15/19................................................. 1,250 1,394
6.875%, 8/15/25................................................. 1,100 1,086
-------
2,480
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (28.6%)
6.875%, 2/28/97................................................. 2,675 2,702
8.50%, 2/15/00.................................................. 1,575 1,686
7.875%, 11/15/04................................................ 850 914
-------
5,302
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
U.S. TREASURY STRIPS (5.4%)
Zero Coupon, 8/15/03........................................... $1,625 $ 1,011
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $8,833).................. 8,793
- -------------------------------------------------------------------------------
AGENCY SECURITIES (11.2%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (6.2%)
6.13%, 2/27/06................................................. 800 750
6.50%, 1/1/26 Pool # D67614.................................... 424 398
-------
1,148
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (3.7%)
7.00%, 5/15/24 Pool # 376510................................... 724 698
- -------------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY (1.3%)
7.85%, 06/15/44................................................ 250 241
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $2,095)........................... 2,087
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (7.2%)
- -------------------------------------------------------------------------------
Banc One Auto Grantor Trust, Series 1996-A, Class A 6.10%,
10/15/02...................................................... 299 299
Chase Manhattan Grantor Trust, 1995-A, Class A 6.00%, 9/17/01.. 365 364
Fingerhut Financial Services 6.45%, 2/15/25.................... 400 399
NationsBank Credit Card Master Trust, 1995-1, Class A 6.45%,
4/15/03....................................................... 275 274
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $1,338)..................... 1,336
- -------------------------------------------------------------------------------
FLOATING RATE NOTE (2.0%)
- -------------------------------------------------------------------------------
++Airplanes Pass Through Trust, Series 1, Class A4, 6.033%,
3/15/19 (COST $375)............................................ 375 375
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (2.3%)
- -------------------------------------------------------------------------------
Hydro-Quebec, 7.50%, 4/1/16.................................... 175 170
Province of Quebec, 11.00%, 6/15/15............................ 225 263
- -------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $446)...................... 433
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (8.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (8.2%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96 due 5/1/96,
to be repurchased at $1,513, collateralized by $1,424 U.S.
Treasury Bonds, 7.50%, due 11/15/01, valued at $1,543 (COST
$1,513)...................................................... $1,513 $ 1,513
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%) (COST $18,654)....................... 18,510
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.3%)
- -------------------------------------------------------------------------------
Cash.......................................................... 1
Receivable for Investments Sold............................... 923
Interest Receivable........................................... 250
Receivable for Portfolio Shares Sold.......................... 8
Payable for Investments Purchased............................. (1,103)
Payable for Administrative Fees............................... (8)
Payable for Advisory Fees..................................... (1)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (11)
-------
58
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,945,071 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $18,568
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 9.55
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Variable/floating rate security--rate disclosed is as of April 30, 1996.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
AGENCY SECURITIES (63.8%)
- -------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK (6.2%)
5.60%, 7/1/96.................................................. $1,000 $ 1,000
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (36.2%)
Zero Coupon, 8/2/96............................................ 1,500 1,480
Zero Coupon, 9/5/96............................................ 1,500 1,472
Zero Coupon, 10/1/96........................................... 1,500 1,467
Zero Coupon, 10/21/96.......................................... 1,500 1,463
-------
5,882
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (21.4%)
Zero Coupon, 5/9/96............................................ 1,000 999
++4.87%, 5/23/96................................................ 1,000 1,000
Zero Coupon, 6/18/96........................................... 1,500 1,489
-------
3,488
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $10,372).......................... 10,370
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (24.7%)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (24.7%)
7.375%, 5/15/96................................................ 1,000 1,001
6.125%, 7/31/96................................................ 2,000 2,004
6.875%, 2/28/97................................................ 1,000 1,010
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $4,012).................. 4,015
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (10.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (10.9%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96 due 5/1/96,
to be repurchased at $1,774, collateralized by $1,260 U.S.
Treasury Bonds, 12.00%, due 8/15/13, valued at $1,810 (COST
$1,774)....................................................... 1,774 1,774
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.4%) (COST $16,158)........................ 16,159
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (0.6%)
- -------------------------------------------------------------------------------
Cash............................................................. $ 1
Interest Receivable.............................................. 103
Receivable for Portfolio Shares Sold............................. 4
Receivable due from Investment Adviser........................... 4
Payable for Administrative Fees.................................. (7)
Payable for Directors' Fees...................................... (1)
Other Liabilities................................................ (4)
-------
100
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,624,794 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)....... $16,259
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.......... $ 10.01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Variable/Floating rate security--rate disclosed is as of April 30, 1996.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
SIRACH PORTFOLIOS
STATEMENTS OF OPERATIONS
Six Months Ended April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
SIRACH SIRACH SIRACH SIRACH
SPECIAL SIRACH STRATEGIC FIXED SHORT-TERM
EQUITY GROWTH BALANCED INCOME RESERVES
(In Thousands) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............. $ 631 $ 641 $ 271 $ -- $--
Interest............... 1,245 468 1,648 467 484
- ----------------------------------------------------------------------------------------------------------
Total Income.......... 1,876 1,109 1,919 467 484
- ----------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note
B
Basic Fees............ $1,713 $380 $310 $ 48 $ 35
Less: Fees Waived..... -- 1,713 -- 380 -- 310 (48) -- (35) --
------ ---- ---- ---- ----
Administrative Fees--
Note C................ 281 71 63 42 38
Custodian Fees......... 24 8 13 1 4
Registration and Filing
Fees.................. 26 5 4 2 2
Audit Fees............. 13 7 7 6 7
Legal Fees............. 19 4 4 1 1
Printing Fees.......... 3 3 3 3 3
Directors' Fees--Note
F..................... 7 2 2 1 1
Distributions and
Service Fees--Note D
Institutional Service
Class................. -- @ -- @ -- -- --
Other Expenses......... 30 10 13 2 3
Expenses Assumed by the
Adviser--Note B....... -- -- -- (2) (14)
- ----------------------------------------------------------------------------------------------------------
Total Expenses........ 2,116 490 419 56 45
Expense Offset--Note A. (6) (2) (2) (1) (1)
- ----------------------------------------------------------------------------------------------------------
Net Expenses.......... 2,110 488 417 55 44
- ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
(LOSS)................. (234) 621 1,502 412 440
- ----------------------------------------------------------------------------------------------------------
NET REALIZED GAIN ON
INVESTMENTS............ 51,047 11,463 6,740 179 --
- ----------------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIA-
TION) ON INVESTMENTS... 56,898 3,902 (1,416) (615) (7)
- ----------------------------------------------------------------------------------------------------------
NET GAIN (LOSS) ON
INVESTMENTS............ 107,945 15,365 5,324 (436) (7)
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $107,711 $15,986 $ 6,826 $ (24) $433
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
@ Distribution and Service Fees are less than $500.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER APRIL 30, 1996
(In Thousands) 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss)........................ $ 3,241 $ (234)
Net Realized Gain................................... 104,351 51,047
Net Change in Unrealized Appreciation (Deprecia-
tion).............................................. 10,095 56,898
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Opera-
tions............................................ 117,687 107,711
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class................................ (3,406) (736)
Net Realized Gain:
Institutional Class................................ (30,438) (104,063)
- --------------------------------------------------------------------------------
Total Distributions............................... (33,844) (104,799)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE H):
Institutional Class:
Issued--Regular.................................... 50,511 23,006
--In Lieu of Cash Distributions.................... 33,371 102,742
Redeemed........................................... (183,167) (84,454)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Institutional Class
Shares........................................... (99,285) 41,294
- --------------------------------------------------------------------------------
Institutional Service Class*:
Issued--Regular.................................... -- 6
Redeemed........................................... -- (2)
- --------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares........................................... -- 4
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Trans-
actions.......................................... (99,285) 41,298
- --------------------------------------------------------------------------------
Total Increase (Decrease)........................... (15,442) 44,210
Net Assets:
Beginning of Period................................. 513,468 498,026
- --------------------------------------------------------------------------------
End of Period (1)................................... $ 498,026 $ 542,236
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Net Assets Consist of:
Paid in Capital.................................... $ 310,335 $ 351,633
Undistributed (Distributions in Excess of) Net In-
vestment Income................................... 549 (421)
Accumulated Net Realized Gain...................... 104,071 51,055
Unrealized Appreciation............................ 83,071 139,969
- --------------------------------------------------------------------------------
$ 498,026 $ 542,236
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on March 22,
1996.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
SIRACH GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER APRIL 30, 1996
(In Thousands) 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 1,352 $ 621
Net Realized Gain................................... 4,964 11,463
Net Change in Unrealized Appreciation (Deprecia-
tion).............................................. 9,582 3,902
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Opera-
tions............................................ 15,898 15,986
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income:
Institutional Class................................ (1,406) (596)
Institutional Service Class*....................... -- (1)
- --------------------------------------------------------------------------------
Total Distributions............................... (1,406) (597)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE H):
Institutional Class:
Issued--Regular.................................... 52,374 17,093
--In Lieu of Cash Distributions.................... 1,348 564
Redeemed........................................... (34,371) (20,303)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Institutional Class
Shares........................................... 19,351 (2,646)
- --------------------------------------------------------------------------------
Institutional Service Class*:
Issued--Regular.................................... -- 754
--In Lieu of Cash Distributions.................. -- 1
- --------------------------------------------------------------------------------
Net Increase from Institutional Service Class
Shares........................................... -- 755
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Trans-
actions.......................................... 19,351 (1,891)
- --------------------------------------------------------------------------------
Total Increase...................................... 33,843 13,498
Net Assets:
Beginning of Period................................. 80,944 114,787
- --------------------------------------------------------------------------------
End of Period (1)................................... $114,787 $128,285
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Net Assets Consist of:
Paid in Capital..................................... $103,346 $101,455
Undistributed Net Investment Income................. 138 162
Accumulated Net Realized Gain (loss)................ (499) 10,964
Unrealized Appreciation............................. 11,802 15,704
- --------------------------------------------------------------------------------
$114,787 $128,285
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Initial offering of Institutional Service Class Shares began on March 22,
1996.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER APRIL 30, 1996
(In Thousands) 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 3,313 $ 1,502
Net Realized Gain................................... 4,167 6,740
Net Change in Unrealized Appreciation (Deprecia-
tion).............................................. 8,906 (1,416)
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................. 16,386 6,826
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (3,308) (1,620)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Issued--Regular..................................... 24,186 8,549
--In Lieu of Cash Distributions..................... 3,308 1,620
Redeemed............................................ (44,302) (20,207)
- -------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions....... (16,808) (10,038)
- -------------------------------------------------------------------------------
Total Decrease...................................... (3,730) (4,832)
Net Assets:
Beginning of Period................................. 99,564 95,834
- -------------------------------------------------------------------------------
End of Period (1)................................... $ 95,834 $ 91,002
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Net Assets Consist of:
Paid in Capital..................................... $ 89,501 $ 79,463
Undistributed Net Investment Income................. 399 281
Accumulated Net Realized Gain (Loss)................ (2,521) 4,219
Unrealized Appreciation............................. 8,455 7,039
- -------------------------------------------------------------------------------
$ 95,834 $ 91,002
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER APRIL 30, 1996
(In Thousands) 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 829 $ 412
Net Realized Gain................................... 83 179
Net Change in Unrealized Appreciation (Deprecia-
tion).............................................. 977 (615)
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations................................... 1,889 (24)
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (832) (400)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Issued--Regular..................................... 4,809 6,564
--In Lieu of Cash Distributions..................... 832 400
Redeemed............................................ (3,437) (3,411)
- -------------------------------------------------------------------------------
Net Increase from Capital Share Transactions....... 2,204 3,553
- -------------------------------------------------------------------------------
Total Increase...................................... 3,261 3,129
Net Assets:
Beginning of Period................................. 12,178 15,439
- -------------------------------------------------------------------------------
End of Period (1)................................... $15,439 $18,568
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Net Assets Consist of:
Paid in Capital..................................... $15,508 $19,061
Undistributed Net Investment Income................. 90 102
Accumulated Net Realized Loss....................... (630) (451)
Unrealized Appreciation (Depreciation).............. 471 (144)
- -------------------------------------------------------------------------------
$15,439 $18,568
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER APRIL 30, 1996
(In Thousands) 31, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income............................... $ 1,161 $ 440
Net Realized Loss................................... (3) --
Net Change in Unrealized Appreciation (Deprecia-
tion).............................................. 25 (7)
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................. 1,183 433
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (1,160) (454)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Issued--Regular..................................... 11,897 2,588
--In Lieu of Cash Distributions..................... 1,158 453
Redeemed............................................ (15,960) (5,250)
- -------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions....... (2,905) (2,209)
- -------------------------------------------------------------------------------
Total Decrease...................................... (2,882) (2,230)
Net Assets:
Beginning of Period................................. 21,371 18,489
- -------------------------------------------------------------------------------
End of Period (1)................................... $ 18,489 $16,259
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Net Assets Consist of:
Paid in Capital..................................... $ 18,379 $16,170
Undistributed Net Investment Income................. 105 91
Accumulated Net Realized Loss....................... (3) (3)
Unrealized Appreciation............................. 8 1
- -------------------------------------------------------------------------------
$ 18,489 $16,259
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL
SERVICE CLASS
INSTITUTIONAL CLASS SHARES SHARES
------------------------------------------------------------------- ----------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------
SIX MONTHS MARCH 22, 1996**
ENDED TO
APRIL 30, 1996 APRIL 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 8.58 $ 13.90 $ 15.03 $ 19.10 $ 16.10 $ 18.80 $ 16.54
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)................ 0.07 0.05 (0.01) 0.04 0.11 -- (0.01)
Net Realized and
Unrealized Gain
(Loss)................ 5.33 1.13 4.68 (0.90) 3.65 3.45 1.45
- --------------------------------------------------------------------------------------------------------------
Total from Investment
Operations............ 5.40 1.18 4.67 (0.86) 3.76 3.45 1.44
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.08) (0.05) (0.01) (0.02) (0.11) (0.03) --
Net Realized Gain...... -- -- (0.59) (2.12) (0.95) (4.24) --
- --------------------------------------------------------------------------------------------------------------
Total Distributions.... (0.08) (0.05) (0.60) (2.14) (1.06) (4.27) --
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 13.90 $ 15.03 $ 19.10 $ 16.10 $ 18.80 $ 17.98 $ 17.98
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN............ 63.13% 8.50% 31.81% (4.68)% 25.31% 23.62% 8.71%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $255,118 $358,714 $528,078 $513,468 $498,026 $542,231 $ 5
Ratio of Expenses to
Average Net Assets..... 0.92% 0.90% 0.89% 0.88% 0.85%# 0.86%#* 1.01%#*
Ratio of Net Investment
Income (Loss) to Aver-
age Net Assets......... 0.61% 0.38% (0.03)% 0.27% 0.64% (0.10)%* (0.51)%*
Portfolio Turnover Rate. 85% 122% 102% 107% 137% 69% 69%
Average Commission Rate
##..................... N/A N/A N/A N/A N/A $ 0.0599 $0.0599
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Initial offering of Institutional Service Class Shares.
# For the year ended October 31, 1995, and for the six months ended April 30,
1996 the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.85%, and 0.86%*, respectively, for the
Institutional Class Shares. For the six months ended April 30, 1996 the
Ratio of Expenses to Average Net Assets would be 1.01%* for the
Institutional Service Class Shares.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INSTITUTIONAL
SERVICE CLASS
INSTITUTIONAL CLASS SHARES SHARES
------------------------------------------------ --------------
SIX MONTHS MARCH 22,
DECEMBER 1, ENDED 1996*** TO
1993** TO YEAR ENDED APRIL 30, 1996 APRIL 30, 1996
OCTOBER 31, 1994 OCTOBER 31, 1995 (UNAUDITED) (UNAUDITED)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 9.66 $ 11.35 $ 12.80
- -----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.10 0.15 0.06 0.01
Net Realized and
Unrealized Gain
(Loss)................ (0.36) 1.70 1.61 0.17
- -----------------------------------------------------------------------------------------
Total from Investment
Operations........... (0.26) 1.85 1.67 0.18
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.08) (0.16) (0.06) (0.02)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 9.66 $ 11.35 $ 12.96 $ 12.96
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
TOTAL RETURN............ (2.58)% 19.33% 14.76 % 1.41%
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $80,944 $114,787 $127,515 $ 770
Ratio of Expenses to
Average Net Assets..... 0.92%* 0.86%# 0.84%#* 1.12%#*
Ratio of Net Investment
Income to Average Net
Assets................. 1.13%* 1.48% 1.06%* 0.45%*
Portfolio Turnover Rate. 141% 119% 60% 60%
Average Commission Rate
##..................... N/A N/A $ 0.0600 $0.0600
- -----------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
*** Initial offering of Institutional Service Class Shares.
# For the year ended October 31, 1995, and for the six months ended April
30, 1996, the Ratio of Expenses to Average Net Assets excludes the effect
of expense offsets. If expense offsets were included, the Ratio of
Expenses to Average Net Assets would be 0.84% and 0.83%*, respectively,
for the Institutional Class Shares. For the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets would be 1.11%* for the
Institutional Service Class Shares.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 1, SIX MONTHS
1993** TO YEAR ENDED ENDED APRIL
OCTOBER 31, OCTOBER 30, 1996
1994 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 10.00 $ 9.35 $ 10.75
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................... 0.27 0.36 0.18
Net Realized and Unrealized Gain (Loss)... (0.69) 1.39 0.58
- --------------------------------------------------------------------------------
Total From Investment Operations......... (0.42) 1.75 0.76
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income..................... (0.23) (0.35) (0.19)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $ 9.35 $ 10.75 $ 11.32
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN............................... (4.19)% 19.10% 7.13%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)...... $99,564 $95,834 $91,002
Ratio of Expenses to Average Net Assets.... 0.90%* 0.87%# 0.88%#*
Ratio of Net Investment Income to Average
Net Assets................................ 3.05%* 3.49% 3.13%*
Portfolio Turnover Rate.................... 158% 158% 93%
Average Commission Rate ##................. N/A N/A $0.0600
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996 the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses
to Average Net Assets would be 0.86% and 0.87%*, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 1, SIX MONTHS
1993** TO YEAR ENDED ENDED APRIL
OCTOBER 31, OCTOBER 30, 1996
1994 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $ 10.00 $ 9.16 $ 9.88
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+................ 0.48 0.58 0.27
Net Realized and Unrealized Gain
(Loss)............................... (0.91) 0.73 (0.33)
- --------------------------------------------------------------------------------
Total From Investment Operations..... (0.43) 1.31 (0.06)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................. (0.41) (0.59) (0.27)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......... $ 9.16 $ 9.88 $ 9.55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN........................... (4.33)%++ 14.75%++ (0.65)%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).. $12,178 $15,439 $18,568
Ratio of Net Expenses to Average Net
Assets+............................... 0.75%* 0.76%# 0.75%#*
Ratio of Net Investment Income to
Average Net Assets+................... 5.37%* 6.13% 5.60%*
Portfolio Turnover Rate................ 230% 165% 145%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
**Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.08,
$.06, and $.03 respectively, for the period ended October 31, 1994, the
year ended October 31, 1995 and for the six months ended April 30, 1996.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.75% and 0.75%*, respectively.
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 1, SIX MONTHS
1993** TO YEAR ENDED ENDED APRIL
OCTOBER 31, OCTOBER 30, 1996
1994 31, 1995 (UNAUDITED)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 10.00 $ 10.03 $ 10.02
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+.................. 0.34 0.59 0.26
Net Realized and Unrealized Loss (0.02) (0.02) (0.01)
- ---------------------------------------------------------------------------------
Total From Investment Operations....... 0.32 0.57 0.25
- ---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................... (0.29) (0.58) (0.26)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........... $ 10.03 $ 10.02 $ 10.01
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN............................. 3.24%++ 5.83%++ 2.53%++
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).... $21,371 $18,489 $16,259
Ratio of Expenses to Average Net Assets+. 0.50%* 0.52%# 0.51%#*
Ratio of Net Investment Income to Average
Net Assets+............................. 3.53%* 5.34% 5.00%*
Portfolio Turnover Rate.................. 13% 38% 0%
- ---------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.04,
$.04 and $.03 respectively, for the period ended October 31, 1994, the year
ended October 31, 1995 and for the six months ended April 30, 1996.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
# For the year ended October 31, 1995, and for the six months ended April 30,
1996 the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.50%, and 0.50%*, respectively.
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The Sirach Special Equity Portfolio, Sirach
Growth Portfolio, Sirach Strategic Balanced Portfolio, Sirach Fixed Income
Portfolio and Sirach Short-Term Reserves Portfolio (the "Portfolios") are
portfolios of UAM Funds, Inc. The Sirach Growth Portfolio, Sirach Strategic
Balanced Portfolio, Sirach Fixed Income Portfolio and Sirach Short-Term
Reserves Portfolio each began operations on December 1, 1993. The Sirach
Special Equity Portfolio began operations on October 2, 1989. The Sirach
Special Equity, Sirach Growth and Sirach Strategic Balanced Portfolios are
authorized to offer two separate classes of shares--Institutional Class Shares
and Institutional Service Class Shares. As of the date of this report, only
the Sirach Special Equity Portfolio and Sirach Growth Portfolio have issued
Institutional Service Class Shares. At April 30, 1996, the UAM Funds were
comprised of thirty-seven active portfolios. The financial statements of the
remaining portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the
Portfolios in the preparation of their 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: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day, at the mean of the bid and
asked prices on such day. Price information on listed securities is taken
from the exchange where the security is primarily traded. Over-the-counter
and unlisted equity securities are valued at the mean of the current bid
and asked prices. Fixed income securities are stated on the basis of
valuations provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities,
quotations from dealers, market transactions in comparable securities and
various relationships between securities in determining value. Short-term
investments that have remaining maturities of sixty days or less at time of
purchase are valued at amortized cost, if it approximates market value. The
value of other assets and securities for which no quotations are readily
available is determined in good faith at fair value using methods
determined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue 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.
Paid in capital, undistributed net investment income and accumulated net
realized gain (loss) have been adjusted for prior year permanent book-tax
differences.
38
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
At April 30, 1996, cost of investments and unrealized appreciation
(depreciation) of investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
SIRACH PORTFOLIOS (000) (000) (000) (000)
----------------- -------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Special Equity............. $393,587 $142,806 $(2,837) $139,969
Growth..................... 111,324 16,269 (565) 15,704
Strategic Balanced......... 82,619 8,019 (980) 7,039
Fixed Income............... 18,654 35 (179) (144)
Short-Term Reserves........ 16,158 5 (4) 1
</TABLE>
At October 31, 1995, the following portfolios had available approximate
capital loss carryovers for Federal Income tax purposes available to offset
future net capital gains through the indicated expiration dates:
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------------
SIRACH PORTFOLIOS 2002 2003 TOTAL
----------------- ---------- ------ ----------
<S> <C> <C> <C>
Growth.......................................... $ 386,000 -- $ 386,000
Strategic Balanced.............................. 2,353,000 -- 2,353,000
Fixed Income.................................... 626,000 -- 626,000
Short-Term Reserves............................. -- $4,000 4,000
</TABLE>
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolios' 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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolios have 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.
4. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly.
Any realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments.
5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized on the accrual basis. Discounts and premiums
on securities purchased are amortized over their respective lives. Most
expenses of the UAM Funds can be directly attributed to a particular
portfolio. Expenses which
39
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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 each Portfolio have been increased to include expense
offsets for custodian balance credits.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Sirach Capital Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolios at a fee calculated at an annual rate of average
daily net assets, as follows:
<TABLE>
<CAPTION>
SIRACH PORTFOLIOS RATE
- ----------------- -----
<S> <C>
Special Equity............................................................ 0.70%
Growth.................................................................... 0.65%
Strategic Balanced........................................................ 0.65%
Fixed Income.............................................................. 0.65%
Short-Term Reserves....................................................... 0.40%
</TABLE>
The Adviser has voluntarily agreed to waive a portion of its advisory fees and
to assume certain expenses, if necessary, in order to keep the Portfolio's
annual operating expenses, after the effects of expense offset arrangements
from exceeding 0.75% and 0.50% of average daily net assets for the Sirach
Fixed Income and Sirach Short-Term Reserves Portfolios, respectively.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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%, 0.04%, 0.04%, 0.04%, and
0.06% of average daily net assets for the Sirach Special Equity Portfolio,
Sirach Growth Portfolio, Sirach Strategic Balanced Portfolio, Sirach Fixed
Income, and Sirach Short-Term Reserves Portfolio, respectively. Also effective
April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), a wholly-owned
subsidiary of The Chase Manhattan Bank, N.A., 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.
40
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
For the period April 15, 1996 to April 30, 1996, UAM Funds Services, Inc.
earned the following amounts as Administrator:
<TABLE>
<CAPTION>
ADMINISTRATION
SIRACH PORTFOLIOS FEES
- ----------------- --------------
<S> <C>
Special Equity................................................... $30,306
Growth........................................................... 7,244
Strategic Balanced............................................... 6,026
Fixed Income..................................................... 3,241
Short-Term Reserves.............................................. 3,200
</TABLE>
D. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Sirach Special Equity Portfolio and Sirach Growth Portfolio have adopted a
Distribution and Service Plan (the "Plans") on behalf of the Institutional
Service Class Shares pursuant to Rule 12b-1 under the Investment Company Act
of 1940. Under the Plans, the Sirach Special Equity Portfolio and Sirach
Growth Portfolio may not incur distribution or service costs which exceed an
annual rate of 0.75% of the Sirach Special Equity Portfolio and Sirach Growth
Portfolio's net assets. The Board has currently limited aggregate payments
under the Plans to 0.50% per annum of the Sirach Special Equity Portfolio and
Sirach Growth Portfolio's net assets. The Sirach Special Equity Portfolio and
Sirach Growth Portfolio are not currently making payments under the
Distribution Plan. Under the Service Plan, the Sirach Special Equity Portfolio
and Sirach Growth Portfolio reimburse the Distributor or the Service Agent for
payments made at an annual rate of up to 0.25% of the average daily net assets
of the Institutional Service Class Shares owned by clients of such Service
Agents. The Distributor does not receive any fee or other compensation with
respect to the Portfolios.
E. PURCHASES AND SALES: For the period ended April 30, 1996, purchases and
sales of investment securities other than long-term U.S. Government and Agency
securities and short-term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
SIRACH PORTFOLIOS (000) (000)
- ----------------- --------- --------
<S> <C> <C>
Special Equity............................................... $312,682 $357,716
Growth....................................................... 60,075 70,638
Strategic Balanced........................................... 52,304 54,913
Fixed Income................................................. 8,887 7,101
Short-Term Reserves.......................................... -- --
</TABLE>
Purchases and sales of long-term U.S. Government securities were $31,591,000
and $38,072,000, respectively, for Sirach Strategic Balanced Portfolio and
$11,475,000 and $12,310,000, respectively, for Sirach Fixed Income Portfolio.
There were no purchases and sales of long-term government securities for
Sirach Special Equity Portfolio, Sirach Growth Portfolio and Sirach Short-Term
Reserves Portfolio.
41
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
F. 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.
G. LINE OF CREDIT: The Portfolios, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating Portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the year
ended October 31, 1995, there were no borrowings under the agreement.
42
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
H. OTHER: Transactions in capital shares for the Portfolios, by class, were as
follows:
<TABLE>
<CAPTION>
INSTITUTIONAL
INSTITUTIONAL CLASS SHARES SERVICE CLASS SHARES
---------------------------- ------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED MARCH 22, 1996* TO
OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
1995 1996 1995 1996
(000) (000) (000) (000)
----------- ---------------- ----------- ------------------
<S> <C> <C> <C> <C>
SIRACH SPECIAL EQUITY
PORTFOLIO:
Shares Issued.......... 3,143 1,323 -- --
In Lieu of Cash Distri-
butions............... 2,298 7,042 -- --
Shares Redeemed........ (10,848) (4,701) -- --
------- ------ --- ---
Net Increase (Decrease)
from Capital Share
Transactions........... (5,407) 3,664 -- --
======= ====== === ===
SIRACH GROWTH PORTFOLIO:
Shares Issued.......... 4,952 1,376 -- 59
In Lieu of Cash Distri-
butions............... 130 47 -- --
Shares Redeemed........ (3,352) (1,693) -- --
------- ------ --- ---
Net Increase (Decrease)
from Capital Share
Transactions........... 1,730 (270) -- 59
======= ====== === ===
SIRACH STRATEGIC BAL-
ANCED
PORTFOLIO:
Shares Issued.......... 2,482 767
In Lieu of Cash Distri-
butions............... 336 147
Shares Redeemed........ (4,557) (1,785)
------- ------
Net Decrease from
Capital Share
Transactions........... (1,739) (871)
======= ======
SIRACH FIXED INCOME
PORTFOLIO:
Shares Issued.......... 503 683
In Lieu of Cash Distri-
butions............... 88 41
Shares Redeemed........ (359) (341)
------- ------
Net Increase from
Capital Share
Transactions........... 232 383
======= ======
SIRACH SHORT-TERM RE-
SERVE
PORTFOLIO:
Shares Issued.......... 1,186 259
In Lieu of Cash Distri-
butions............... 116 46
Shares Redeemed........ (1,588) (525)
------- ------
Net Decrease from
Capital Share
Transactions........... (286) (220)
======= ======
</TABLE>
* Initial offering of Institutional Service Class Shares.
At April 30, 1996, the percentage of total shares outstanding held by record
shareholders owning 10% or greater of the aggregate total shares outstanding
for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF
SIRACH PORTFOLIOS SHAREHOLDERS % OWNERSHIP
- ----------------- ------------ -----------
<S> <C> <C>
Fixed Income........................................... 3 51.8%
Short-Term Reserves.................................... 3 75.5%
</TABLE>
43
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
ICM EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and Executive
Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Investment Counselors of Maryland, Inc.
803 Cathedral Street
Baltimore, MD 21201
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
ICM EQUITY
PORTFOLIO
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
Dear Shareholder:
For the six months ended April 30, 1996, the net asset value per share (NAV)
of the ICM Equity Portfolio increased from $12.14 to $13.77. Including
reinvestment of dividends and capital gains distributions totaling $0.57 paid
in December 1995 and April 1996, the total return of the Portfolio for the six
months was 18.76%, compared to a 13.76% return for the S&P 500 Index over the
same period. The Portfolio's nearly 500 basis point outperformance was
attributable to strong performance in a number of sectors, including: banking
and finance (especially BankAmerica, Comerica, NationsBank and Chase
Manhattan), retailing (TJX Companies, Inc.), computers and technology (Dell
Computer, IBM and Seagate Technology), basic industry (Dow Chemical and Phelps
Dodge), healthcare (Integrated Health Services), and utilities (Telefonos de
Mexico and MCI Corporation). The star performer in the Portfolio for the six
month period was TJX Companies, Inc., up over 118%. The other top performers
included Dell Computer (sold late in April), BankAmerica, Seagate Technology
and Dow Chemical. Weak performers included First Colony, Burlington Northern,
Melville Corporation, Philips Electronics and AT&T Corporation. We sold First
Colony, Burlington Northern and Melville during the quarter, but added to our
holdings of Philips Electronics.
The U.S. equity market continued to display impressive strength in the most
recent six months. Common stocks were aided by a strong bond market for the
three months ended January 31, 1996, and continued to rise in the three months
ended April 30, 1996, despite a significant pullback in the bond market.
<TABLE>
<CAPTION>
TOTAL RETURNS
------------------
ICM EQUITY S&P 500
PORTFOLIO INDEX
---------- -------
<S> <C> <C>
3 Months Ended 1/31/96................................... 10.67% 10.01%
3 Months Ended 4/30/96................................... 7.30% 3.40%
6 Months Ended 4/30/96................................... 18.76% 13.76%
</TABLE>
The divergence of stock and bond market performance which occurred in the last
three months was, in our opinion, caused by stronger than expected GDP and
employment growth. Bond investors fear stronger economic growth because the
accompanying increase in loan demand and rising inflationary expectations
normally push interest rates up. Equity investors are often more sanguine
about an expanding economy, because of the accompanying rise in corporate
profits that normally takes place. The main risk to the equity market at
present is a continuation of the upward trend in rates. If long rates
stabilize at the current 7% level and real GDP growth continues at a 2 1/2% to
3% clip, we see no reason why well selected equities cannot continue to make
some upward progress.
The Portfolio performed well in the first half of its fiscal year. We
attribute the improved performance to a number of factors. We reduced the
number of stocks in the Portfolio from 47 to 36, concentrating on our best
ideas. We also reduced its cash position in order to finance an increase in
technology holdings (with new purchases of IBM Corporation and Dell Computer)
and increases in some existing technology positions. Perceptions among
investors as a group that the economy was stronger than expected also led to
renewed interest in cyclically sensitive groups such as retailers, banks,
basic industry companies and technology, where the Portfolio has significant
exposure.
In our annual report to shareholders, we noted the importance of sticking to
one's investment disciplines even when they produce subpar results for a
period of time. We are pleased to report an improvement in results,
1
<PAGE>
and remain committed to the value principles which have proven themselves in
the past. We will continue to focus our attention on the stocks of well
financed companies with well below average price-to-earnings and price-to-book
ratios and above average or sharply improving profitability and financial
strength.
As of April 30, 1996, the Portfolio held 36 stocks with the following
statistical profile as compared to the S&P 500 Index:
<TABLE>
<CAPTION>
ICM EQUITY S&P 500
PORTFOLIO INDEX
---------- -------
<S> <C> <C>
Average Price to Earnings Ratio (96 Est.)................ 11.9x 16.8x
Average Price to Book Value.............................. 2.2x 3.0x
Average Return on Equity................................. 19.0% 18.2%
Average Debt/Total Capitalization........................ 38.7% 45.0%
Median Market Capitalization (millions).................. $7,722 $4,518
</TABLE>
Respectfully submitted,
/s/ David E. Nelson
David E. Nelson, CFA
Principal
Investment Counselors of Maryland, Inc.
DEFINITION OF COMPARATIVE INDEX
-------------------------------
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers and did not assume expenses on
behalf of the Portfolio, total return for the Portfolio would have been lower.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
2
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.8%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.8%)
Lockheed Martin Corp. .......................................... 1,540 $ 124
- -------------------------------------------------------------------------------
AUTOMOTIVE (2.6%)
Ford Motor Corp. ............................................... 5,070 182
- -------------------------------------------------------------------------------
BASIC RESOURCES (9.5%)
International Paper Co. ........................................ 5,440 217
Phelps Dodge Corp. ............................................. 3,170 233
USX-US Steel Group, Inc. ....................................... 6,800 224
------
674
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.1%)
Philip Morris Cos., Inc. ....................................... 1,630 147
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (3.2%)
Parker-Hannifin Corp. .......................................... 5,440 230
- -------------------------------------------------------------------------------
CHEMICALS (3.4%)
Dow Chemical Co. ............................................... 2,720 242
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (7.6%)
Guilford Mills, Inc. ........................................... 10,420 253
TJX Cos., Inc. ................................................. 9,700 286
------
539
- -------------------------------------------------------------------------------
ELECTRONICS (8.5%)
International Business Machines Corp. .......................... 2,080 224
Nokia Corp. ADR................................................. 5,200 189
Philips Electronics N.V. ....................................... 5,260 189
------
602
- -------------------------------------------------------------------------------
ENERGY (8.7%)
Atlantic Richfield Co. ......................................... 1,810 213
Equitable Resources, Inc. ...................................... 6,700 203
YPF S.A. ADR.................................................... 9,060 198
------
614
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (15.2%)
BankAmerica Corp. .............................................. 2,360 $ 179
Chase Manhattan Corp. .......................................... 2,720 187
Comerica, Inc. ................................................. 4,080 178
First Union Corp. .............................................. 2,540 156
NationsBank Corp. .............................................. 2,450 195
Republic New York Corp. ........................................ 2,990 178
------
1,073
- --------------------------------------------------------------------------------
HEALTH CARE (3.5%)
Intergrated Health Services..................................... 9,060 249
- --------------------------------------------------------------------------------
INSURANCE (7.8%)
Chubb Corp. .................................................... 910 86
Providian Corp. ................................................ 4,980 230
Torchmark Corp. ................................................ 5,400 232
------
548
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (7.5%)
Omega Healthcare Investors, Inc. ............................... 4,800 134
Pacific Gulf Properties, Inc. .................................. 11,330 198
United Dominion Realty Trust.................................... 14,140 202
------
534
- --------------------------------------------------------------------------------
TECHNOLOGY (2.7%)
Hewlett-Packard Co. ............................................ 1,090 115
*Seagate Technology.............................................. 1,360 79
------
194
- --------------------------------------------------------------------------------
TRANSPORTATION (3.4%)
Norfolk Southern Corp. ......................................... 1,090 92
Union Pacific Corp. ............................................ 2,170 148
------
240
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES (7.3%)
AT&T Corp. .................................................... 2,270 $ 139
MCI Communications Corp. ...................................... 5,620 164
Telefonos de Mexico S.A. ADR, Class L.......................... 6,250 212
------
515
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $5,424)............................... 6,707
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.4%)
- -------------------------------------------------------------------------------
REPURCHASED AGREEMENT (5.4%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due 5/1/96,
to be repurchased at $384, collateralized by $333 U.S. Trea-
sury Bonds, 8.50%, due 2/15/20, valued at $392 (COST $384).... $ 384 384
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%) (COST $5,808)........................ 7,091
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
- -------------------------------------------------------------------------------
Receivable from Investment Adviser............................. 20
Dividends Receivable........................................... 7
Other Assets................................................... 4
Payable for Investments Purchased.............................. (36)
Payable for Administrative Fees................................ (6)
Payable for Directors' Fees.................................... (1)
------
(12)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 514,193 outstanding $0.001 par value Institu-
tional Class shares
(authorized 25,000,000 shares)................................ $7,079
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE........ $13.77
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ICM EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
1996
(In Thousands) (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends.................................................... $ 105
Interest..................................................... 9
- --------------------------------------------------------------------------------
Total Income................................................ 114
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.................................................. $ 22
Less: Fees Waived........................................... (22) --
----
Administrative Fees--Note C.................................. 38
Registration and Filing Fees................................. 13
Audit Fees................................................... 6
Printing Fees................................................ 6
Custodian Fees............................................... 3
Directors' Fees--Note F...................................... 1
Other Expenses............................................... 1
Expenses Assumed by the Adviser--Note B...................... (37)
- --------------------------------------------------------------------------------
Total Expenses.............................................. 31
@Expense Offset--Note A....................................... --
- --------------------------------------------------------------------------------
Net Expenses................................................ 31
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME......................................... 83
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENT............................... 668
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS.......... 441
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS....................................... 1,109
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $1,192
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
@ Amount represents Custodian balance credits of $238
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ICM EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 137 $ 83
Net Realized Gain.................................. 247 668
Net Change in Unrealized Appreciation.............. 747 441
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 1,131 1,192
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (129) (76)
Net Realized Gain.................................. (7) (245)
- --------------------------------------------------------------------------------
Total Distributions............................... (136) (321)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 2,502 1,224
--In Lieu of Cash Distributions.................. 131 321
Redeemed........................................... (422) (2,202)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Trans-
actions.......................................... 2,211 (657)
- --------------------------------------------------------------------------------
Total Increase..................................... 3,206 214
Net Assets:
Beginning of Period................................ 3,659 6,865
- --------------------------------------------------------------------------------
End of Period (2).................................. $6,865 $7,079
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued...................................... 240 95
In Lieu of Cash Distributions...................... 12 26
Shares Redeemed.................................... (38) (173)
- --------------------------------------------------------------------------------
214 (52)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital.................................... $5,758 $5,101
Undistributed Net Investment Income................ 18 25
Accumulated Net Realized Gain...................... 247 670
Unrealized Appreciation............................ 842 1,283
- --------------------------------------------------------------------------------
$6,865 $7,079
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
OCTOBER 1, YEARS ENDED SIX MONTHS
1993** TO OCTOBER 31, ENDED
OCTOBER 31, -------------- APRIL 30, 1996
1993 1994 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERI-
OD................................ $10.00 $ 9.94 $10.41 $ 12.14
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+............ 0.01 0.20 0.26 0.16
Net Realized and Unrealized Gain
(Loss)........................... (0.07) 0.45 1.75 2.04
- --------------------------------------------------------------------------------
Total from Investment Operations. (0.06) 0.65 2.01 2.20
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income............. -- (0.18) (0.26) (0.14)
Net Realized Gain................. -- -- (0.02) (0.43)
- --------------------------------------------------------------------------------
Total Distributions.............. -- (0.18) (0.28) (0.57)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..... $ 9.94 $10.41 $12.14 $ 13.77
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN++..................... (0.60)% 6.63% 19.62% 18.76%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands)............................ $1,977 $3,659 $6,865 $ 7,079
Ratio of Expenses to Average Net
Assets+........................... 0.90%* 0.90% 0.92%# 0.91%*#
Ratio of Net Investment Income to
Average Net Assets+............... 1.06%* 2.15% 2.44% 2.39%*
Portfolio Turnover Rate............ 11 % 17% 37% 41%
Average Commission Rate ##......... N/A N/A N/A $0.0695
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of
$0.04, $0.21, $0.16 and $0.11 per share for the period ended October 31,
1993, the years ended October 31, 1994, 1995 and the six months ended April
30, 1996, respectively.
++ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Adviser during the period.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be 0.90% for the year ended October 31, 1995 and 0.90%*
for the six months ended April 30, 1996.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The ICM Equity Portfolio (the "Portfolio"), a
portfolio of UAM Funds, Inc., began operations on October 1, 1993. At April
30, 1996, the UAM Funds were comprised of thirty-seven active portfolios. The
financial statements of the remaining portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid price on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid price. 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 is 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 continue 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 April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $5,808,000. Net unrealized appreciation for
Federal income tax purposes aggregated approximately $1,283,000, of which
$1,300,000 related to appreciated securities and $17,000 related to
depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market 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.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly.
Any realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
9
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. 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 have been increased to include expense offsets for custodian
balance credits.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Investment Counselors of Maryland, 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
0.625% 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 0.90% of average daily
net assets.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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 0.06% of average daily net assets
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
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
10
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $3,100 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases and sales of approximately $2,706,000 and $3,271,000,
respectively, of investment securities other than long-term U.S. Government
and short-term securities. There were no purchases and sales of long-term U.S.
Government securities.
F. 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.
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, 67.0% of total shares outstanding were held by
two record shareholders owning 10% or greater of the aggregate total shares
outstanding.
11
<PAGE>
- ------------------------------------------------------
UAM FUNDS
ICM SMALL COMPANY PORTFOLIO
- ------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and Executive
Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- ------------------------------------------------------
INVESTMENT ADVISER
Investment Counselors of Maryland, Inc.
803 Cathedral Street
Baltimore, MD 21201
- ------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- ------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- ------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- ------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
This report has been prepared for shareholders and
may be distributed to others only if preceded or
accompanied by a current prospectus.
- ------------------------------------------------------
UAM FUNDS
ICM SMALL
COMPANY PORTFOLIO
- ------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
ICM SMALL COMPANY PORTFOLIO
"SMALL CAP STOCKS ARE DOING BETTER"
Dear Shareholder,
Despite a significant increase in long term interest rates over the last four
months (January, 1996--April, 1996), the equity market has continued to move
higher, led for the first time in a while by small cap stocks. This improved
relative performance by small cap stocks has occurred during the second
quarter of the current fiscal year and coincides with an increase in the value
of the dollar, a rise in long term interest rates, and a change in
expectations for economic growth on the part of investors, with faster growth
now expected for the next six to twelve months. This economic backdrop is
almost the exact opposite of that which existed for much of calendar year 1995
when big cap stocks generally outperformed.
The performance of the Portfolio did not keep pace with the Russell 2000 Index
for the first half of fiscal 1996, although the relative performance in the
second quarter (February 1--April 30) was much better than in the first
quarter.
<TABLE>
<CAPTION>
TOTAL RETURNS
-----------------------------------------------------
1ST FISCAL QUARTER 2ND FISCAL QUARTER 1ST FISCAL HALF
------------------ ------------------ ---------------
NOV. 1, 1995- FEB. 1, 1996- NOV. 1, 1995-
JAN. 31, 1996 APRIL 30, 1996 APRIL 30, 1996
------------------ ------------------ ---------------
<S> <C> <C> <C>
ICM Small Co. Portfolio... 3.20% 9.50% 13.00%
Russell 2000.............. 6.84% 10.84% 18.42%
S&P 500................... 10.01% 3.40% 13.76%
</TABLE>
The Portfolio's performance during the first three months of the current
fiscal year was disappointing. In part, these results were due to the fact
that small cap stocks were not doing well; but most of the blame can be
attributed to two factors. First, the Portfolio was heavily represented in
sectors of the market, such as consumer stocks and basic industry stocks,
which did not perform well. Second, the Portfolio's cash reserves averaged
close to 15% during the quarter and these reserves restrained the price
advance a bit. Recent results have been better and we remain very confident in
our investment process.
In our opinion, the type of economic environment which exists today has
historically been conducive to better relative performance by smaller
companies, although there is no guarantee the same will occur in the future. A
rising dollar usually results in improved relative profits on the part of
domestic companies as opposed to large multi-nationals. Faster GDP growth also
helps smaller companies which tend to be more sensitive to the U.S. economy.
On top of this favorable economic backdrop, small cap stocks appear quite
reasonably valued after underperforming big cap stocks for nearly two years.
We believe the Portfolio is well positioned to take advantage of the current
economic and market trends. The Portfolio's exposure to the consumer, and the
holdings of basic industrial companies and capital goods manufacturers should
help the returns if the economy continues to improve. The Portfolio is a bit
underweighted in financial stocks. However, the REIT position is being
increased because we believe REIT's offer an attractive risk-return profile.
1
<PAGE>
The magnitude of the advance in the equity market has been quite dramatic and
our more cautious approach to the market, which we began to implement a year
ago, was, in retrospect, ill timed. This approach did not involve a major
increase in cash reserves which averaged less than 15% over this period. We
did, however, make a conscious effort to buy stocks which, in the past, had
exhibited lower price volatility than the average stock. As a result, the
total portfolio has become less volatile and, in a sharply rising market, this
is not a particularly desirable trait. We believe that this approach may still
work to the Portfolio's benefit.
Respectfully,
/s/ Robert D. McDorman, Jr.
Robert D. McDorman, Jr.
Principal
Investment Counselors of Maryland, Inc.
DEFINITIONS OF COMPARATIVE INDICES
The Russell 2000 Index is an unmanaged index composed of the 2000 smallest
stocks in the Russell 3000, a market value weighted index of the 3,000 largest
U.S. publicly traded companies.
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
2
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.1%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (4.4%)
Donnelly Corp. .............................................. 115,000 $ 1,711
*Dorsey Trailers, Inc. ....................................... 200,000 750
Excel Industries, Inc. ...................................... 100,000 1,325
Smith (A.O.) Corp. .......................................... 125,000 2,875
*Starcraft Corp. ............................................. 90,000 360
*Strattec Security Corp. ..................................... 150,000 2,775
Treadco, Inc. ............................................... 80,000 540
Wynn's International, Inc. .................................. 126,450 3,430
--------
13,766
- --------------------------------------------------------------------------------
BANKS (3.5%)
First Commerce Corp. ........................................ 50,000 1,700
First Financial Corp. ....................................... 140,000 3,290
TCF Financial Corp. ......................................... 80,000 2,830
Vermont Financial Services Corp. ............................ 90,000 2,858
--------
10,678
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (6.0%)
*Astec Industries, Inc. ...................................... 130,000 1,284
*Avondale Industries, Inc. ................................... 200,000 3,800
*BE Aerospace, Inc. .......................................... 75,000 1,153
*CMI Corp., Class A........................................... 300,000 1,950
Core Industries, Inc. ....................................... 100,500 1,420
Kennametal, Inc. ............................................ 100,000 3,787
Scotsman Industries, Inc. ................................... 150,000 2,906
Varlen Corp. ................................................ 88,000 2,211
--------
18,511
- --------------------------------------------------------------------------------
CHEMICALS (3.7%)
Aceto Corp. ................................................. 88,000 1,342
*Applied Extrusion Technologies, Inc. ........................ 200,000 2,775
Cambrex Corp. ............................................... 40,800 1,754
Dexter Corp. ................................................ 125,000 3,359
Furon Co. ................................................... 100,000 2,175
--------
11,405
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSTRUCTION (10.7%)
*BMC West Corp. .............................................. 140,000 $ 2,730
Centex Construction Products, Inc. .......................... 300,000 4,313
Centex Corp. ................................................ 50,000 1,350
Continental Homes Holding Corp. ............................. 125,000 2,859
Granite Construction, Inc. .................................. 232,500 4,592
*Griffon Corp. ............................................... 350,000 3,150
Juno Lighting, Inc. ......................................... 135,000 1,991
MDC Holdings, Inc. .......................................... 400,000 2,800
Martin Marietta Materials, Inc. ............................. 150,000 3,431
Republic Gypsum Co. ......................................... 35,000 486
Southdown, Inc. ............................................. 230,000 5,405
-------
33,107
- -------------------------------------------------------------------------------
CONSUMER DURABLES (5.6%)
Aaron Rents, Inc., Class B................................... 150,000 3,938
Bush Industries, Inc., Class A............................... 125,000 3,781
Coachmen Industries, Inc. ................................... 75,000 2,100
General Housewares Corp. .................................... 100,000 1,300
*Material Science Corp. ...................................... 140,000 2,240
*Rex Stores Corp. ............................................ 225,000 3,515
*Winsloew Furniture, Inc. .................................... 60,000 304
-------
17,178
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.5%)
*Cone Mills Corp. ............................................ 150,000 1,706
EKCO Group, Inc. ............................................ 150,000 919
*ERO, Inc. ................................................... 100,000 625
*Fieldcrest Cannon, Inc. ..................................... 70,000 1,496
*Galey & Lord, Inc. .......................................... 200,000 2,175
Guilford Mills, Inc. ........................................ 120,000 2,910
*Sylvan, Inc. ................................................ 75,000 928
-------
10,759
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (3.7%)
Apache Corp. ................................................. 31,500 $ 913
*Nabors Industries, Inc. ...................................... 350,000 5,381
*Oceaneering International, Inc. .............................. 150,000 2,363
*Offshore Logistics, Inc. ..................................... 100,000 1,450
Penn Virginia Corp. .......................................... 40,000 1,280
-------
11,387
- --------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (0.5%)
*Carmike Cinemas, Inc. Class A................................. 60,000 1,598
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (1.4%)
Alex Brown, Inc. ............................................. 50,000 2,706
Edwards (A.G.), Inc. ......................................... 22,500 529
Legg Mason, Inc. ............................................. 40,000 1,150
-------
4,385
- --------------------------------------------------------------------------------
HEALTH CARE (1.6%)
Beckman Instruments, Inc. .................................... 60,000 2,220
*Bio Rad Labs Class A.......................................... 9,100 423
*Spacelabs Medical, Inc. ...................................... 100,000 2,225
-------
4,868
- --------------------------------------------------------------------------------
INSURANCE (8.2%)
*Acmat Corp. .................................................. 100,000 1,200
Allied Group, Inc. ........................................... 75,000 2,662
Capital Re Corp. ............................................. 68,200 2,558
CMAC Investment Corp. ........................................ 50,000 2,800
Financial Security Assurance Holding.......................... 53,728 1,451
GCR Holdings, Ltd. ........................................... 40,000 1,005
Lawyers Title Corp. .......................................... 70,000 1,260
Life RE Corp. ................................................ 125,000 3,734
MAIC Holdings, Inc. .......................................... 33,390 1,077
*Penn Treaty American Corp. ................................... 80,000 1,500
PXRE Corp. ................................................... 160,000 4,080
Trenwick Group, Inc. ......................................... 40,000 1,910
-------
25,237
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MANUFACTURING (3.2%)
Clarcor, Inc. .............................................. 55,000 $ 1,086
Donaldson Co., Inc. ........................................ 40,500 1,063
*Essef Corp. ................................................ 70,000 1,033
Harsco Corp. ............................................... 18,000 1,240
Hunt Manufacturing Co. ..................................... 200,500 3,358
Synalloy Corp. ............................................. 100,000 1,850
Tennant Co. ................................................ 5,000 120
--------
9,750
- -------------------------------------------------------------------------------
METALS (4.7%)
AK Steel Holding Corp. ..................................... 125,000 4,781
Carpenter Technology Corp. ................................. 80,000 3,010
Easco, Inc. ................................................ 150,000 1,312
J & L Specialty Steel, Inc. ................................ 225,000 4,078
*Steel of West Virginia, Inc. ............................... 125,000 1,188
--------
14,369
- -------------------------------------------------------------------------------
PAPER & PACKAGING (2.0%)
American Business Products, Inc. ........................... 75,000 1,631
Rayonier, Inc. ............................................. 80,000 2,870
*Specialty Paperboard, Inc. ................................. 135,000 1,755
--------
6,256
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (2.3%)
Cali Realty Corp. .......................................... 100,000 2,287
Healthcare Realty Trust, Inc. .............................. 50,000 1,119
Irvine Apartment Communities................................ 20,000 400
Liberty Property Trust...................................... 60,000 1,238
Omega Healthcare Investors, Inc. ........................... 24,500 686
Shurgard Storage Centers, Inc. ............................. 30,000 769
Town & Country Trust........................................ 45,000 630
--------
7,129
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
RETAIL (4.7%)
Big B, Inc. ................................................ 150,000 $ 1,594
*Carson Pirie Scott & Co. ................................... 122,000 2,959
*Lechters, Inc. ............................................. 225,000 1,575
Ruddick Corp. .............................................. 140,000 1,855
Shopko Stores, Inc. ........................................ 150,000 2,325
Smith's Food & Drug Centers, Inc., Class B.................. 125,000 3,125
Strawbridge & Clothier...................................... 69,000 1,259
--------
14,692
- -------------------------------------------------------------------------------
SERVICES (6.2%)
ABM Industries, Inc. ....................................... 110,000 3,754
Bowne & Co., Inc. .......................................... 120,000 2,160
*Devon Group, Inc. .......................................... 125,000 3,937
PHH Corp. .................................................. 85,000 4,834
*Rexel, Inc. ................................................ 300,000 4,013
*Unitel Video, Inc. ......................................... 70,000 385
--------
19,083
- -------------------------------------------------------------------------------
TECHNOLOGY (11.9%)
AMETEK, Inc. ............................................... 200,000 3,850
Analysts International Corp. ............................... 50,000 1,850
*BancTec, Inc. .............................................. 132,800 2,706
Charter Power System, Inc. ................................. 70,000 1,890
*Exar Corp. ................................................. 82,500 1,361
*ILC Technology, Inc. ....................................... 100,000 1,150
Marshall Industries......................................... 100,000 3,187
Methode Electronics, Inc., Class A.......................... 200,000 3,250
National Computer Systems, Inc. ............................ 150,000 3,263
*Norstan, Inc. .............................................. 55,000 1,444
*Phototronics, Inc. ......................................... 140,000 3,640
Pioneer Standard Electronics................................ 125,000 2,000
Quixote Corp. .............................................. 200,000 1,200
*Silicon Valley Group, Inc. ................................. 125,000 3,312
*Western Digital Corp. ...................................... 115,000 2,703
--------
36,806
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (1.2%)
Rollins Truck Leasing Corp.................................. 206,200 $ 2,242
TNT Freightways Corp........................................ 60,000 1,350
--------
3,592
- -------------------------------------------------------------------------------
UTILITIES (2.1%)
Comsat Corp................................................. 213,700 6,518
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $218,681).......................... 281,074
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (8.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.0%)
J.P. Morgan Securities Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $6,034, collateralized by
$4,044 U.S. Treasury Bonds, 10.625%, due 8/15/15, valued at
$6,155 (COST $6,033) ....................................... $ 6,033 6,033
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (6.4%)
++Federal Farm Credit Bank, 5.17%, 5/29/96.................. 10,000 9,960
++Federal National Mortgage Association Discount Note,
5.19%, 6/18/96............................................. 10,000 9,931
--------
19,891
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $25,924).................. 25,924
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%) (COST $244,605).................... 306,998
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
- -------------------------------------------------------------------------------
Cash........................................................ 1
Receivable for Investments Sold............................. 1,875
Receivable for Portfolio Shares Sold........................ 269
Dividends Receivable........................................ 227
Interest Receivable......................................... 1
Other Assets................................................ 3
Payable for Investments Purchased........................... (512)
Payable for Investment Advisory Fees........................ (169)
Payable for Portfolio Shares Redeemed....................... (92)
Payable for Administrative Fees............................. (31)
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSET AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Payable for Directors' Fees..................................... $ (1)
Other Liabilities............................................... (32)
--------
1,539
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 15,150,742 outstanding $0.001 par value Institutional
Class shares (authorized 50,000,000 shares)......................... $308,537
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE............. $ 20.36
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
++ Security is valued at cost.
* Non-Income Producing Security
Interest rates shown for the U.S. Government Agency Obligations represent
effective yields at April 30, 1996.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ICM SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
1996
(In Thousands) (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends.......................................................... $ 1,885
Interest........................................................... 1,061
- --------------------------------------------------------------------------------
Total Income...................................................... 2,946
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B................................... 967
Administrative Fees--Note C........................................ 163
Custodian Fees..................................................... 13
Directors' Fees--Note F............................................ 4
Other Expenses..................................................... 63
- --------------------------------------------------------------------------------
Total Expenses.................................................... 1,210
Expense Offset--Note A............................................. (8)
- --------------------------------------------------------------------------------
Net Expenses...................................................... 1,202
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................... 1,744
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.................................... 2,213
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS................ 31,078
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS............................................. 33,291
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $ 35,035
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ICM SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 1,817 $ 1,744
Net Realized Gain.................................. 12,752 2,213
Net Change in Unrealized Appreciation.............. 13,796 31,078
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 28,365 35,035
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (1,470) (1,736)
Net Realized Gain.................................. (5,149) (12,737)
- --------------------------------------------------------------------------------
Total Distributions............................... (6,619) (14,473)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 128,619 48,140
--In Lieu of Cash Distributions.................. 6,136 12,942
Redeemed........................................... (21,464) (23,905)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions...... 113,291 37,177
- --------------------------------------------------------------------------------
Total Increase..................................... 135,037 57,739
Net Assets:
Beginning of Period................................ 115,761 250,798
- --------------------------------------------------------------------------------
End of Period (2).................................. $250,798 $ 308,537
================================================================================
(1)Shares Issued and Redeemed:
Shares Issued...................................... 7,178 2,524
In Lieu of Cash Distributions...................... 377 706
Shares Redeemed.................................... (1,176) (1,249)
- --------------------------------------------------------------------------------
6,379 1,981
================================================================================
(2)Net Assets Consist of:
Paid in Capital.................................... $206,300 $243,477
Undistributed Net Investment Income................ 437 445
Accumulated Net Realized Gain...................... 12,746 2,222
Unrealized Appreciation............................ 31,315 62,393
- --------------------------------------------------------------------------------
$250,798 $308,537
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED OCTOBER 31, ENDED
--------------------------------------------- APRIL 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 7.78 $ 12.50 $ 14.96 $ 18.75 $ 17.05 $ 19.04
- ----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.14 0.11 0.08 0.09 0.16 0.12
Net Realized and
Unrealized Gain....... 4.73 2.81 4.94 0.64 2.70 2.24
- ----------------------------------------------------------------------------------------
Total from Investment
Operations........... 4.87 2.92 5.02 0.73 2.86 2.36
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.15) (0.10) (0.07) (0.09) (0.14) (0.12)
Net Realized Gain...... -- (0.36) (1.16) (2.34) (0.73) (0.92)
- ----------------------------------------------------------------------------------------
Total Distributions... (0.15) (0.46) (1.23) (2.43) (0.87) (1.04)
- ----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 12.50 $ 14.96 $ 18.75 $ 17.05 $ 19.04 $ 20.36
========================================================================================
TOTAL RETURN............ 62.79% 23.96% 35.20% 4.59% 17.73% 13.00%
========================================================================================
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $43,559 $58,483 $81,870 $115,761 $250,798 $308,537
Ratio of Expenses to
Average Net Assets..... 1.02% 0.95% 0.95% 0.93% 0.87%# 0.88%*#
Ratio of Net Investment
Income to Average Net
Assets................. 1.32% 0.77% 0.46% 0.58% 1.02% 1.26%*
Portfolio Turnover Rate. 49% 34% 47% 21% 20% 7%
Average Commission Rate
##..................... N/A N/A N/A N/A N/A $0.0596
- ----------------------------------------------------------------------------------------
</TABLE>
* Annualized
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be 0.86% for the year ended October 31, 1995 and 0.87%*
for the six months ended April 30, 1996.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The ICM Small Company Portfolio (the
"Portfolio"), a portfolio of UAM Funds, Inc., began operations on April 19,
1989. At April 30, 1996, the UAM Funds were comprised of thirty-seven active
portfolios. The financial statements of the remaining portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid price on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid price. 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 is 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 continue 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.
Paid in capital, undistributed net investment income and accumulated net
realized loss have been adjusted for prior year permanent book-tax
differences.
At April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $244,605,000. Net unrealized appreciation
for Federal income tax purposes aggregated approximately $62,393,000, of
which $70,630,000 related to appreciated securities and $8,237,000 related
to depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market 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.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all its net investment income to shareholders quarterly. Any
realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
13
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are principally due to differing book and tax treatments in the timing of
the recognition of gains or losses on investments.
5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. 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.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Investment Counselors of Maryland, 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
0.70% of average daily net assets.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
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;
14
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $17,224 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases and sales of approximately $57,428,000 and $16,497,000,
respectively, of investment securities other than long-term U.S. Government
and short-term securities. There were no purchases and sales of long-term U.S.
Government securities.
F. 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.
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, 11.3% of total shares outstanding were held by
one record shareholder owning 10% or greater of the aggregate total of shares
outstanding.
15
<PAGE>
- ------------------------------------------------------
UAM FUNDS
ICM FIXED INCOME PORTFOLIO
- ------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and Executive
Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- ------------------------------------------------------
INVESTMENT ADVISER
Investment Counselors of Maryland, Inc.
803 Cathedral Street
Baltimore, MD 21201
- ------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- ------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- ------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- ------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
This report has been prepared for shareholders and
may be distributed to others only if preceded or
accompanied by a current prospectus.
- ------------------------------------------------------
UAM FUNDS
ICM FIXED INCOME
PORTFOLIO
- ------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
Dear Shareholders:
Performance results for the ICM Fixed Income Portfolio are shown below. For
the six months ended April 30, 1996, the Portfolio returned 0.25% versus 0.53%
for the Lehman Brothers Aggregate Bond Index. For the three months ended April
30, 1996, the Portfolio returned -3.22% versus -2.97% for the benchmark index.
Performance is presented net of all fees and expenses.
PERFORMANCE--ALL PERIODS ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
3 MONTH 6 MONTH
------- -------
<S> <C> <C>
ICM Fixed Income Portfolio...................................... -3.22% 0.25%
Lehman Brothers Aggregate Bond Index............................ -2.97% 0.53%
</TABLE>
THE FIXED INCOME MARKET--SEMI-ANNUAL REVIEW. In aggregate, the fixed income
market produced a slightly positive return for the six months ended April 30,
1996. Higher rates during the three months ended April 30, 1996 erased most of
the positive returns experienced during the three months ended January 31,
1996. At the beginning of the six months ended April 30, 1996, the yield on
the U.S. Treasury 30 year bond was 6.33%. By December 31, 1995, the Treasury
bond yield had plunged to 5.94%. The prospect of completing a balanced budget
agreement, signs of a slower economy, and continued low inflation fueled the
bond market rally. A reversal in rates began in January, 1996, and by the end
of April, 1996, the yield on the U.S. Treasury bond was pushing toward 7%.
There are several reasons why the yield on the U.S. Treasury bond has climbed
almost 106 basis points. The hope of achieving a credible balanced budget
accord has dissolved, economic growth is stronger than expected, and higher
commodity prices and perceived pressures to increase wages undermine the case
for low inflation. Higher yields, as a result, remedy a perceived threat to
the real earning power of fixed income assets.
MARKET SECTOR REVIEW. All sectors of the U.S. domestic fixed income market
posted modest returns for the six months ended April 30, 1996. While corporate
securities continued to track U.S. Treasury performance closely, the mortgage
sector provided strong relative returns. For the six months ended April 30,
1996, the U.S. Treasury, corporate, and mortgage components of the Lehman
Brothers Aggregate Bond Index returned 0.03%, 0.08% and 1.66%, respectively.
Within the mortgage sector, holdings of conventional 30 year pass-throughs
with coupons above 9.5% performed extremely well. A combination of higher
yields and lower prepayment assumptions helped this group achieve a total
return of 0.95% for the three months ended April 30, 1996.
While fears of higher growth and inflation plagued the U.S. market, foreign
bonds enjoyed strong relative performance on a dollar-hedged basis. Over the
six months ended April 30, 1996, the Lehman Brothers U.S. Treasury Index
underperformed bond markets in every other industrial country, except for New
Zealand. Markets in Europe, in particular, posted strong results. France, for
example, returned 18.7% for the six month period ended April 30, 1996
according to Lehman Brothers. Even in Japan, where fear of imminent growth
sparked a major sell-off in December, 1995, the market returned 1.61% on a
dollar-hedged basis over the six months ended April 30, 1996, according to
Lehman Brothers.
1
<PAGE>
THE ICM FIXED INCOME PORTFOLIO OVERVIEW. Although we are pleased with the six
month performance of the Portfolio, we are disappointed with our results for
the three month period ended April 30, 1996. Like many other bond managers, we
were caught during the initial spike in rates with too much interest rate
exposure relative to our benchmark. We also failed to maintain a defensive
portfolio structure at the beginning of 1996 since we were neutral on the
economy. Although our mortgage holdings performed well, we were not
overweighted in mortgage pass-throughs with coupons above 8.5%. While these
securities performed extremely well, especially during the three months ended
April 30, 1996, we rarely overweight this group since their return is very
sensitive to the outcome of a bet implicitly made on short-term and long-term
prepayment speeds.
The Portfolio experienced the following shifts in sector allocations over the
six months ended April 30, 1996. In order to increase yield and exposure to an
undervalued sector, we increased mortgage holdings from 25% to 30%. Mortgage
allocations included current coupon pass-throughs and well structured, short
average life PAC bonds. Corporate allocations were reduced to 13% from 19% to
reflect more closely our slightly negative view on credit spreads. Tactical
foreign allocations to the German and Australian bond markets during the six
month period ended April 30, 1996, composed no more than 7% of the Portfolio.
These and other foreign markets continue to provide opportunities to add value
to the Portfolio.
DERIVATIVE SECURITIES. The Portfolio uses the following derivative
instruments: Exchange Traded Futures, Exchange Traded Options, Collateralized
Mortgage Obligations (CMOs) and Mortgage Pass-through Securities. On April 30,
1996, the sale of 10 U.S. Treasury 10 year note futures contracts composed
4.8% of the Portfolio. This position offset the purchase of five German 10
year bonds which composed 5.5% of the Portfolio. Increasing exposure to German
bonds while decreasing exposure to the U.S. Treasury 10 year note has proven
beneficial as yield spreads between these respective markets have tightened
from +30 basis points to -45 basis points over the six months ended April 30,
1996.
Strategies involving exchange-traded options implemented during the six months
ended April 30, 1996 added little value to the Portfolio. Put options
purchased in November, December, and February expired worthless which means
that the premium paid for the insurance against rising interest rates was
forfeited. This reduced performance by no more than 4 basis points. Call
option strategies faired slightly better, but made a negligible contribution
to the Portfolio.
We increased the allocation of mortgage-backed securities to 30% during the
six months ended April 30, 1996. Mortgage pass-through securities composed 22%
of the Portfolio as of April 30, 1996. The higher yields on current pass-
throughs, we believe, provide ample compensation for prepayment risk given
market conditions. CMO holdings were also increased to 9% of the Portfolio
during the six months ended April 30, 1996. The Portfolio's CMO holdings have
simple structures, most include well-seasoned underlying collateral and none
is levered. This sector continues to provide high relative income, strong
credit quality and liquidity.
OUTLOOK. Yields in the bond market reflect an enormous amount of pessimism.
The term structure of interest rates suggests that real economic growth will
exceed 2.5% and inflation will approach 3.5%. Federal Fund futures, for
January, 1997 settlement, are trading near 6%. This is 75 basis points higher
than current overnight Federal Funds. These market measures are quite a
contrast to the 25-50 basis points of ease embedded in the U.S. Treasury curve
at the end of 1995.
Should yields on the U.S. Treasury 30 year bond approach 7.25%, we would be
more inclined to buy bonds than to sell them. Asset allocation models should
find fixed income prospective returns increasingly attractive
2
<PAGE>
compared to equities, barring a major correction in stocks. Higher rates
should eventually have a dampening effect on the economy. The markets are too
pessimistic on the prospects for meaningful budget deficit reduction in the
U.S.; global capital markets and commitments within the G-7 will continue to
guide budgetary policies toward deficit reduction. We also believe that a
longer term demographic trend, which favors investment over consumption,
remains intact. These factors continue to build a case for lower yields over
time.
The possibility of strong, synchronized global growth threatens our view. The
economic wake of surging Japanese demand, European and Latin American growth,
and a booming Pacific Rim would put further pressure on U.S. interest rates.
Increased export demand would stretch limited labor capacity in the U.S.
Global growth would also keep pressure on industrial commodity prices. In both
cases, inflation expectations would rise further. While this scenario remains
a possibility, we believe it is far too early to bet on dramatic economic
turnarounds in Japan, Europe and Mexico.
Respectfully submitted,
/s/ Dan Shackelford
Dan Shackelford, CFA
DEFINITION OF THE COMPARATIVE INDEX
The Lehman Brothers Aggregate Bond Index is an unmanaged fixed income market
value-weighted index that combines the Lehman Brothers Government/Corporate
Index and the Lehman Brothers Mortgage-Backed Securities Index. 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 $100 million for U.S.
Government issues and $25 million for others.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers and did not assume expenses on
behalf of the Portfolio, total return for the Portfolio would have been lower.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
3
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (13.2%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (8.7%)
American General Finance 8.125%, 8/15/09....................... $ 250 $ 264
Associates Corp. of North America 8.375%, 1/15/98.............. 25 26
Commercial Credit Corp. 8.70%, 6/15/09......................... 100 111
**Dean Witter Discover 5.60%, 3/2/99............................ 15 15
Ford Motor Credit Corp. Medium Term Note 6.70%, 8/2/00......... 250 249
General Electric Capital Corp. 8.85%, 4/1/05................... 350 391
General Motors Acceptance Corp. 8.875%, 6/1/10................. 50 56
Household Finance Corp. 8.875%, 7/5/99......................... 50 50
Morgan Stanley, Inc. 5.65%, 6/15/97............................ 350 349
Norwest Financial, Inc. 6.23%, 9/1/98.......................... 300 300
U.S. West Capital, Inc. 8.40%, 9/15/99......................... 100 105
-------
1,916
- -------------------------------------------------------------------------------
INDUSTRIAL (2.4%)
American Home Products 7.70%, 2/15/00.......................... 250 259
Dow Chemical Co. 8.55%, 10/15/09............................... 25 27
EG & G, Inc. 6.80%, 10/15/05................................... 200 191
Weyerhaeuser Co. 9.05%, 2/1/03................................. 50 56
-------
533
- -------------------------------------------------------------------------------
TRANSPORTATION (1.9%)
Boeing Co. 7.95%, 8/15/24...................................... 250 267
Ryder System, Inc. 7.30%, 10/30/00............................. 150 153
-------
420
- -------------------------------------------------------------------------------
UTILITIES (0.2%)
Commonwealth Edison Co. 8.00%, 10/15/03........................ 10 10
General Telephone of Wisconsin 7.50%, 3/1/02................... 10 10
New York Electric & Gas 6.50%, 9/1/98.......................... 15 15
-------
35
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $2,869)................... 2,904
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -----------------------------------------------------------------------------
YANKEE BOND (0.5%)
- -----------------------------------------------------------------------------
FINANCIAL SERVICES (0.5%)
InterAmerica Development Bank
8.40%, 9/1/09 (COST $109)................................... $ 100 $ 111
- -----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES (22.1%)
- -----------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (4.7%)
Pool #E48794,
15 yr. Guarantee 6.50%, 7/1/08.............................. 110 107
Pool #E00292,
Gold 6.50%, 4/1/09.......................................... 303 294
Pool #845640
**7.919%, 8/1/23 ............................................ 235 240
Pool #C00449
7.00%, 3/1/26............................................... 400 386
-------
1,027
- -----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (12.5%)
- -----------------------------------------------------------------------------
Pool #81817
9.50%, 8/1/02............................................... 13 13
Pool #232847
7.00%, 8/1/08............................................... 47 47
Pool #232361
6.00%, 10/1/08.............................................. 75 71
Pool #264441
6.00%, 1/1/09............................................... 84 79
Pool #250498
6.50%, 3/1/11............................................... 297 288
Pool #50013
9.50%, 10/1/17.............................................. 4 4
Pool #55343
9.50%, 10/1/17.............................................. 11 12
Pool #50993
7.00%, 2/1/24............................................... 465 449
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Pool #298034
8.00%, 11/1/24................................................ $ 256 $ 259
Pool #311025
8.00%, 5/1/25................................................. 380 384
Pool #322345
7.50%, 9/1/25................................................. 335 331
Pool #330297
7.00%, 11/1/25................................................ 445 429
FNCI 15 Yr. Fixed FNMA
7.00%, 5/1/11................................................. 400 396
-------
2,762
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (4.9%)
- -------------------------------------------------------------------------------
Pool #17084
8.00%, 9/15/07................................................ 26 26
Pool #20335
8.00%, 10/15/07............................................... 38 39
Pool #400216
7.00%, 4/15/09................................................ 275 274
Pool #109599
12.00%, 1/15/14............................................... 61 70
Pool #311575
7.50%, 2/15/23................................................ 493 487
Pool #387161
7.50%, 10/15/25............................................... 197 195
-------
1,091
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH SECURITIES
(COST $4,565).................................................. 4,880
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (8.7%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (8.6%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.9%)
Series 1544-E
6.25%, 6/15/08................................................ $ 200 $ 198
Series 1003-C
8.50%, 12/15/16............................................... 6 6
-------
204
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (7.7%)
Series 1993-194 CL PG PAC (11)
5.65%, 4/25/05................................................ 350 339
Series 1990-103 CL J
7.50%, 10/25/19............................................... 49 50
Series 1991 21-H
7.00%, 12/25/19............................................... 154 154
Series 1993 S2-D
5.50%, 12/25/02............................................... 150 148
Series G92-30 H
7.00%, 1/25/20................................................ 30 30
Series G92-15 G PAC (11)
7.00%, 4/25/20................................................ 395 381
Series G19-H PAC
8.40%, 6/25/20................................................ 200 206
Series 92-11 J PAC (11)
7.00%, 4/25/21................................................ 400 382
-------
1,690
-------
1,894
- -------------------------------------------------------------------------------
OTHER (0.1%)
FBC Mortgage Securities Trust Series 7-B
**5.963%, 1/25/17............................................. 2 2
Morgan Stanley Mortgage Trust Series Y3
8.95%, 3/1/16................................................. 16 16
-------
18
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $2,228)......... 1,912
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES (50.0%)
- --------------------------------------------------------------------------------
Student Loan Marketing Association (1.1%)
**5.45%, 3/3/97................................................. $ 250 $ 250
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS (15.0%)
7.125%, 2/15/23................................................. 500 502
12.75%, 11/15/10................................................ 25 35
7.50%, 11/15/16................................................. 2,650 2,770
-------
3,307
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (33.9%)
7.375%, 5/15/96................................................. 15 15
6.25%, 1/31/97.................................................. 150 151
8.875%, 11/15/97................................................ 50 52
5.125%, 3/31/98................................................. 625 615
6.125%, 3/31/98................................................. 500 501
5.125%, 4/30/98................................................. 1,000 983
5.25%, 7/31/98.................................................. 150 147
6.375%, 1/15/99................................................. 445 447
6.375%, 7/15/99................................................. 2,460 2,468
6.875%, 8/31/99................................................. 125 127
5.50%, 4/15/00.................................................. 100 97
6.25%, 5/31/00.................................................. 200 199
7.50%, 11/15/01................................................. 50 52
6.375%, 8/15/02................................................. 1,285 1,274
6.25%, 2/15/03.................................................. 250 246
7.25%, 8/15/04.................................................. 100 104
-------
7,478
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $11,306)....... 11,035
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NO. OF VALUE
CONTRACTS (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
PURCHASED CALL OPTIONS (0.0%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS (0.0%)
++*U.S. Treasury 10 Year Note, expiring 6/96, strike price
U.S.$114.................................................. 10 $ --
++*U.S. Treasury 5 Year Note, expiring 6/96, strike price
U.S.$109.50............................................... 10 --
- -------------------------------------------------------------------------------
TOTAL PURCHASED CALL OPTIONS (COST $8)...................... --
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (6.0%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.6%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $1,245, collateralized by
$1,080 U.S. Treasury Bonds, 8.50%, due 2/15/20, valued at
$1,270 (COST $ 1,245)..................................... $1,245 1,245
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION (0.4%)
+++U.S. Treasury Bill 4.83%, 8/1/96 (COST $99) ............ 100 99
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,344).................. 1,344
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%) (COST $22,429) .................. 22,186
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.5%)
- -------------------------------------------------------------------------------
Cash....................................................... 1
Interest Receivable........................................ 286
Receivable for Portfolio Shares Sold....................... 254
Receivable from Investment Adviser......................... 11
Receivable for Daily Variation on Futures Contracts........ 3
Other Assets............................................... 12
Payable for Investments Purchased.......................... (651)
Payable for Administrative Fees............................ (8)
Payable for Directors' Fees................................ (1)
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Written Options Outstanding, at Value (premiums received $3 ). $ --
Other Liabilities............................................. (25)
-------
(118)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 2,171,025 outstanding $0.001 par value Institu-
tional Class shares (authorized 50,000,000 shares)........... $22,068
===============================================================================
NET ASSET VALUE PER SHARE $ 10.16
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
++ Market value is less than $500.00
+++ A portion of this security was pledged to cover margin requirements for
open futures contracts.
* Non-Income Producing Security.
** Variable/Floating rate security--rate disclosed is as of April 30, 1996.
PAC--Planned Amortization Class.
Interest Rate disclosed for the U.S. Treasury Bill represents effective
yield at April 30, 1996.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ICM FIXED INCOME
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
1996
(In Thousands) (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $ 560
- --------------------------------------------------------------------------------
Total Income............................................... 560
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees................................................. $ 44
Less: Fees Waived.......................................... (44) --
----
Administrative Fees--Note C................................. 43
Printing Fees............................................... 11
Audit Fees.................................................. 7
Custodian Fees.............................................. 6
Directors' Fees--Note F..................................... 1
Other Expenses.............................................. 6
Expenses Assumed by the Adviser--Note B .................... (30)
- --------------------------------------------------------------------------------
Total Expenses............................................. 44
@Expense Offset--Note A..................................... --
- --------------------------------------------------------------------------------
Net Expenses............................................... 44
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME........................................ 516
- --------------------------------------------------------------------------------
NET REALIZED GAIN:
Investments................................................. 51
Futures Contracts........................................... 32
- --------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FUTURES CONTRACTS. 83
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION ON INVESTMENTS AND
FUTURES CONTRACTS........................................... (605)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS...................................... (522)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS......... $ (6)
================================================================================
</TABLE>
@ Amount represents custodian balance credits of $270
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ICM FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 915 $ 516
Net Realized Gain.................................. 30 83
Net Change in Unrealized Appreciation (Deprecia-
tion)............................................. 1,098 (605)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. 2,043 (6)
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (813) (518)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 7,677 6,546
--In Lieu of Cash Distributions.................. 788 497
Redeemed........................................... (5,531) (1,216)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions...... 2,934 5,827
- --------------------------------------------------------------------------------
Total Increase..................................... 4,164 5,303
Net Assets:
Beginning of Period................................ 12,601 16,765
- --------------------------------------------------------------------------------
End of Period (2).................................. $16,765 $22,068
================================================================================
(1)Shares Issued and Redeemed:
Shares Issued..................................... 750 632
In Lieu of Cash Distributions..................... 78 48
Shares Redeemed................................... (541) (116)
- --------------------------------------------------------------------------------
287 564
================================================================================
(2) Net Assets Consist of:
Paid in Capital................................... $16,379 $22,206
Undistributed Net Investment Income............... 134 133
Accumulated Net Realized Loss..................... (120) (37)
Unrealized Appreciation (Depreciation)............ 372 (234)
- --------------------------------------------------------------------------------
$16,765 $22,068
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NOVEMBER 3, YEARS ENDED SIX MONTHS
1992** TO OCTOBER 31, ENDED
OCTOBER 31, ----------------- APRIL 30, 1996
1993 1994 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 10.00 $ 10.58 $ 9.55 $ 10.43
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income+......... 0.51 0.52 0.59 0.28
Net Realized and Unrealized
Gain (Loss) on Investments and
Futures....................... 0.51 (0.98) 0.82 (0.25)
- --------------------------------------------------------------------------------
Total from Investment Opera-
tions........................ 1.02 (0.46) 1.41 0.03
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.......... (0.44) (0.48) (0.53) (0.30)
Net Realized Gain.............. -- (0.09) -- --
- --------------------------------------------------------------------------------
Total Distributions........... (0.44) (0.57) (0.53) (0.30)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.. $ 10.58 $ 9.55 $ 10.43 $ 10.16
================================================================================
TOTAL RETURN++.................. 10.38% (4.43)% 15.11% 0.25%
================================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thou-
sands)......................... $12,465 $12,601 $16,765 $22,068
Ratio of Expenses to Average Net
Assets+........................ 0.84%* 0.84% 0.63%# 0.50%*#
Ratio of Net Investment Income
to Average Net Assets+......... 5.41%* 5.26% 6.04% 5.86%*
Portfolio Turnover Rate......... 65% 82% 49% 22%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of
$0.03, $0.04, $0.08 and $0.04 per share for the period ended October 31,
1993, the years ended October 31, 1994, 1995 and the six months ended April
30, 1996, respectively.
++ Total return would have been lower had certain expenses not been waived and
expenses assumed by the Adviser during the period.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be 0.61% for the year ended October 31, 1995 and 0.50%*
for the six months ended April 30, 1996.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The ICM Fixed Income Portfolio (the
"Portfolio"), a portfolio of UAM Funds, Inc., began operations on November 3,
1992. At April 30, 1996, the UAM Funds were comprised of thirty-seven active
portfolios. The financial statements of the remaining portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Fixed income securities are stated on the basis of
valuations provided by brokers and/or a pricing service which uses
information with respect to transactions in fixed income securities,
quotations from dealers, market transactions in comparable securities and
various relationships between securities in determining value. Short-term
investments that have remaining maturities of sixty days or less at time of
purchase are valued at amortized cost, if it approximates market value. The
value of other assets and securities for which no quotations are readily
available is 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 continue 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.
Paid in capital, undistributed net investment income and accumulated net
realized loss have been adjusted for prior year permanent book-tax
differences. Reclassifications between undistributed net investment income
and accumulated net realized loss arose principally from differing book and
tax treatments for foreign currency transactions; reclassifications between
paid in capital and accumulated net realized loss arose principally from
differing book and tax treatments for in-kind redemptions (Note A6).
At April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $22,429,000. Net unrealized depreciation for
Federal income tax purposes aggregated approximately $243,000, of which
approximately $74,000 related to appreciated securities and approximately
$317,000 related to depreciated securities.
At October 31, 1995, the Portfolio had available a capital loss carryover
for Federal income tax purposes of approximately $110,000, which will
expire on October 31, 2002.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market 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
14
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
4. FUTURES CONTRACTS: The Portfolio's purchases and sales of futures
contracts are designed to hedge a portion of its investments against
changes in value or as an alternative to purchasing or selling actual
securities. Upon entering into a futures contract, the Portfolio is
required to deposit with a broker an amount in cash or securities ("initial
margin") equal to a certain percentage of the purchase price indicated in
the futures contract. Subsequent payments ("variation margin") are made or
received by the Portfolio each day and are recorded for financial reporting
purposes as unrealized appreciation or depreciation. When futures contracts
are closed, the difference between the opening value at the date of
purchase and the value at closing is recorded as realized gain or loss in
the statement of operations. Futures contracts are valued at the settlement
price established each day by the board of trade or exchange on which they
are traded. Futures contracts involve market risk in excess of the amounts
recognized in the statement of net assets. Risks arise from the possible
movements in security values underlying these instruments. The change in
value of futures contracts primarily corresponds with the value of their
underlying instruments, which may not correlate with the change in value of
the hedged investments. In addition, there is risk that the Portfolio may
not be able to enter into a closing transaction because of an illiquid
secondary market.
The Portfolio had the following futures contracts open at April 30, 1996:
<TABLE>
<CAPTION>
NET
UNREALIZED
NUMBER AGGREGATE APPRECIATION
OF FACE VALUE EXPIRATION (DEPRECIATION)
CONTRACTS CONTRACTS (000) DATE (000)
--------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Purchases:
German 10 Year Bond.......... 5 DEM 1,213 June-96 U.S.$--
Sales:
U.S. Treasury 10 Year Note... 10 U.S.$1,075 June-96 6
-------
U.S.$ 6
=======
</TABLE>
DEM--Deutsche Mark
5. PURCHASED AND WRITTEN OPTIONS: The Portfolio may write covered call and
put options. Premiums are received and are recorded as liabilities, and
subsequently adjusted to the current value of the options written. Premiums
received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or are canceled
in closing purchase transactions are offset against the proceeds or amount
paid on the transaction to determine the realized gain or loss. By writing
a call option, a Portfolio foregoes in exchange for the premium the
opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase. Possible losses from
written options may be unlimited.
The Portfolio may also purchase call and put options on their portfolio
securities. The Portfolio may purchase call and put options to close out
covered call and put positions or to protect against an increase in the
price of the security it anticipates purchasing. Possible losses from
purchased options cannot exceed the total amount invested.
15
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
Use of put and call options could result in losses to the Portfolio, force
the purchase or sale of portfolio securities at inopportune times or for
prices higher or lower than current market values, or cause the Portfolio
to hold a security it might otherwise not purchase or sell. Losses
resulting from the use of options will reduce the Portfolio's net asset
value, and possibly income, and the losses may be greater than if options
had not been used.
During the six months ended April 30, 1996, the Portfolio participated in
writing covered call and put options. The Portfolio had option activity as
follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS (000)
--------- --------
<S> <C> <C>
Options outstanding at October 31, 1995.................. -- $--
Options written during the period........................ 20 5
Options cancelled in closing transactions during the
period.................................................. (10) (2)
--- ----
Options outstanding at April 30, 1996.................... 10 $ 3
=== ====
</TABLE>
6. IN-KIND TRANSACTIONS: For the year ended October 31, 1995, the Portfolio
realized losses of $11,000 from in-kind redemptions.
7. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly.
Any realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments, futures and options, and
permanent differences as presented in Note A2.
8. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Most expenses of the UAM Funds can be directly attributed
to a particular portfolio. Expenses which cannot be directly attributed are
apportioned among the portfolios of the UAM Funds based on their relative
net assets. 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.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Investment Counselors of Maryland, 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
0.50% of average daily net assets. Effective April 1, 1995, the Adviser has
voluntarily agreed to waive a portion of its
16
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
advisory fees and to assume expenses, if necessary, in order to keep the
Portfolio's total annual operating expenses, after the effect of expense
offset arrangements, from exceeding 0.50% of average daily net assets.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $3,264 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases and sales of approximately $65,000 and $431,000, respectively,
of investment securities other than long-term U.S. Government and Agency and
short-term securities. Purchases and sales of long-term U.S. Government and
Agency securities totaled approximately $8,789,000 and $3,315,000,
respectively.
F. 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.
17
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
18
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
C & B BALANCED PORTFOLIO
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer Peter M. Whitman, Jr.
Director, President Director
and Chairman
William H. Park
Mary Rudie Barneby Vice President and
Director and Assistant Treasurer
Executive Vice President
Karl O. Hartmann
John T. Bennett, Jr. Secretary
Director
Robert R. Flaherty
J. Edward Day Treasurer
Director
Harvey M. Rosen
Philip D. English Assistant Secretary
Director
William A. Humenuk
Director
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Cooke & Bieler, Inc.
1700 Market Street
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street,
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
C & B BALANCED
PORTFOLIO
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
May 6, 1996
Dear Shareholder:
The following provides a detailed description of the securities held and
statement of operations for the Cooke & Bieler Balanced Portfolio for the six
month period ended April 30, 1996.
Over this most recent six month period, the Portfolio had a total return of
8.64%, slightly better than the Benchmark Index's return of 8.27%. The
Benchmark Index is a blended return of 60% of the S&P 500 Index and 40% of the
Lehman Brothers Government/Corporate Index. Individually, the S&P 500 Index
had a total return during this period of 13.76% and the Lehman Brothers
Government/Corporate Index had a total return of 0.04%. We are satisfied with
these most recent results. Our strategy is to protect the substantial gains
achieved in 1995 and heretofore in 1996. Although Cooke & Bieler is not a
"market timing" firm, we are concerned about the overall valuation of most
financial assets.
As of April 30, 1996, the Portfolio's assets were allocated 59% to common
stocks, 39% to bonds and 2% to cash equivalents.
The internal research effort at Cooke & Bieler remains focused on "high
quality/low risk" companies, as well as "high quality/low risk" bonds. The
common stocks held in this Portfolio should prove to be intrinsically
profitable, pay responsible dividends and may have the ability to grow
dividends at better than market rates. On the bond side, the majority of the
holdings are obligations of the U.S. Government with an average maturity of
about 5 years.
Sincerely,
/s/ Peter A. Thompson
Peter A. Thompson
DEFINITIONS OF THE COMPARATIVE INDICES
--------------------------------------
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Lehman Brothers Government/Corporate Index is an unmanaged index composed
of a combination of the Government and Corporate Bond Indices. The Government
Index includes public obligations of the U.S. Treasury, issues of Government
agencies, and corporate debt backed by the U.S. Government. The Corporate Bond
Index includes fixed-rate nonconvertible corporate debt. Also included are
Yankee Bonds and nonconvertible debt issued by or guaranteed by foreign or
international governments and agencies. All issues are
1
<PAGE>
investment grade (BBB) or higher, with maturities of at least one year and
outstanding par value of at least $100 million for U.S. Government issues and
$25 million for others. Any security downgraded during the month is held in
the Index until month-end and then removed. All returns are market value
weighted inclusive of accrued income.
The Benchmark Index, a hypothetical combination of unmanaged indices, reflects
the Portfolio's typical mix of 60% stocks and 40% bonds. The index combines
returns from the S&P 500 Index and the Lehman Brothers Government/Corporate
Index.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers on behalf of the Portfolio,
total return would have been lower. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
2
<PAGE>
C & B BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (58.3%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.4%)
Boeing Co. ..................................................... 2,600 $ 213
Raytheon Co. ................................................... 11,500 582
-------
795
- --------------------------------------------------------------------------------
AUTOMOTIVE (3.9%)
Cooper Tire & Rubber Co. ....................................... 5,900 145
Eaton Corp. .................................................... 5,000 302
Genuine Parts Co. .............................................. 11,100 491
-------
938
- --------------------------------------------------------------------------------
BANKS (0.7%)
Wachovia Corp. ................................................. 3,600 158
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.1%)
McCormick & Co., Inc. .......................................... 12,600 280
Philip Morris Cos., Inc. ....................................... 2,500 225
-------
505
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (5.6%)
American Greetings Corp., Class A............................... 10,100 279
Donnelley (R.R.) & Sons Co. .................................... 4,000 144
Dun & Bradstreet Corp. ......................................... 2,900 176
McGraw-Hill Cos., Inc. ......................................... 5,800 256
Readers Digest Association, Inc., Class A (Non-Voting).......... 11,600 476
-------
1,331
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (3.8%)
Cooper Industries, Inc. ........................................ 6,600 280
Dover Corp. .................................................... 12,000 618
-------
898
- --------------------------------------------------------------------------------
CHEMICALS (2.0%)
Eastman Chemical Co. ........................................... 3,000 202
Lubrizol Corp. ................................................. 9,500 276
-------
478
- --------------------------------------------------------------------------------
COMPUTERS (0.9%)
International Business Machines Corp. .......................... 2,000 215
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
C & B BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSTRUCTION (1.9%)
Sherwin-Williams Co. ........................................... 9,800 $ 458
- --------------------------------------------------------------------------------
CONSUMER DURABLES (4.4%)
Avery Dennison Corp. ........................................... 3,600 205
Corning, Inc. .................................................. 14,400 500
Service Corp. International..................................... 6,300 335
-------
1,040
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.9%)
Avon Products, Inc. ............................................ 4,400 391
Hasbro, Inc. ................................................... 8,700 320
International Flavors & Fragrances, Inc. ....................... 4,600 226
-------
937
- --------------------------------------------------------------------------------
ELECTRONICS (1.6%)
Grainger (W.W.), Inc. .......................................... 2,500 173
Motorola, Inc. ................................................. 3,400 208
-------
381
- --------------------------------------------------------------------------------
ENERGY (6.2%)
Burlington Resources, Inc. ..................................... 9,300 346
Exxon Corp. .................................................... 6,500 553
Royal Dutch Petroleum Co. ...................................... 3,900 559
-------
1,458
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (8.8%)
EXEL Ltd. ...................................................... 4,300 310
H & R Block, Inc. .............................................. 7,900 277
Marsh & McLennan Cos., Inc. .................................... 6,500 611
MBIA, Inc. ..................................................... 4,400 314
State Street Boston Corp. ...................................... 11,500 574
-------
2,086
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (1.6%)
Whitman Corp. .................................................. 14,600 369
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (0.9%)
Pitney Bowes, Inc. ............................................. 4,500 219
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
C & B BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
PAPER & PACKAGING (2.2%)
Union Camp Corp. ............................................... 9,500 $ 517
- --------------------------------------------------------------------------------
PHARMACEUTICALS (4.4%)
Bristol-Myers Squibb Co. ....................................... 5,800 477
Schering-Plough Corp. .......................................... 9,700 557
-------
1,034
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $10,922)............................... 13,817
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (16.7%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.0%)
Boeing Co.
6.35%, 6/15/03................................................. $ 500 482
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (6.5%)
Coca Cola Co.
7.875%, 9/15/98................................................ 1,000 1,033
Philip Morris Cos., Inc.
8.75%, 6/15/97................................................. 500 512
-------
1,545
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (4.6%)
Clorox Co.
8.80%, 7/15/01................................................. 1,000 1,083
- --------------------------------------------------------------------------------
ENERGY (1.1%)
Amoco, Canada
7.25%, 12/1/02................................................. 250 253
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (2.5%)
Chevron Profit Sharing Savings Plan Trust Fund
7.28%, 1/1/97.................................................. 600 605
- --------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS (COST $3,847)........................ 3,968
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
C & B BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES (21.9%)
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (6.6%)
7.50%, 2/11/02............................................... $1,500 $ 1,557
- -------------------------------------------------------------------------------
U.S. TREASURY BOND (2.2%)
7.50%, 11/15/16.............................................. 500 523
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (13.1%)
8.125%, 2/15/98.............................................. 600 621
7.00%, 4/15/99............................................... 1,000 1,020
7.50%, 11/15/01.............................................. 1,000 1,047
8.25%, 5/15/05............................................... 400 422
-------
3,110
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $5,061)...... 5,190
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.4%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $557, collateralized by $484
U.S. Treasury Bonds, 8.5%, due 2/15/20, valued at $569 (COST
$557)......................................................... 557 557
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.3%) (COST $20,387)....................... 23,532
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.7%)
- -------------------------------------------------------------------------------
Interest Receivable........................................... 192
Dividends Receivable.......................................... 14
Other Assets.................................................. 2
Payable for Investments Purchased............................. (29)
Payable for Investment Advisory Fees.......................... (7)
Payable for Administrative Fees............................... (7)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (8)
-------
156
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,897,800 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $23,688
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 12.48
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
C & B BALANCED PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
(In Thousands) 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest...................................................... $ 349
Dividends..................................................... 165
- --------------------------------------------------------------------------------
Total Income................................................. 514
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees................................................... $ 74
Less: Fees Waived............................................ (26) 48
----
Administrative Fees--Note C................................... 40
Registration and Filing Fees.................................. 9
Audit Fees.................................................... 7
Custodian Fees................................................ 5
Directors' Fees--Note F....................................... 1
Other Expenses................................................ 8
- --------------------------------------------------------------------------------
Total Expenses............................................... 118
@ Expense Offset--Note A...................................... --
- --------------------------------------------------------------------------------
Net Expenses................................................. 118
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME.......................................... 396
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS............................... 1,229
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS........... 336
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS........................................ 1,565
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $1,961
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
@ Amount represents Custodian balance credits of $119.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
C & B BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED APRIL
OCTOBER 30, 1996
(In Thousands) 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.................................. $ 1,162 $ 396
Net Realized Gain...................................... 2,589 1,229
Net Change in Unrealized Appreciation.................. 1,387 336
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.. 5,138 1,961
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.................................. (1,204) (399)
Net Realized Gain...................................... (643) (2,579)
- --------------------------------------------------------------------------------
Total Distributions................................... (1,847) (2,978)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular........................................ 1,075 187
--In Lieu of Cash Distributions...................... 1,548 2,694
Redeemed............................................... (13,845) (2,322)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions................................................ (11,222) 559
- --------------------------------------------------------------------------------
Total Decrease......................................... (7,931) (458)
Net Assets:
Beginning of Period.................................... 32,077 24,146
- --------------------------------------------------------------------------------
End of Period (2)...................................... $ 24,146 $23,688
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 88 15
In Lieu of Cash Distributions......................... 131 225
Shares Redeemed....................................... (1,084) (181)
- --------------------------------------------------------------------------------
(865) 59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $ 18,701 $19,260
Undistributed Net Investment Income................... 93 90
Accumulated Net Realized Gain......................... 2,543 1,193
Unrealized Appreciation............................... 2,809 3,145
- --------------------------------------------------------------------------------
$ 24,146 $23,688
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
C & B BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED OCTOBER 31, ENDED APRIL
----------------------------------------------- 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.44 $ 11.88 $ 12.57 $ 12.68 $ 11.86 $ 13.13
- ------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.40+ 0.46 0.45 0.48+ 0.52+ 0.22+
Net Realized and
Unrealized Gain
(Loss)................ 2.45 0.79 0.40 (0.39) 1.51 0.83
- ------------------------------------------------------------------------------------------
Total From Investment
Operations........... 2.85 1.25 0.85 0.09 2.03 1.05
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.40) (0.46) (0.44) (0.47) (0.52) (0.22)
Net Realized Gain...... (0.01) (0.10) (0.30) (0.44) (0.24) (1.48)
- ------------------------------------------------------------------------------------------
Total Distributions... (0.41) (0.56) (0.74) (0.91) (0.76) (1.70)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 11.88 $ 12.57 $ 12.68 $ 11.86 $ 13.13 $ 12.48
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
TOTAL RETURN............ 30.50%++ 10.72% 7.01% 0.74%++ 17.83%++ 8.64%++
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $26,346 $35,326 $42,974 $32,077 $24,146 $23,688
Ratio of Expenses to
Average Net Assets..... 1.00%+ 0.91% 0.90% 1.00%+ 1.00%#+ 1.00%#*+
Ratio of Net Investment
Income to Average Net
Assets................. 4.07%+ 3.78% 3.65% 3.84%+ 3.80%+ 3.35%*+
Portfolio Turnover Rate. 11% 12% 22% 24% 22% 13%
Average Commission Rate
##..................... N/A N/A N/A N/A N/A $0.0509
- ------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Net of voluntarily waived fees of $0.01, $0.001, $0.004 and $0.01 per share
for the years ended October 31, 1991, 1994, 1995, and for the six months
ended April 30, 1996, respectively.
++ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would not significantly differ.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds"), were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The C & B Balanced Portfolio (the
"Portfolio"), a portfolio of UAM Funds, Inc., began operations on December 29,
1989. At April 30, 1996, the UAM Funds were comprised of thirty-seven active
portfolios. The financial statements of the remaining portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day, at the bid price on such day.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted equity
securities are valued at the current bid price. Fixed income securities are
stated on the basis of valuations provided by brokers and/or a pricing
service which uses information with respect to transactions in fixed income
securities, quotations from dealers, market transactions in comparable
securities and various relationships between securities in determining
value. Short-term investments that have remaining maturities of sixty days
or less at time of purchase are valued at amortized cost, if it
approximates market value. The value of other assets and securities for
which no quotations are readily available is 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 continue 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.
Paid in capital, undistributed net investment income and accumulated net
realized gain have been adjusted for prior year permanent book-tax
differences.
At April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $20,387,000. Net unrealized appreciation for
Federal income tax purposes aggregated approximately $3,145,000 of which
$3,269,000 related to appreciated securities and $124,000 related to
depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market 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
10
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all its net investment income to shareholders quarterly. Any
realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments.
5. OTHER: Security transactions are accounted for on the 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. Discounts and premiums
on securities purchased are amortized over their respective lives. Most
expenses of the UAM Funds can be directly attributed to a particular
portfolio. Expenses which cannot be directly attributed are apportioned
among the portfolios of the UAM Funds based on their relative net assets.
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.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Cooke & Bieler, 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 0.625% 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.
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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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
11
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
fee of 0.06% of average daily net assets for the Portfolio. Also effective
April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), a wholly-owned
subsidiary of The Chase Manhattan Bank, N.A., 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.
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $3,535 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases and sales of approximately $2,444,000 and $3,937,000,
respectively, of investment securities other than long-term U.S. Government
and short-term securities. Purchases of long-term U.S. Government securities
were approximately $541,000. There were no sales and maturities of long-term
U.S. Government securities.
F. 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.
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, 46.5% of total shares outstanding were held by
three record shareholders owning 10% or greater of the aggregate total shares
outstanding.
12
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
C & B EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Mary Rudie Barneby Peter M. Whitman, Jr.
Director and Director
Executive Vice President
John T. Bennett, Jr. William H. Park
Director Vice President and
Assistant Treasurer
J. Edward Day Karl O. Hartmann
Director Secretary
Philip D. English Robert R. Flaherty
Director Treasurer
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Cooke & Bieler, Inc.
1700 Market Street
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
C & B
EQUITY
PORTFOLIO
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
May 6, 1996
Dear Shareholder:
The following provides a detailed description of the securities held and
statement of operations for the Cooke & Bieler Equity Portfolio for the six
month period ended April 30, 1996.
Over this most recent six month period, the Portfolio had a total return of
14.46%, better than the S&P 500's return of 13.76%. We are gratified by these
most recent results. Our strategy is to protect the substantial gains achieved
in 1995 and heretofore in 1996, realizing that if the market were to duplicate
last year's results, that the Portfolio would most likely appreciate by a
lesser amount. Although Cooke & Bieler is not a "market timing" firm, we are
concerned about the overall valuation of the S&P 500.
Cooke & Bieler's internal research effort continues to be focused on well
managed companies with strong financial characteristics. The companies held in
the Portfolio have strong balance sheets, are highly profitable, and should
produce above average earnings and dividend growth. Such characteristics
should produce strong relative results if the investment environment turns
hostile and yet these same characteristics should allow the Portfolio to
participate meaningfully in any further market advance.
Our overall goal remains the same--to outperform the S&P 500 Index over the
longer term and to do so, by taking less risk than the overall market.
Sincerely,
/s/ Peter A. Thompson
Peter A. Thompson
DEFINITION OF THE COMPARATIVE INDEX
-----------------------------------
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
1
<PAGE>
C & B EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (96.7%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (5.5%)
Boeing Co. ................................................... 41,600 $ 3,416
Raytheon Co. ................................................. 201,900 10,221
--------
13,637
- --------------------------------------------------------------------------------
AUTOMOTIVE (6.4%)
Cooper Tire & Rubber Co. ..................................... 107,800 2,641
Eaton Corp. .................................................. 82,500 4,991
Genuine Parts Co. ............................................ 181,700 8,040
--------
15,672
- --------------------------------------------------------------------------------
BANKS (1.1%)
Wachovia Corp. ............................................... 60,900 2,680
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (3.5%)
McCormick & Co., Inc. ........................................ 200,800 4,468
Philip Morris Cos., Inc. ..................................... 46,000 4,146
--------
8,614
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (9.4%)
American Greetings Corp., Class A............................. 166,800 4,608
Donnelley (R.R.) & Sons Co. .................................. 69,000 2,484
Dun & Bradstreet Corp. ....................................... 45,700 2,782
McGraw-Hill Cos., Inc. ....................................... 113,400 5,004
Readers Digest Association, Inc., Class A (Non-Voting)........ 202,900 8,319
--------
23,197
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (6.4%)
Cooper Industries, Inc. ...................................... 115,200 4,896
Dover Corp. .................................................. 209,900 10,810
--------
15,706
- --------------------------------------------------------------------------------
CHEMICALS (3.2%)
Eastman Chemical Co. ......................................... 45,900 3,087
Lubrizol Corp. ............................................... 166,700 4,834
--------
7,921
- --------------------------------------------------------------------------------
COMPUTERS (1.6%)
International Business Machines Corp. ........................ 35,700 3,838
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
C & B EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSTRUCTION (3.3%)
Sherwin-Williams Co. ......................................... 172,200 $ 8,050
- --------------------------------------------------------------------------------
CONSUMER DURABLES (6.9%)
Avery Dennison Corp. ......................................... 45,500 2,594
Corning, Inc. ................................................ 246,400 8,562
Service Corp. International................................... 110,700 5,881
--------
17,037
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (6.8%)
Avon Products, Inc. .......................................... 81,100 7,208
Hasbro, Inc. ................................................. 154,700 5,685
International Flavors & Fragrances, Inc. ..................... 76,600 3,763
--------
16,656
- --------------------------------------------------------------------------------
ELECTRONICS (2.7%)
Grainger (W.W.), Inc. ........................................ 42,900 2,960
Motorola, Inc. ............................................... 58,000 3,552
--------
6,512
- --------------------------------------------------------------------------------
ENERGY (10.6%)
Burlington Resources, Inc. ................................... 163,800 6,102
Exxon Corp. .................................................. 120,800 10,268
Royal Dutch Petroleum Co. .................................... 68,200 9,770
--------
26,140
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (14.7%)
EXEL Ltd. .................................................... 76,000 5,472
H & R Block, Inc. ............................................ 139,000 4,882
Marsh & McLennan Cos., Inc. .................................. 114,600 10,772
MBIA, Inc. ................................................... 73,900 5,275
State Street Boston Corp. .................................... 197,700 9,860
--------
36,261
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (2.6%)
Whitman Corp. ................................................ 252,600 6,378
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (1.5%)
Pitney Bowes, Inc. ........................................... 74,700 3,642
- --------------------------------------------------------------------------------
PAPER & PACKAGING (3.3%)
Union Camp Corp. ............................................. 150,300 8,173
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
C & B EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
PHARMACEUTICALS (7.2%)
Bristol-Myers Squibb Co. ................................... 96,200 $ 7,912
Schering-Plough Corp. ...................................... 171,900 9,863
--------
17,775
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $189,305).......................... 237,889
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.5%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $8,561, collateralized by
$5,479 U.S. Treasury Bonds, 13.25%, due 5/15/14, valued at
$8,732 (COST $8,560)...................................... $8,560 8,560
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%) (COST $197,865)................... 246,449
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
- -------------------------------------------------------------------------------
Cash........................................................ 1
Receivable for Investments Sold............................. 627
Dividends Receivable........................................ 243
Receivable for Portfolio Shares Sold........................ 2
Interest Receivable......................................... 1
Other Assets................................................ 7
Payable for Investments Purchased........................... (678)
Payable for Portfolio Shares Redeemed....................... (423)
Payable for Investment Advisory Fees........................ (125)
Payable for Administrative Fees............................. (26)
Payable for Directors' Fees................................. (2)
Other Liabilities........................................... (33)
--------
(406)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 14,495,834 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).. $246,043
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE..... $ 16.97
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
C & B EQUITY PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
(In Thousands) 1996
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends........................................................... $ 2,867
Interest............................................................ 311
- --------------------------------------------------------------------------------
Total Income....................................................... 3,178
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B.................................... 770
Administrative Fees--Note C......................................... 143
Custodian Fees...................................................... 10
Directors' Fees--Note F............................................. 4
Other Expenses...................................................... 43
- --------------------------------------------------------------------------------
Total Expenses..................................................... 970
Expense Offset--Note A.............................................. (1)
- --------------------------------------------------------------------------------
Net Expenses....................................................... 969
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME................................................ 2,209
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS..................................... 21,385
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS................. 10,261
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS.............................................. 31,646
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $33,855
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
C & B EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED APRIL
OCTOBER 30, 1996
(In Thousands) 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................... $ 5,343 $ 2,209
Net Realized Gain....................................... 14,986 21,385
Net Change in Unrealized Appreciation................... 25,576 10,261
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations... 45,905 33,855
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................... (5,401) (2,393)
Net Realized Gain....................................... -- (11,481)
- --------------------------------------------------------------------------------
Total Distributions.................................... (5,401) (13,874)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular......................................... 36,111 7,595
--In Lieu of Cash Distributions.................... 4,791 13,484
Redeemed................................................ (44,530) (40,830)
- --------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions........... (3,628) (19,751)
- --------------------------------------------------------------------------------
Total Increase.......................................... 36,876 230
Net Assets:
Beginning of Period..................................... 208,937 245,813
- --------------------------------------------------------------------------------
End of Period (2)....................................... $245,813 $246,043
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued.......................................... 2,478 460
In Lieu of Cash Distributions.......................... 334 860
Shares Redeemed........................................ (3,047) (2,501)
- --------------------------------------------------------------------------------
(235) (1,181)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital........................................ $196,434 $176,683
Undistributed Net Investment Income.................... 488 304
Accumulated Net Realized Gain.......................... 10,568 20,472
Unrealized Appreciation................................ 38,323 48,584
- --------------------------------------------------------------------------------
$245,813 $246,043
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
C & B EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED OCTOBER 31, ENDED APRIL
------------------------------------------------- 30, 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.13 $ 12.33 $ 13.29 $ 13.06 $ 13.13 $ 15.68
- ------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.25+ 0.29 0.28 0.31 0.34 0.15
Net Realized and
Unrealized Gain....... 3.20 1.02 0.24 0.28 2.55 2.04
- ------------------------------------------------------------------------------------------
Total From Investment
Operations........... 3.45 1.31 0.52 0.59 2.89 2.19
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.25) (0.30) (0.26) (0.30) (0.34) (0.16)
Net Realized Gain...... -- (0.05) (0.49) (0.18) -- (0.74)
In Excess of Net
Realized Gain......... -- -- -- (0.04) -- --
- ------------------------------------------------------------------------------------------
Total Distributions... (0.25) (0.35) (0.75) (0.52) (0.34) (0.90)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 12.33 $ 13.29 $ 13.06 $ 13.13 $ 15.68 $ 16.97
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
TOTAL RETURN............ 38.04%++ 10.68% 4.05% 4.67% 22.28% 14.46%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $50,321 $112,763 $209,153 $208,937 $245,813 $246,043
Ratio of Expenses to
Average Net Assets..... 1.00%+ 0.83% 0.82% 0.82% 0.79%# 0.79%#*
Ratio of Net Investment
Income to Average Net
Assets................. 2.65%+ 2.27% 2.28% 2.39% 2.35% 1.79%*
Portfolio Turnover Rate. 7% 45% 21% 46% 42% 18%
Average Commission Rate
##..................... N/A N/A N/A N/A N/A $ 0.0508
- ------------------------------------------------------------------------------------------
</TABLE>
* Annualized
+ Net of voluntarily waived fees of $0.001 per share for the year ended
October 31, 1991.
++ Total return would have been lower had certain fees not been waived during
the period indicated.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.78% and 0.79%*, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds"), were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The C & B Equity Portfolio (the "Portfolio"),
a portfolio of UAM Funds, Inc., began operations on May 15, 1990. At April 30,
1996, the UAM Funds were comprised of thirty-seven active portfolios. The
financial statements of the remaining portfolios are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the bid price on such day. Price
information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted securities are
valued at the current bid price. 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 is 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 continue 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 April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $197,865,000. Net unrealized appreciation
for Federal income tax purposes aggregated approximately $48,584,000, of
which $50,078,000 related to appreciated securities and $1,494,000 related
to depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market 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.
4. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income to shareholders quarterly.
Any realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These
8
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
differences are primarily due to differing book and tax treatments in the
timing of the recognition of gains or losses on investments.
5. OTHER: Security transactions are accounted for on trade date, the date
the trade was executed. Costs used in determining realized gains and losses
on the sale of investment securities are based on the specific
identification method. 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.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Cooke & Bieler, 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 0.625% 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.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
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
9
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $14,056 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases and sales of approximately $41,133,000 and $67,177,000,
respectively, of investment securities other than long-term U.S. Government
and short-term securities. There were no purchases and sales of long-term U.S.
Government securities.
F. 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.
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. During the period
ended April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, 14.2% of total shares outstanding were held by
one record shareholder owning 10% or greater of the aggregate total shares
outstanding.
10
<PAGE>
- --------------------------------------------------------------------------------
UAM FUNDS
ACADIAN INTERNATIONAL EQUITY
PORTFOLIO
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and
Executive Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Acadian Asset Management, Inc.
Two International Place Boston, MA 02110
- --------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- --------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square Philadelphia, PA 19103
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street Boston, MA 02110
- --------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
UAM FUNDS
ACADIAN
INTERNATIONAL
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
Dear Shareholder,
We are pleased to present the semi-annual report for the Acadian International
Equity Portfolio. This commentary covers the six months from November 1, 1995
to April 30, 1996, focusing on the Portfolio's performance and some of the
economic and market conditions that impacted returns.
PORTFOLIO PERFORMANCE REVIEW
Total return for the six months ended April 30, 1996 was 14.84% in U.S.
dollars. The benchmark, the Morgan Stanley Capital International Index for
Europe, Australia, and the Far East (EAFE), returned 13.21%.
ECONOMIC AND MARKET CONDITIONS
The developed international equity markets as represented by the EAFE Index
returned 13.21% for the six months ended April 30, 1996, as strong gains were
recorded in many markets. The main engine of stock market returns was Japan,
which makes up approximately 40% of the EAFE Index and returned 18.08% for the
six-month period. While Japan was lackluster for most of 1995, investors began
to return late in the year, attracted by low equity valuations, a weaker yen,
improving economic news, and signs that the government would move to resolve
the crisis in the banking industry. Other Asian markets were also strong, with
Hong Kong rising 16.0%, Singapore 15.9%, and Malaysia 28.0%. In Europe, most
equity markets were lackluster at year-end due to economic slowdowns and
political uncertainty, but regained momentum in the first few months of 1996
as governments lowered interest rates and economic fundamentals looked to be
improving. France was the strongest major European market for the six-month
period, returning 14.6%, while Germany and the U.K. returned 4.3% and 5.5%
respectively.
Generally, larger companies did better than smaller ones in the last two
months of 1995, with the Salomon Brothers Extended Market Index of smaller
companies underperforming the larger-cap Primary Market Index. However, this
trend reversed itself in January, and the first four months of 1996 saw a
marked outperformance by smaller international companies.
INVESTMENT STRATEGY USED DURING THE FIRST HALF
Acadian continued to pursue its disciplined, value-based strategy, using
quantitative valuation frameworks to identify the most attractive companies in
our 16,000+ security database. While these frameworks are tailored to reflect
the unique conditions of each market, some of the key factors used in valuing
companies include price/book ratio, price/earnings ratio, capitalization size,
price momentum, changes in analysts' earnings estimates, and a proprietary
dividend discount model.
While a prediction of overall market return is an explicit input into the
valuation of each stock, Acadian portfolios are built from the bottom up, and
thus country and industry weightings are the result of buying the most
attractive stocks in the investment universe (while maintaining a reasonable
level of benchmark-relative risk). This stock-selection approach led to the
Portfolio being overweighted in several key countries over the six-month
period, including Australia, France, Canada, and Singapore. The Portfolio was
underweighted in Germany, Italy, Japan, and the United Kingdom.
The resulting Portfolio had very attractive valuation characteristics, with a
price/book value, price/sales ratio, and price/earnings ratio all
significantly lower than the benchmark index. The Portfolio also had a
somewhat
1
<PAGE>
smaller orientation than the EAFE Index, with proportionally more assets in
the mid-size $1-$5 billion capitalization range, and somewhat fewer assets in
the larger-size range of $5-$10 billion in capitalization.
COMMENTARY ON THE PORTFOLIO'S INVESTMENT PERFORMANCE
As noted above, the Acadian International Equity Portfolio returned 14.84% for
the six months ended April 30, 1996, versus a return of 13.21% for the EAFE
Index. Over the period, country selection contributed positively to the
Portfolio's total return, outperforming the benchmark index by 60 basis
points. Stock selection netted out to a neutral return over the period,
outperforming strongly in January and February, but underperforming the
benchmark moderately in other months. The final component of return, currency,
added 100 basis points. This was the result of a 7.7% hedge against the
Japanese yen, which contributed positively to Portfolio return as the yen
weakened in March and April.
Some of the more significant Portfolio allocations impacting returns included:
. FRANCE: The Portfolio's overweighting in France had a positive impact on
returns from a country allocation perspective, adding 20 basis points.
However, stock selection underperformed the benchmark by 120 basis points. A
crippling strike, followed by the government's abandoning of key aspects of
its economic reform program, caused smaller, economically sensitive stocks
to underperform in a highly uncertain political and economic environment.
This trend reversed itself in the first few months of 1996, but not enough
to prevent an overall underperformance of 100 basis points.
. GERMANY: The Portfolio's underweighting in Germany added 20 basis points of
value as this market underperformed the benchmark as a whole. However, a
small 10-basis-point underperformance in stock selection offset this
slightly. Generally, smaller, value-oriented stocks in the Portfolio tended
to underperform as Germany suffered from slowing economic growth, a strong
Deutschemark which hurt exports, fears of rising unemployment, and a
downgrade of corporate earnings. Thus the total performance for the
Portfolio's German holdings was 10 basis points above the benchmark.
. JAPAN: Successful stock selection led to positive value-added from the
Japanese market in the six months ended April 30. Among the Portfolio's good
buys were undervalued financial stocks which had been beaten down by
economic worries but subsequently returned to full value, as well as stocks
in the consumer goods sector that responded positively to increasing demand
as the economy improved. In total, Japanese holdings added 180 basis points
of return.
. UNITED KINGDOM: Unlike the markets of continental Europe, the U.K. had a
fairly robust year in 1995 and did not experience the same degree of
economic stagnation. Its equity market continued to post new highs, with the
result that the first few months of 1996 have been characterized by concern
about overheating. Value stocks did well in this environment, as investors
moved out of the larger, growth-oriented stocks that had risen so sharply
over the last year. The result was a 60-basis-point outperformance for the
Portfolio from stock selection.
CURRENT OUTLOOK
We continue to find extremely attractive valuations in the international
equity markets, particularly in the smaller- to mid-cap sector. As an asset
class, international small-caps have underperformed major cap-weighted
2
<PAGE>
indices for over five years, creating the opportunity to purchase a range of
attractive companies at very compelling fundamental valuation levels. Looking
ahead, we see several other favorable trends in the international equity
markets. As reported widely in the financial press (for example, the 1/29/96
Wall Street Journal), U.S. assets have been moving into non-U.S. equity
markets at an unprecedented rate, helping support strong stock market returns.
The economic climate is characterized by falling interest rates in many key
markets, amid continued low inflation. Key countries including Germany,
France, and Japan have launched broad-based programs for additional economic
stimulus. These trends, combined with the current modest valuation levels of
many international markets, should create, we believe, a favorable environment
for value-focused equity investing.
If we can provide any further information, please contact me at (617) 946-
3500.
Sincerely,
/S/ CHURCHILL G. FRANKLIN
Churchill G. Franklin
Senior Vice President
DEFINITION OF THE COMPARATIVE INDEX
-----------------------------------
The Morgan Stanley Capital International EAFE Index is an unmanaged index
composed of 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.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers and did not assume expenses on
behalf of the Portfolio, total return for the Portfolio would have been lower.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. For a complete discussion of the risks associated with
international investing, please refer to the Portfolio's Prospectus.
3
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (94.5%)
- -------------------------------------------------------------------------------
AUSTRALIA (1.6%)
Caltex Australia Ltd. ....................................... 34,800 $ 152
Westpac Banking Corp. ....................................... 25,600 124
-------
276
- -------------------------------------------------------------------------------
CANADA (2.2%)
*Acklands Ltd. ............................................... 4,700 38
Bank of Nova Scotia.......................................... 600 14
Canadian Imperial Bank of Commerce........................... 800 25
Metro-Richeliee, Inc., Class A............................... 1,325 18
Onex Corp. .................................................. 10,300 107
*Stelco Inc, Class A.......................................... 14,000 70
Trilon Financial Corp., Class A.............................. 30,300 117
-------
389
- -------------------------------------------------------------------------------
FRANCE (8.6%)
*Bollore Technologies S.A. ................................... 150 16
Cardif S.A. ................................................. 10 2
Cie Bancaire S.A. ........................................... 475 52
Cie Financiere de CIC et de L'Union Europeenne............... 300 21
Compagnie Generale D'Industrie et de Participations.......... 637 142
Credit Local de France....................................... 50 4
*Credit Lyonnais.............................................. 400 13
Credit National.............................................. 1,400 109
De Dietrich et Compagnie S.A. ............................... 500 26
Eridania Beghin-Say S.A. .................................... 900 147
Gaumont S.A. ................................................ 650 53
Group Poliet................................................. 1,050 108
Klepierre.................................................... 1,050 122
Labinal S.A. ................................................ 250 36
Parisienne de Reescompte..................................... 440 38
Pernod Ricard................................................ 1,750 114
Rhone-Poulenc................................................ 6,200 149
Saint Louis.................................................. 450 131
Societe Financiere Interbail................................. 1,750 86
Sommer-Allibert Industrie AG................................. 300 86
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
FRANCE--(CONTINUED)
Union des Assurances Federales............................... 50 $ 6
*Vallourec.................................................... 550 27
Worms et Compagnie........................................... 500 27
-------
1,515
- -------------------------------------------------------------------------------
GERMANY (3.8%)
BASF AG...................................................... 700 190
Deutsche Pfandbrief & Hypothekenbank AG...................... 3,000 102
*Papierwerke Waldof-Aschaffenburg AG.......................... 800 107
*Phillip Holzmann AG.......................................... 150 49
Viag AG...................................................... 384 150
Villeroy & Boch AG........................................... 450 61
-------
659
- -------------------------------------------------------------------------------
HONG KONG (3.9%)
Cathay Pacific Airway Ltd.................................... 108,000 188
Cheung Kong Holdings, Ltd.................................... 16,000 114
Kumagai Gumi Ltd............................................. 133,000 123
Lai Sun Garment (International) Ltd.......................... 32,000 37
Peregrine Investment Holdings Ltd............................ 70,000 108
Semi-Tech (Global) Ltd....................................... 34,000 50
Tai Cheung Properties........................................ 80,000 71
-------
691
- -------------------------------------------------------------------------------
ITALY (2.1%)
*Autostrade S.p.A............................................. 91,500 118
Comau Finanziaria S.p.A...................................... 33,700 41
Riunion Adriatica............................................ 10,318 115
Telecom Italia S.p.A......................................... 62,000 103
-------
377
- -------------------------------------------------------------------------------
JAPAN (38.4%)
Aoki International Co., Ltd.................................. 2,000 49
Asahi Denka Kogyo KK......................................... 5,000 44
Bank of Okinawa Ltd.......................................... 1,000 36
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Chibu Shiryu................................................. 2,000 $ 20
Chiyoda Fire & Marine Insurance Co., Ltd. ................... 9,000 60
Chugoku Electric Power Co., Ltd. ............................ 2,000 48
Daiichi Phamaceutical Co., Ltd. ............................. 9,000 151
Daikyo, Inc. ................................................ 24,000 180
Daio Paper Corp. ............................................ 5,000 67
Daiwa House Industry......................................... 12,000 191
Daiwa Kosho Lease Co., Ltd. ................................. 12,000 131
Dia Kensetsu Co., Ltd. ...................................... 1,000 12
Dowa Fire & Marine Insurance Co. ............................ 4,000 24
Fuji Fire & Marine Insurance................................. 8,000 47
Fuji Oil..................................................... 1,000 9
Fuji Photo Film Co., Ltd. ................................... 9,000 280
Fujikura Rubber.............................................. 2,000 12
Fujita Corp. ................................................ 32,000 160
Gifu Bank.................................................... 600 2
Hiroshima Bank............................................... 9,000 50
Hitachi Credit Corp. ........................................ 6,000 112
Hitachi Ltd. ................................................ 33,000 356
Hitachi Maxell............................................... 3,000 65
Hokkaido Bank................................................ 35,000 115
Hokkaido Electric Power...................................... 1,000 24
Hokkaido Takushoku Bank...................................... 20,000 58
Honda Motor Co., Ltd. ....................................... 9,000 206
Iwatani International Corp. ................................. 11,000 61
Jaccs........................................................ 2,000 19
Joshin Denki................................................. 2,000 27
Kamei........................................................ 4,000 50
Kita-Nippon Bank............................................. 1,000 55
Kyudenko Co., Ltd. .......................................... 6,000 88
Marubeni Corp. .............................................. 1,000 6
Matsumura-Gumi............................................... 13,000 82
Matsushita Electric Industrial Co., Ltd. .................... 13,000 230
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Matsushita Electric Works.................................... 17,000 $ 193
Mitsubishi Electric Corp. ................................... 6,000 47
Mitsubishi Oil............................................... 20,000 180
Nichiei (Fudosan)............................................ 10,000 47
Nichimen Corp. .............................................. 32,000 151
Nintendo Corp., Ltd. ........................................ 500 39
Nippon Meat Packers, Inc. ................................... 10,000 159
Nippon Metal Industry........................................ 9,000 49
Nippon Oil Co., Ltd. ........................................ 23,000 159
Nippon Shinpan Co. .......................................... 24,000 179
Nissho Iwai Corp. ........................................... 1,210 15
Orient Corp. ................................................ 29,000 183
Orix Corp. .................................................. 4,000 165
*Renown, Inc. ................................................ 12,000 50
Seino Transportation Co., Ltd. .............................. 6,000 105
Sekisui Chemical Co. ........................................ 15,000 189
Sekisui House Ltd. .......................................... 16,000 199
Shinwa Bank Ltd. ............................................ 1,000 6
Shionogi & Co. .............................................. 10,000 92
Shiseido Co., Ltd. .......................................... 16,000 202
Sumitomo Marine & Fire....................................... 5,000 48
Sumitomo Realty & Development................................ 24,000 193
Suntelephone Co., Ltd. ...................................... 2,000 16
TDK Corp. ................................................... 1,000 57
*Thaiheiyo Bank Ltd. ......................................... 29,000 1
Toagosei Co., Ltd. .......................................... 9,000 50
Tokyo Construction Co. ...................................... 25,000 124
Tokyo Sowa Bank.............................................. 1,000 5
*Towa Real Estate Development................................. 7,000 32
Toyo Seikan Kaisha........................................... 1,000 35
Toyota Tsusho Corp. ......................................... 8,000 60
Yakult Honsha................................................ 2,000 30
Yamaha Motor Co., Ltd. ...................................... 5,000 55
Yamaichi Securities Co. ..................................... 21,000 166
Yamanouchi Pharmaceutical Co. ............................... 8,000 190
Yamatake-Honeywell Co., Ltd. ................................ 10,000 189
-------
6,787
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MALAYSIA (2.1%)
Bandar Raya Developments Bhd. ............................... 7,000 $ 13
MBF Capital Bhd. ............................................ 13,000 20
Multi-Purpose Holdings Bhd. ................................. 43,000 75
Oriental Holdings Bhd. ...................................... 10,000 61
Perlis Plantations Bhd. ..................................... 23,000 97
Rashid Hussein Bhd. ......................................... 31,000 109
-------
375
- -------------------------------------------------------------------------------
NETHERLANDS (6.2%)
ABN Amro Holdings N.V. ...................................... 4,358 226
Aegon N.V. .................................................. 3,501 167
Boskalis Westminster N.V. ................................... 4,900 72
DSM N.V. .................................................... 1,700 174
European Vinyls Corp. International N.V. .................... 2,600 93
Hollandsche Benton Groep N.V. ............................... 1,000 171
Koninklijke Van Ommeren N.V. ................................ 4,200 157
Koninklijke Volker Stevin N.V. .............................. 600 41
-------
1,101
- -------------------------------------------------------------------------------
NEW ZEALAND (0.9%)
Brierley Investments Ltd. ................................... 108,600 102
Lion Nathan Ltd. ............................................ 21,100 53
-------
155
- -------------------------------------------------------------------------------
NORWAY (0.5%)
Den Norske Bank A.S. ........................................ 33,100 95
- -------------------------------------------------------------------------------
SINGAPORE (1.6%)
Hotel Properties Ltd. ....................................... 34,000 66
Singapore Bus Service (Foreign).............................. 3,600 28
Singapore Land Ltd. ......................................... 13,000 93
Wing Tai Holdings Ltd. ...................................... 40,000 103
-------
290
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SPAIN (1.3%)
Electra de Viesgo S.A. ...................................... 4,200 $ 82
Europistas Concesionaria Espanola S.A........................ 1,582 12
Tabacalera S.A., Class A..................................... 3,000 137
-------
231
- -------------------------------------------------------------------------------
SWEDEN (1.0%)
Electrolux AB................................................ 1,700 86
SSAB Svenkst Stal AB, Class B................................ 6,000 73
Stena Line, Class B.......................................... 3,125 17
-------
176
- -------------------------------------------------------------------------------
SWITZERLAND (1.0%)
Aare-Tessin AG (Registered).................................. 50 36
Baer Holding AG (Bearer)..................................... 20 22
Baloise Holding Ltd.......................................... 10 22
Compagnie Financiere Richemont AG, Class A................... 60 88
-------
168
- -------------------------------------------------------------------------------
UNITED KINGDOM (19.3%)
APV plc...................................................... 44,300 63
Anglian Water plc............................................ 17,300 151
Arjo Wiggins Appleton plc.................................... 60,400 166
Bristol Water Holding plc.................................... 1,100 21
British Airways plc.......................................... 24,200 189
British Steel plc............................................ 54,500 163
Burmah Castrol plc........................................... 11,200 179
De La Rue plc................................................ 15,900 178
General Accident plc......................................... 16,000 152
Guardian Royal Exchange plc.................................. 10,900 37
HSBC Holdings plc............................................ 16,500 244
Hillsdown Holdings plc....................................... 60,000 161
Hyder plc.................................................... 3,600 40
Invesco plc.................................................. 23,700 90
Kwik Fit Holdings plc........................................ 5,436 19
Midlands Electricity plc..................................... 4,400 26
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UNITED KINGDOM--(CONTINUED)
National Grid Group plc...................................... 13,527 $ 41
National Home Loans Holdings plc............................. 7,800 11
National Westminster Bank plc................................ 17,200 158
Northern Electric plc........................................ 8,400 83
Nothern Foods plc............................................ 62,500 170
Premier Oil plc.............................................. 265,900 127
Royal Insurance plc.......................................... 28,100 154
Severn Trent plc............................................. 18,500 166
Smithkline Beecham plc....................................... 1,200 13
Sun Alliance Group plc....................................... 25,500 136
Thames Water plc............................................. 17,700 153
United Utitlities plc........................................ 17,900 160
Yorkshire Electricity Group plc.............................. 3,040 37
Yorkshire Water plc.......................................... 11,300 114
-------
3,402
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $16,090)............................ 16,687
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.4%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $595, collateralized by $560
U.S.Treasury Notes 7.50%, due 11/15/01, valued at $607
(COST $595)............................................... $ 595 595
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (97.9%) (COST $16,685)...................... 17,282
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
<S> <C>
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (2.1%)
- -------------------------------------------------------------------------------
Receivable for Investments Sold..................................... $ 1,135
Dividends Receivable................................................ 66
Foreign Currency (Cost $28)......................................... 28
Receivable due from Investment Adviser.............................. 1
Other Assets........................................................ 3
Payable for Investments Purchased................................... (788)
Net Unrealized Loss on Forward Foreign Currency Exchange Contract... (44)
Payable for Administrative Fees..................................... (6)
Payable for Directors' Fees......................................... (1)
Other Liabilities................................................... (14)
-------
380
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,356,305 outstanding $0.001 par value Institutional
Class shares
(authorized 25,000,000 shares)..................................... $17,662
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 13.02
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION: Under the terms of
forward foreign currency exchange contracts open at April 30, 1996, the
Portfolio is obligated to deliver foreign currency in exchange for U.S.
dollars as indicated below:
<TABLE>
<CAPTION>
IN NET
CURRENCY EXCHANGE UNREALIZED
TO DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
---------- ------ ---------- -------- ------ ----------
<S> <C> <C> <C> <C> <C>
JPY 143,567 $1,387 7/19/96 $1,343 $1,343 $(44)
====== ====== ====
</TABLE>
- --------
JPY--Japanese Yen
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
At April 30, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Automotive..................................................... 2.5% $ 449
Banks.......................................................... 7.0 1,237
Basic Resources................................................ 1.6 286
Beverages, Food & Tobacco...................................... 6.7 1,177
Capital Equipment.............................................. 0.4 62
Chemicals...................................................... 6.7 1,188
Construction................................................... 6.3 1,120
Consumer Durables.............................................. 0.6 103
Consumer Non-Durables.......................................... 0.4 71
Consumer Staples............................................... 1.1 202
Electronics.................................................... 6.6 1,157
Energy......................................................... 4.2 742
Entertainment & Leisure........................................ 0.3 53
Financial Services............................................. 10.9 1,918
Holding Company................................................ 4.0 713
Home Furnishings & Appliances.................................. 1.1 199
Industrial..................................................... 2.1 373
Insurance...................................................... 4.5 802
Lodging & Restaurants.......................................... 0.4 66
Manufacturing.................................................. 1.5 265
Metals......................................................... 1.1 192
Paper & Packaging.............................................. 3.7 647
Pharmaceuticals................................................ 2.5 446
Real Estate.................................................... 4.7 822
Repurchase Agreement........................................... 3.4 595
Services....................................................... 1.6 288
Technology..................................................... 0.6 108
Telecommunications............................................. 0.7 119
Textiles & Apparel............................................. 0.6 99
Transportation................................................. 3.9 684
Utilities...................................................... 6.2 1,099
- -------------------------------------------------------------------------------
Total Investments............................................. 97.9% $17,282
Other Assets and Liabilities (Net)............................. 2.1 380
----- -------
Net Assets.................................................... 100.0% $17,662
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
1996
(In Thousands) (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends.................................................... $ 106
Interest..................................................... 2
Less: Foreign Taxes Withheld................................. (15)
- -------------------------------------------------------------------------------
Total Income............................................... 93
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee.................................................. $27
Less: Fees Waived.......................................... (27) --
---
Administrative Fees--Note C.................................. 41
Registration and Filing Fees................................. 11
Audit Fees................................................... 7
Custodian Fees............................................... 6
Printing Fees................................................ 6
Directors' Fees--Note F...................................... 1
Other Expenses............................................... 1
Expenses Assumed by the Investment Adviser--Note B........... (30)
- -------------------------------------------------------------------------------
Total Expenses............................................. 43
Expense Offset--Note A....................................... -- @
- -------------------------------------------------------------------------------
Net Expenses............................................... 43
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME......................................... 50
- -------------------------------------------------------------------------------
NET REALIZED GAIN ON:
Investments................................................. 674
Foreign Exchange Transactions............................... 36
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS................................................ 710
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments................................................. 422
Foreign Exchange Translations............................... (46)
- -------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION).... 376
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN EXCHANGE TRANSACTIONS..... 1,086
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $1,136
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
@ Amount represents Custodian balance credits of $310.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED
ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss).......................... $ (2) $ 50
Net Realized Gain..................................... 43 710
Net Change in Unrealized Appreciation (Depreciation).. (153) 376
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (112) 1,136
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain..................................... (51) (45)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 161 14,568
--In Lieu of Cash Distributions..................... 50 45
Redeemed.............................................. -- (517)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 211 14,096
- --------------------------------------------------------------------------------
Total Increase........................................ 48 15,187
Net Assets:
Beginning of Period................................... 2,427 2,475
- --------------------------------------------------------------------------------
End of Period (2)..................................... $2,475 $17,662
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 13 1,181
In Lieu of Cash Distributions........................ 5 4
Shares Redeemed...................................... -- (43)
- --------------------------------------------------------------------------------
18 1,142
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital...................................... $2,256 $16,352
Undistributed Net Investment Income.................. -- 50
Accumulated Net Realized Gain........................ 43 708
Unrealized Appreciation.............................. 176 552
- --------------------------------------------------------------------------------
$2,475 $17,662
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
MARCH 29, 1993** OCTOBER 31, APRIL 30,
TO OCTOBER 31, --------------- 1996
1993 1994 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $10.00 $11.77 $12.37 $ 11.54
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss)
(1)......................... (0.04) (0.04) (0.01) 0.04
Net Realized and Unrealized
Gain (Loss)................. 1.81 0.95 (0.56) 1.65
- --------------------------------------------------------------------------------
Total from Investment
Operations................. 1.77 0.91 (0.57) 1.69
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain............ -- (0.31) (0.26) (0.21)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD....................... $11.77 $12.37 $11.54 $ 13.02
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.................. 17.70%+ 8.02%+ (4.58)%+ 14.84%+
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................. $2,264 $2,427 $2,475 $17,662
Ratio of Expenses to Average
Net Assets (1)............... 2.50%* 2.50% 2.54%# 1.18%*#
Ratio of Net Investment Income
(Loss) to Average Net Assets
(1).......................... (0.76)%* (0.38)% (0.11)% 1.38%*
Portfolio Turnover Rate....... 44% 56% 76% 72%
Average Commission Rate ###... N/A N/A N/A $0.0026
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of operations.
+ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the periods indicated.
(1) Net of voluntarily waived fees and expenses assumed by the Adviser for the
period ended October 31, 1993, the years ended October 31, 1994, 1995 and
for the six months ended April 30, 1996 of $0.14, $0.21, $0.46, and $0.04
per share, respectively.
# For the year ended October 31, 1995, and for the six months ended April
30, 1996, the Ratio of Expenses to Average Net Assets excludes the effect
of expense offsets. If expense offsets were included, the Ratio of
Expenses to Average Net Assets would be 2.50% and 1.17%*, respectively.
### For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The Acadian International Equity Portfolio
(the "Portfolio"), a portfolio of UAM Funds, Inc., began operations on March
29, 1993. At April 30, 1996, the UAM Funds were comprised of thirty-seven
active portfolios. The financial statements of the remaining portfolios are
presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Securities listed on a United States securities
exchange for which market quotations are readily available are valued at
the last quoted sales price as of the close of the exchange on the day the
valuation is made or, if no sale occurred on such day, at the bid price on
such day. Securities listed on a foreign exchange are valued at their
closing price. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and
unlisted securities are valued at the current bid price. 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 is 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 continue 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. The Portfolio may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on either
income or gains earned or repatriated. The Portfolio accrues such taxes
when the related income is earned.
Paid in capital, undistributed net investment income and accumulated net
realized gain have been adjusted for prior year permanent book-tax
differences. Reclassifications between undistributed net investment income
and accumulated net realized gain arose principally from differing book and
tax treatments for foreign currency transactions; reclassifications between
paid in capital and undistributed net investment income arose principally
from differing book and tax treatments for deferred organization costs
(Note A7).
At April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $16,685,000. Net unrealized appreciation for
Federal income tax purposes aggregated approximately $597,000, of which
$1,271,000 related to appreciated securities and $674,000 related to
depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in 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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolio
16
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Portfolio are
maintained in U.S dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the bid prices of such currencies against U.S. dollars last
quoted by a major bank. The Portfolio does not isolate that portion of
realized or unrealized gains and losses resulting from changes in the
foreign exchange rate from fluctuations arising from changes in the market
prices of the securities. Net realized gains and losses on foreign currency
transactions represent net foreign exchange gains or losses from forward
foreign currency exchange contracts, disposition of foreign currencies,
currency gains or losses realized between trade and settlement dates on
securities transactions and the difference between the amount of the
investment income and foreign withholding taxes recorded on the Portfolio's
books and the U.S. dollar equivalent amounts actually received or paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolio may enter
into forward foreign currency exchange contracts to protect the value of
securities held and related receivables and payables against changes in
future foreign exchange rates. A forward currency contract is an agreement
between two parties to buy or sell currency at a set price on a future
date. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is marked-to-market daily using the
forward rate and the change in market value is recorded by the Portfolio as
unrealized gain or loss. The Portfolio recognizes realized gain or loss
when the contract is closed, equal to the difference between the value of
the contract at the time it was opened and the value at the time it was
closed. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts
and are generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all its net investment income to shareholders annually. Any
realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on forward foreign currency contracts and
permanent differences as presented in Note A2.
7. 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,
except that certain dividends from foreign securities are recorded as soon
as the Portfolio is informed of 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
17
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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. Costs incurred by
the Portfolio in connection with its organization have been deferred and
are being amortized on a straight-line basis over a five year period.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Acadian 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 0.75% of
the first $50 million of average daily net assets, 0.65% of the next $50
million of average daily net assets, 0.50% of the next $100 million average
daily net assets and 0.40% of the average daily net assets in excess of $200
million. Effective January 1, 1996, the Adviser has voluntarily agreed to
waive a portion of its advisory fees and to assume expenses on behalf of the
Portfolio, 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. Prior to January 1, 1996, 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 2.50% of average daily net assets.
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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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 0.06% of average daily net assets
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
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;
18
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $3,375 from the Portfolio as Administrator.
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases of $17,353,000 and sales of $4,600,000 of investment securities
other than long-term U.S. Government and short-term securities. There were no
purchases and sales of long-term U.S. Government securities.
F. 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.
G. LINE OF CREDIT: The Portfolio, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables it to participate
in a $100 million unsecured line of credit with several banks. Borrowings will
be made solely to temporarily finance the repurchase of portfolio shares.
Interest is charged to each participating portfolio based on its borrowings at
a rate per annum equal to the Federal Funds Rate plus 0.75%. In addition, a
commitment fee of 1/10th of 1% per annum, payable at the end of each calendar
quarter, is accrued by each participating portfolio based on their average
daily unused portion of the line of credit. During the period ended April 30,
1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, 93.8% of total shares outstanding were held by
two record shareholders owning 10% or greater of the aggregate total shares
outstanding.
At April 30, 1996, the net assets of the Portfolio were substantially
comprised of foreign denominated securities and/or currency. Changes in
currency exchange rates will affect the value and investment income from such
securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
governmental supervision and regulation of foreign securities markets and the
possibility of political or economic instability.
During the six months ended April 30, 1996, the Portfolio had in-kind
transactions of securities with a value of $13,538,344, including unrealized
appreciation of $405,537.
19
<PAGE>
- ------------------------------------------------------
UAM FUNDS
ACADIAN EMERGING MARKETS PORTFOLIO
- ------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and
Executive Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- ------------------------------------------------------
INVESTMENT ADVISER
Acadian Asset Management, Inc.
Two International Place
Boston, MA 02110
- ------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- ------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- ------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- ------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- ------------------------------------------------------
This report has been prepared for shareholders and may
be distributed to others only if preceded or
accompanied by a current prospectus.
- ------------------------------------------------------
UAM FUNDS
ACADIAN
EMERGING
MARKETS
PORTFOLIO
- ------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
Dear Shareholder,
We are pleased to present the semi-annual report for the Acadian Emerging
Markets Portfolio. This commentary covers the six months from November 1, 1995
to April 30, 1996, focusing on the Portfolio's performance and some of the
economic and market conditions that impacted returns.
PORTFOLIO PERFORMANCE REVIEW
For the six months ended April 30, 1996, the Acadian Emerging Markets
Portfolio returned 12.67%, versus 15.15% for the IFC Investable Index, a
widely followed emerging markets benchmark.
ECONOMIC AND MARKET CONDITIONS
The world's emerging equity markets, as represented by the IFC Investable
Index, returned 15.15% for the six months ended April 30, 1996. This robust
performance was in marked contrast to most of 1995, a year which saw generally
declining returns following the currency crisis in Mexico which sparked a
major sell-off in emerging markets around the world. The negative environment
drove equity valuations down to the point where by year end, as Mexico's
economy began to recover and other countries showed continued growth,
investors began to return in search of bargains. In January, the IFC
Investable Index rose a sharp 8.5%, and generally continued to gain in the
months leading up to April 30.
Looking at individual regions over the period, Latin American markets were
generally very strong, with Argentina (+38.7%) and Mexico (+30.4%) dominating.
The Europe/Africa/Middle East region also had a robust six months,
particularly in Eastern Europe where the Czech Republic returned 18.4%, Poland
48.9%, and Hungary posted a 25.4% gain. More lackluster was South Africa,
returning just 1.1%, and some markets in emerging Asia, although Malaysia and
Indonesia were strong.
INVESTMENT STRATEGY USED DURING THE FIRST HALF
Acadian continues to pursue its highly structured and disciplined approach to
the emerging markets, using a database of information on over 60 emerging
markets and 4,800 stocks. Our emerging markets process emphasizes country
selection, but also examines a variety of factors at the stock level. Using
proprietary dividend-discount models which evaluate each country's market in
aggregate as well as aggregate-market P/E and P/B ratios. Acadian regularly
ranks all emerging markets in its universe according to their relative
attractiveness. Acadian's multi-factor valuation process is also applied at
the stock level, identifying the most attractive stocks in each market.
As a result, the Portfolio was invested in 15 emerging equity markets,
compared with 26 in the benchmark. Key overweightings were Greece, Argentina,
Brazil, Hungary, the Philippines, Portugal, Turkey, and Thailand, while key
underweightings were South Africa, Korea, and Malaysia.
1
<PAGE>
The resulting Portfolio had very attractive valuation characteristics, with a
price/book value, prices/sales ratio, and price/earnings ratio all
significantly lower than the benchmark index. The Portfolio also had a
somewhat smaller orientation than the IFC Investable Index, with relatively
more assets in the mid-size $1-$5 billion capitalization range, and fewer
assets in the larger-size range of $5-$20 billion in capitalization.
COMMENTARY ON THE PORTFOLIO'S INVESTMENT PERFORMANCE
As noted above, the Acadian Emerging Markets Portfolio returned 12.67% for the
six months ended April 30, 1996, versus a return of 15.15% for the IFC
Investable Index. While stock selection was generally strong over the period,
contributing 30 basis points of return in excess of the benchmark, country
selection underperformed by 270 basis points. Some of the more significant
portfolio allocations impacting returns included:
. THAILAND: The Portfolio was overweighted in Thailand, which detracted 60
basis points from returns as this market underperformed the IFC Investable
Index as a whole. However, stock selection was successful, adding back 80
basis points in an environment characterized by strong exports and the
moderating of what some had feared to be too-rapid economic growth.
. SOUTH AFRICA: The Portfolio's underweighting in South Africa was
successful, adding 70 basis points. South Africa proved to be one of the
worst-performing markets in the IFC Investable Index for the period, amid a
very weak currency and concerns that the economy was peaking. Value-
oriented stock selection added 10 basis points of additional value, for a
total outperformance of 80 basis points.
. HUNGARY: Eastern Europe proved to be another source of value added for the
Portfolio, as capital inflows were very strong and these markets surged.
The Portfolio's overweighting in Hungary added value, while stock selection
also outperformed. The total value added was 30 basis points.
. BRAZIL: One of the larger overweightings in the Portfolio was Brazil, where
fundamentals appeared to be improving and many attractively valued stocks
were available. The country allocation detracted from returns slightly as
this market underperformed the IFC Investable Index by a small margin.
Stock selection detracted 120 basis points as the Portfolio's more
economically sensitive, value-oriented stocks reacted to concerns about the
widening deficit and the possibility of a rise in inflation. The end result
was an underperformance of 150 basis points.
. MALAYSIA: The Portfolio was underweighted in Malaysia, which detracted 100
basis points as the Malaysian market had a strong six months driven by an
improving economic outlook, reduced trade deficit, and controlled growth.
. OTHER: The overweighting in Greece detracted 100 basis points from return
as this market underperformed, while the Portfolio's lack of investment in
Taiwan detracted 50 basis points versus the benchmark as this market
performed strongly. The overweighting in Argentina was successful, adding
50 basis points, and in Mexico stock selection added 60 basis points amid
signs of economic recovery.
CURRENT OUTLOOK
After two years of relative underperformance while earnings gains have
generally continued strong, equity valuations in the emerging markets are
currently at very compelling levels. Many analysts are predicting a strong
influx of new U.S. pension money into this sector in 1996, as institutions
seek to reallocate funds ballooned by the strong U.S. market performance last
year (for example, see the Wall Street Journal, 1/29/96). Our own market
intelligence confirms this prediction. While investors should carefully
consider the higher level of volatility and
2
<PAGE>
risk in these markets, we strongly believe the emerging markets remain a
critical asset class for investors seeking optimal portfolio diversification
and the potential for strong long-term excess returns.
If we can provide any further information, please contact me at (617) 946-
3500.
Sincerely,
/s/ Churchill G. Franklin
Churchill G. Franklin
Senior Vice President
DEFINITION OF THE COMPARATIVE INDEX
-----------------------------------
The IFC Investable Index is an unmanaged emerging markets index maintained by
the International Finance Corporation. The index consists of 890 companies in
25 emerging equity markets, and is designed to measure more precisely the type
of 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.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. For a complete discussion of the risks associated with
international investing, please refer to the Portfolio's Prospectus.
3
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (86.6%)
- -------------------------------------------------------------------------------
ARGENTINA (6.9%)
*Astra Cia Argentina de Petro.............................. 130,400 $ 277
Banco de Galicia y Buenos Aires S.A., Class B............. 58,882 352
*Bansud S.A., Class B...................................... 4,201 40
Central Puerto S.A., Class B.............................. 21,000 76
Cia Naviera Perez Companc, Class B........................ 98,562 613
Citicorp Equity Investments S.A., Class B................. 19,635 70
Indupa S.A. .............................................. 142,100 66
Ipako Industrias Petroquimicas Argentina S.A. ............ 26,100 104
Juan Minetti S.A. ........................................ 17,640 71
Molinos Rio de la Plata S.A., Class B..................... 19,400 202
Siderca S.A., Class A..................................... 232,900 270
Telecom Argentina S.A., Class B........................... 23,100 104
Telefonica de Argentina, Class B.......................... 130,000 380
Transportadora de Gas del Sur S.A., Class B............... 138,200 355
YPF S.A., Class D......................................... 22,100 486
-------
3,466
- -------------------------------------------------------------------------------
BRAZIL (6.5%)
Albarus S.A. ............................................. 212,000 192
Alparagatas S.A. ......................................... 980,000 92
Banco Itau S.A. .......................................... 98,000 34
Brahma.................................................... 305,172 157
Brasilit S.A. ............................................ 229,250 301
Cia Acos Especiais--Acesita............................... 34,335,000 129
Cia Antarctica Paulista-Industria......................... 1,400,000 169
Cia Petroquimica Do Sul................................... 6,600,000 361
Cia Vidraria Santa Marina................................. 20,000 77
Cigarros Souza Cruz....................................... 11,000 86
Eletrobras................................................ 400,000 96
Itausa Investimentos Itau S.A. ........................... 430,000 304
Light Participacoes S.A. ................................. 1,015,000 35
Light Servicos Electricas................................. 1,015,000 322
Mineracao da Trindade-Samitri............................. 4,305,000 100
Refinaria Petroleo Ipiranga............................... 16,800,000 119
*Santista Alimentos S.A. .................................. 137,000 210
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
BRAZIL--(CONTINUED)
Serrana S.A.............................................. 131,000 $ 92
*Telecomunicacoes do Rio de Janeiro S.A................... 600,000 50
Telebras................................................. 1,511,790 64
White Martins S.A........................................ 203,300,000 262
-------
3,252
- -------------------------------------------------------------------------------
GREECE (6.7%)
Alpha Investment S.A..................................... 1,600 18
Commercial Bank of Greece S.A............................ 16,440 540
Credit Bank of Athens.................................... 17,991 901
Elais Olegiaous Co. ..................................... 1,000 32
Ergo Bank S.A............................................ 13,100 660
Hellas Can Packaging Manufacturers....................... 1,000 21
Hellenic Bottling Co. S.A................................ 15,000 539
Hellenic Technodomiki.................................... 1,000 17
*Heracles General Cement Co. S.A.......................... 4,700 54
Intracom S.A. ........................................... 9,400 228
Ionian Bank.............................................. 2,616 47
National Bank of Greece.................................. 4,400 213
Strintzis Lines.......................................... 3,600 15
Titan Cement Co.......................................... 1,600 74
-------
3,359
- -------------------------------------------------------------------------------
HUNGARY (1.3%)
Danubius Hotels Rt....................................... 5,300 72
EGIS Rt.................................................. 5,900 256
*Fotex Rt Budapest........................................ 33,000 37
Gedeon Richter GDS ...................................... 2,700 95
Primagaz Rt.............................................. 2,200 90
Pick Szeged Rt GDR....................................... 2,100 101
-------
651
- -------------------------------------------------------------------------------
INDONESIA (4.5%)
Argha Karya Prima Industry (Foreign)..................... 27,500 38
Astra International (Foreign)............................ 43,200 64
Bank Dagang Nasional (Foreign)........................... 182,000 181
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
INDONESIA--(CONTINUED)
Barito Pacific Timber (Foreign)............................ 349,000 $ 352
Dharmaal Intiland (Foreign)................................ 41,500 32
Gadjah Tunggal (Foreign)................................... 174,000 102
Hanjaya Mandala Sampoerna (Foreign)........................ 26,250 290
Indah Kiat Pulp & Paper Co. (Foreign)...................... 292,344 304
Indosat (Foreign).......................................... 15,000 52
Inti Indorayon Utama (Foreign)............................. 69,000 85
Jakarta International Hotels & Development (Foreign)....... 22,500 30
Kalbe Farma (Foreign)...................................... 11,000 32
Mayora Indah Co. (Foreign)................................. 40,560 28
Pabrik Kertas Tjiwi Kimia (Foreign)........................ 180,593 190
Polysindo Eka Perkasa (Foreign)............................ 54,000 34
*Putra Surya Perkasa (Foreign).............................. 515,500 254
SMART Corp. (Foreign)...................................... 48,000 37
Tempo Scan Pacific (Foreign)............................... 54,000 138
United Tractors (Foreign).................................. 20,500 40
-------
2,283
- -------------------------------------------------------------------------------
KOREA (3.0%)
*Central Investment & Finance............................... 3,400 75
Cheil Industrial, Inc. .................................... 6,500 146
*Han Jin Transportation Co. ................................ 2,060 65
Keum Kang Development Ind. Co. ............................ 6,400 124
LG Chemical Ltd. .......................................... 5,300 58
Samsung Electronics........................................ 2,212 301
Samsung Heavy Industries................................... 7,700 163
*Shinhan Investment & Finance............................... 11,900 249
Tai Han Electric Wire Co. ................................. 6,700 181
*Tongyang Investment & Finance.............................. 2,700 56
Yuhan Corp. ............................................... 1,350 90
-------
1,508
- -------------------------------------------------------------------------------
MALAYSIA (12.6%)
Berjaya Group Bhd.......................................... 288,000 211
Boustead Holdings Bhd. .................................... 132,000 310
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MALAYSIA--(CONTINUED)
Datuk Keramat Holdings Bhd. ................................ 124,000 $ 254
Dunlop Estates Bhd. ........................................ 105,000 232
Edaran Otomobil Nasional Bhd. .............................. 34,000 290
Golden Hope Plantations Bhd. ............................... 105,000 188
Guthrie Ropel Bhd. ......................................... 79,000 165
Ho Hup Construction Co., Bhd. .............................. 44,000 143
Highlands & Lowlands Bhd. .................................. 121,000 228
Hock Hua Bank Bhd. ......................................... 59,000 181
IOI Properties Bhd. ........................................ 67,000 222
Kinta Kellas plc............................................ 18,000 28
Kuala Lumpur Kepong Bhd. ................................... 51,000 131
Kulim Bhd. ................................................. 116,000 240
LARUT Consolidated Bhd. .................................... 96,000 154
Magnum Corp. Bhd. .......................................... 141,750 246
Malaysian Airline System Bhd. .............................. 97,000 321
Multi-Purpose Holdings Bhd. ................................ 193,000 336
Negara Properties Bhd. ..................................... 36,000 129
Oriental Holdings Bhd. ..................................... 60,000 366
Perlis Plantations Bhd. .................................... 23,000 97
Perusahaan Otomobil Nasional Bhd. .......................... 66,000 326
Petronas Dagangan Bhd. ..................................... 32,000 85
Pilecon Engineering Bhd. ................................... 53,000 75
Rashid Hussein Bhd. ........................................ 92,000 325
Southern Bank Bhd. ......................................... 35,000 86
Shangri-La Hotels Malaysia Bhd. ............................ 89,000 105
Sungei Way Holdings Bhd. ................................... 33,000 152
Tenaga Nasional Bhd. ....................................... 111,000 472
Telekom Malaysia Bhd. ...................................... 26,000 245
-------
6,343
- -------------------------------------------------------------------------------
MEXICO (9.9%)
Apasco S.A. de C.V., Class A................................ 51,000 277
Cemex S.A., Class A......................................... 108,000 431
Cemex S.A., Class B......................................... 13,837 59
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MEXICO--(CONTINUED)
Cemex S.A., Class CPO...................................... 6,000 $ 24
*Cifra S.A. de C.V., Class B................................ 202,700 277
*Cifra S.A. de C.V., Class C................................ 220,000 293
Coca-Cola Femsa S.A., Class L.............................. 64,000 172
*Controladora Comercial Mexicana S.A. de C.V., Class B2..... 147,000 134
*Empresas ICA Sociedad Controladora......................... 34,800 479
Fomenta Economico Mexicano S.A. de C.V., Class B........... 101,800 307
Grupo Casa Autrey S.A. de C.V. ............................ 44,000 252
Grupo Celanese S.A., Class B1.............................. 11,000 179
Grupo Financiero Inbursa S.A. de C.V., Class B............. 25,000 97
Grupo Industrial Bimbo S.A. de C.V., Class A............... 22,000 99
Grupo Industrial Maseca, Class B........................... 239,000 234
Grupo Mexico S.A., Class B................................. 24,000 91
*Grupo Televisa S.A., Class CPO............................. 30,600 481
Industrias Penoles S.A. ................................... 78,000 329
Telefonos de Mexico S.A. de C.V., Class L.................. 410,300 693
Transportacion Maritima Mexicana S.A. de C.V., Class L..... 8,000 67
-------
4,975
- -------------------------------------------------------------------------------
PHILIPPINES (4.7%)
Ayala Corp., Class B ...................................... 91,200 129
Ayala Land, Inc., Class B ................................. 75,187 117
First Philippine Holdings Corp., Class B .................. 33,960 77
JG Summit Holding, Inc. ................................... 414,700 171
Manila Electric Co. ....................................... 42,725 399
*Megaworld Properties & Holdings, Inc. ..................... 332,400 239
Petron Corp. .............................................. 645,200 278
Philippine Long Distance Telephone Co. .................... 8,000 408
*Philippine National Bank .................................. 2,964 44
*SM Prime Holdings, Inc. ................................... 749,000 218
San Miguel Corp., Class B ................................. 26,000 82
Universal Robina Corp. .................................... 387,000 197
-------
2,359
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
PORTUGAL (4.3%)
Banco Comercial Portugues S.A. ............................ 17,767 $ 204
Banco de Fomento e Exterior ............................... 17,800 227
Banco Espirito Santo e Comercial de Lisboa ................ 18,840 289
Banco Portugues de Investimento (Registered) .............. 8,951 112
Banco Totta & Acores ...................................... 391 8
Banco Totta & Acores, Class B (Registered) ................ 4,300 83
Cimpor Cimentos de Portugal S.A. .......................... 1,900 36
Corticeira Amorim S.A. .................................... 16,000 181
Credito Predial Portugues ................................. 9,800 79
Empresa Fabril de Maquinas Electricicas ................... 3,600 33
Estabelecimentos Jeronimo Martins & Filho SGPS S.A. ....... 3,800 305
Mondelo Continente SGPS S.A. .............................. 3,200 82
Portugal Telecom S.A. (Registered) ........................ 11,842 258
Sonae Industria e Investimento ............................ 12,000 277
-------
2,174
- --------------------------------------------------------------------------------
SOUTH AFRICA (8.1%)
Anglo-American Gold Investment Co., Ltd. .................. 1,200 125
Driefontein Consolidated Ltd. ............................. 6,000 96
East Rand Gold & Uranium Co., Ltd. ........................ 17,000 47
*Eastvaal Gold Holdings Ltd. ............................... 136,100 227
Ellerine Holdings Ltd. .................................... 12,000 60
Free State Consolidated Gold Mines Ltd. ................... 10,800 120
Harmony Gold Mining Co., Ltd. ............................. 9,500 110
Hartebeesfontein Gold Mining Co., Ltd. .................... 39,300 143
Impala Platinum Holdings, Ltd. ............................ 700 13
Johannesburg Consolidated ................................. 17,100 192
Kloof Gold Mining Co., Ltd. ............................... 17,000 203
LibLife Strategic Investments Ltd. ........................ 81,500 269
Murray & Roberts Holdings Ltd. ............................ 21,500 99
Nedcor Ltd. ............................................... 16,800 237
Randfontein Estates Gold Mining Co., Ltd. ................. 25,800 202
Rembrandt Group Ltd. ...................................... 53,800 461
Sappi Ltd. ................................................ 9,100 114
Sasol Ltd. ................................................ 52,000 542
South African Breweries Ltd. .............................. 13,400 392
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
SOUTH AFRICA--(CONTINUED)
South African Iron & Steel Industrial Corp., Ltd. ......... 48,500 $ 44
Standard Bank Investment Corp., Ltd. ...................... 3,100 115
Vaal Reefs Exploration & Mining Co., Ltd. ................. 1,100 108
Western Areas Gold Mining Ltd. ............................ 5,200 77
Western Deep Levels Ltd. .................................. 1,300 65
-------
4,061
- --------------------------------------------------------------------------------
SRI LANKA (1.3%)
Asian Hotels Ltd. ......................................... 25,600 5
Blue Diamond Jewelry World ................................ 141,900 44
Development Finance Corp. of Ceylon ....................... 48,400 279
Hayleys Ltd. .............................................. 30,000 107
John Keells Holdings Ltd. ................................. 31,085 101
National Development Bank ................................. 7,100 30
Sampath Bank Ltd. ......................................... 105,000 95
-------
661
- --------------------------------------------------------------------------------
THAILAND (8.5%)
Alphatec Electronics (Foreign) ............................ 15,700 172
Asia Credit Co., Ltd. (Foreign) ........................... 32,000 238
Bank of Ayudhya Ltd. (Foreign) ............................ 49,800 294
Electricity Generating Public Co., Ltd. (Foreign) ......... 58,400 183
First Bangkok City Bank Ltd. (Foreign) .................... 200,000 396
Italian-Thai Development Corp. (Foreign) .................. 16,300 150
Jasmine International plc (Foreign) ....................... 52,000 179
Krung Thai Bank plc (Foreign) ............................. 94,630 465
Land and House Co., Ltd. (Foreign) ........................ 6,900 107
National Finance & Securities Co., Ltd. (Foreign) ......... 24,900 147
*NTS Steel Groups Co., Ltd. (Foreign) ...................... 48,700 41
PTT Exploration & Production (Foreign) .................... 19,800 276
Precious Shipping Plc (Foreign) ........................... 26,700 146
Prime Finance & Securities Ltd. (Foreign) ................. 44,100 121
Robinson Department Store (Foreign) ....................... 50,000 124
Samart Corp. plc (Foreign) ................................ 29,600 199
Shinawatra Satellite Public Co., Ltd. (Foreign) ........... 94,600 143
Siam City Cement Co., Ltd. (Foreign) ...................... 6,200 83
Siam Commercial Bank Co., Ltd. (Foreign) .................. 13,000 192
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
THAILAND--(CONTINUED)
Sitca Investment & Securities Co. (Foreign) .............. 700 $ 1
Thai Airways International Ltd. (Foreign) ................ 161,200 358
United Communication Industry (Foreign) .................. 19,400 266
-------
4,281
- -------------------------------------------------------------------------------
TURKEY (7.7%)
Akbank TAS ............................................... 3,555,000 420
Aksa Akrilik Kimya Sanayii AS ............................ 245,620 90
Alarko Holding AS ........................................ 384,760 138
Altinyildiz Mensucat Ve Konfeksiyon Fabriklari AS ........ 69,000 17
Arcelik AS ............................................... 1,751,107 203
Brisa Bridgestone Sabanci ................................ 121,000 45
Cimentas AS .............................................. 334,000 87
Cimsa Cimento Sanayi Ve Ticaret AS ....................... 133,000 72
Cukurova Elektrik AS ..................................... 80,000 44
Ege Biracilik Ve Malt Sanayii AS ......................... 602,840 216
Erciyas Biracilik Ve Malt Sanayii ........................ 82,000 58
Eregli Demir Ve Celik Fab. TAS ........................... 2,370,000 258
*Finans Bank AS ........................................... 618,651 30
Goodyear Lastikleri TAS .................................. 74,000 30
Guney Biracilik Ve Malt Sanayii .......................... 113,000 24
Kartonsan Kart Sanayi Ve Ticaret AS ...................... 210,000 23
Marshall Boya Ve Vernik Sanayii .......................... 163,000 14
Migros Tirk TAS .......................................... 39,600 45
Netas Telekomunik ........................................ 646,000 167
*Otosan Otomobil Sanayii AS ............................... 1,011,000 343
Petkim Petrokimya Holdings AS ............................ 51,000 26
Petrol Ofisi AS .......................................... 1,020,000 292
Tat Konserve Sanayii AS .................................. 301,000 162
Tofas Turk Otomobil Fabrikasi ............................ 1,559,000 168
*Tupras Turkiye Petrol Rafinerileri AS .................... 181,499 42
*Turcas Petrolculuk AS .................................... 384,000 117
*Turk Hava Yollari A.O. ................................... 675,800 146
*Turk Sise Ve Cam Fabrikalari ............................. 285,000 47
Turkiye Garanti Bankasi AS ............................... 2,290,000 140
Turkiye Garanti Bankasi AS (New) ......................... 1,145,000 57
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TURKEY--(CONTINUED)
Turkiye Tutunculer Bankasi ............................... 600,320 $ 15
Yapi Ve Kredi Bankasi AS ................................. 4,978,000 337
-------
3,873
- -------------------------------------------------------------------------------
VENEZUELA (0.6%)
Electricidad de Caracas .................................. 178,019 140
Manufacturas Textiles .................................... 60,720 7
Siderurgica Venezolana Sivensa ........................... 84,000 55
Sudamtex de Venezuela, Class B ........................... 157,542 19
Venezolana de Cementos ................................... 43,017 77
Venezolana de Pulp ....................................... 9,355 7
-------
305
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $40,180) ........................ 43,551
- -------------------------------------------------------------------------------
PREFERRED STOCKS (12.5%)
- -------------------------------------------------------------------------------
BRAZIL (12.5%)
Aracruz Celulose S.A., Class B ........................... 191,700 342
Banco Bradesco ........................................... 38,098,002 430
Banco Itau ............................................... 1,118,000 437
Bombril S.A. ............................................. 8,000,000 137
Brahma ................................................... 833,166 401
Cevel Alimentos S.A. ..................................... 8,000,000 93
Cia Acos Especiais Itabira ............................... 19,740,000 74
Cia Brasil Petroleo Ipiranga ............................. 16,200,000 181
Cia Brasileira de Frigorificos ........................... 272,000 151
Cia Brasileira de Petroleo Ipiranga ...................... 9,700,000 91
Cia Energetica de Minas Gerais ........................... 15,600,000 393
*Cia Siderurgica Paulista-Cosipa, Class B ................. 138,000 160
Cia Siderurgica Riograndense S.A. ........................ 11,300,000 166
Cia Siderurgica Tubarao, Class B ......................... 11,890,000 239
Cia Vale do Rio Doce ..................................... 19,960 366
Copene Petroquimica do Nordeste S.A., Class A ............ 100,000 51
Eletrobras, Class B ...................................... 345,602 85
Fertilizantes Fosfatados ................................. 69,300,000 251
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
PREFERRED STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
BRAZIL--(CONTINUED)
IKPC-Industrias Klabin de Papel E Celulose S.A. .......... 201,000 $ 199
*Iochpe Maxion S.A. ....................................... 310,000 34
Itausa Investimentos Itau S.A. ........................... 370,000 254
Lojas Americanas S.A. .................................... 9,400,000 218
Mineracao da Trindade-Samitri ............................ 2,730,000 58
Petrobras ................................................ 1,358,666 158
Petrobras Distribuidora S.A. ............................. 11,250,000 238
Ripasa S.A. .............................................. 950,000 96
Telebras ................................................. 3,680,060 199
Telepar .................................................. 150,000 56
Telesp S.A. .............................................. 3,309,559 591
Uniao de Industrias Pertoquimicas S.A., Class B .......... 153,500 130
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $6,043) ...................... 6,279
- -------------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
- -------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS (0.3%)
- -------------------------------------------------------------------------------
INDONESIA (0.1%)
*Indah Kiat Pulp & Paper Co. (Foreign) expiring 5/14/96 ... 73,085 37
- -------------------------------------------------------------------------------
KOREA (0.0%)
*Samsung Heavy Industries, expiring 5/6/96 ................ 746 --
- -------------------------------------------------------------------------------
MALAYSIA (0.0%)
*Metroplex Bhd., expiring 5/21/96 ......................... 2,500 --
- -------------------------------------------------------------------------------
TURKEY (0.2%)
*Cimentas AS, expiring 5/20/96 ............................ 167,000 36
*Turkiye Garanti Bankasi AS, expiring 5/8/96 .............. 2,290,000 63
-------
99
- -------------------------------------------------------------------------------
TOTAL RIGHTS (COST $113) .................................. 136
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.7%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.7%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $2,869, collateralized by $2,701
U.S. Treasury Notes 7.50%, due 11/15/01, valued at $2,927
(COST $2,869) ............................................... $2,869 $ 2,869
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (105.1%) (COST $49,205) ..................... 52,835
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-5.1%)
- -------------------------------------------------------------------------------
Foreign Currency (Cost $456) ................................. 430
Dividends Receivable ......................................... 135
Receivable for Investments Sold .............................. 15
Receivable for Portfolio Shares Sold ......................... 2
Other Assets ................................................. 12
Payable for Investments Purchased ............................ (3,053)
Payable for Investment Advisory Fees ......................... (40)
Payable for Administrative Fees .............................. (8)
Payable for Directors' Fees .................................. (1)
Other Liabilities ............................................ (40)
-------
(2,548)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 4,002,950 outstanding $0.001 par value Institu-
tional Class shares (authorized 25,000,000 shares) .......... $50,287
===============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 12.56
===============================================================================
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
GDR--Global Depositary Receipt
GDS--Global Depositary Shares
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
At April 30, 1996, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Automotive ................................................... 3.1% $ 1,560
Banks ........................................................ 11.5 5,808
Basic Resources .............................................. 0.2 119
Beverages, Food & Tobacco .................................... 8.0 4,027
Capital Equipment ............................................ 1.2 591
Chemicals .................................................... 3.7 1,836
Construction ................................................. 4.5 2,280
Consumer Cyclical ............................................ 1.7 843
Consumer Durables ............................................ 0.5 252
Electronics .................................................. 2.1 1,065
Energy ....................................................... 6.8 3,432
Entertainment & Leisure ...................................... 0.5 246
Financial Services ........................................... 10.5 5,271
Holding Company .............................................. 7.0 3,527
Home Furnishings & Appliances ................................ 0.4 203
Lodging & Restaurants ........................................ 0.4 211
Manufacturing ................................................ 1.0 492
Metals ....................................................... 3.6 1,813
Mining ....................................................... 3.1 1,536
Multi-Industry ............................................... 2.1 1,072
Paper & Packaging ............................................ 3.6 1,769
Pharmaceuticals .............................................. 1.7 831
Real Estate .................................................. 2.6 1,318
Repurchase Agreement ......................................... 5.7 2,869
Retail ....................................................... 3.5 1,772
Services ..................................................... 0.1 38
Telecommunications ........................................... 8.9 4,455
Textiles & Apparel ........................................... 0.6 306
Transportation ............................................... 2.3 1,172
Utilities .................................................... 4.2 2,121
- --------------------------------------------------------------------------------
Total Investments ........................................... 105.1 $52,835
Other Assets and Liabilities (Net) ........................... (5.1) (2,548)
----- -------
Net Assets .................................................. 100.0% $50,287
===============================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
1996
(In Thousands) (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends......................................................... $ 785
Interest.......................................................... 46
Less Foreign Taxes Withheld....................................... (58)
- -------------------------------------------------------------------------------
Total Income..................................................... 773
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B.................................. 210
Custodian Fees.................................................... 84
Administrative Fees--Note C....................................... 42
Registration and Filing Fees...................................... 11
Audit Fees........................................................ 7
Printing Fees..................................................... 7
Directors' Fees--Note F........................................... 2
Legal Fees........................................................ 2
Other Expenses.................................................... 5
- -------------------------------------------------------------------------------
Total Expenses................................................... 370
Expense Offset--Note A............................................ --@
- -------------------------------------------------------------------------------
Net Expenses..................................................... 370
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME.............................................. 403
- -------------------------------------------------------------------------------
NET REALIZED LOSS ON:
Investments....................................................... (98)
Foreign Exchange Transactions..................................... (43)
- -------------------------------------------------------------------------------
TOTAL NET REALIZED LOSS ON INVESTMENTS AND FOREIGN EXCHANGE TRANS-
ACTIONS........................................................... (141)
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments....................................................... 4,847
Foreign Exchange Translations..................................... 4
- -------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)......... 4,851
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN EXCHANGE TRANSACTIONS.......... 4,710
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $5,113
===============================================================================
</TABLE>
@ Amount represents Custodian balance credits of $419.
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED
ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 160 $ 403
Net Realized Gain (Loss).............................. 99 (141)
Net Change in Unrealized Appreciation (Depreciation).. (2,707) 4,851
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (2,448) 5,113
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. -- (61)
Net Realized Gain..................................... -- (183)
- --------------------------------------------------------------------------------
Total Distributions.................................. -- (244)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 31,670 12,456
--In Lieu of Cash Distributions..................... -- 242
Redeemed.............................................. (836) (1,224)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 30,834 11,474
- --------------------------------------------------------------------------------
Total Increase........................................ 28,386 16,343
Net Assets:
Beginning of Period................................... 5,558 33,944
- --------------------------------------------------------------------------------
End of Period (2)..................................... $33,944 $50,287
================================================================================
(1)Shares Issued and Redeemed:
Shares Issued........................................ 2,692 1,059
In Lieu of Cash Distributions........................ -- 22
Shares Redeemed...................................... (67) (100)
- --------------------------------------------------------------------------------
2,625 981
================================================================================
(2)Net Assets Consist of:
Paid in Capital...................................... $34,952 $46,426
Undistributed Net Investment Income.................. 47 389
Accumulated Net Realized Gain (Loss)................. 193 (131)
Unrealized Appreciation (Depreciation)............... (1,248) 3,603
- --------------------------------------------------------------------------------
$33,944 $50,287
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED
JUNE 17, 1993** OCTOBER 31, APRIL 30,
TO OCTOBER 31, ---------------- 1996
1993 1994 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $10.00 $11.34 $ 14.00 $ 11.23
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERA-
TIONS
Net Investment Income (Loss)
(1)......................... (0.01) (0.03) 0.05 0.10
Net Realized and Unrealized
Gain (Loss)................. 1.35 2.74 (2.82) 1.31
- --------------------------------------------------------------------------------
Total from Investment Opera-
tions...................... 1.34 2.71 (2.77) 1.41
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income........ -- -- -- (0.02)
Net Realized Gain............ -- (0.05) -- (0.06)
- --------------------------------------------------------------------------------
Total Distributions......... -- (0.05) -- (0.08)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERI-
OD........................... $11.34 $14.00 $ 11.23 $ 12.56
================================================================================
TOTAL RETURN.................. 13.40%+ 23.97%+ (19.79)%+ 12.67%
================================================================================
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................. $3,927 $5,558 $33,944 $50,287
Ratio of Expenses to Average
Net Assets (1)............... 2.43%* 2.07% 1.78%# 1.75%*#
Ratio of Net Investment Income
(Loss) to Average Net Assets
(1).......................... (0.37%)* (0.25%) 0.86% 1.91%*
Portfolio Turnover Rate....... 2% 9% 21% 5%
Average Commission Rate ##.... N/A N/A N/A $0.0002
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Total return would have been lower had certain fees not been waived during
the periods indicated.
(1) Net of voluntarily waived fees for the period ended October 31, 1993, the
years ended October 31, 1994 and 1995 of $0.04, $0.12 and $0.02 per share,
respectively.
# For the year ended October 31, 1995, and for the six months ended April
30, 1996, the Ratio of Expenses to Average Net Assets excludes the effect
of expense offsets. If expense offsets were included, the Ratio of
Expenses to Average Net Assets would be 1.77% and 1.75%*, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust, (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The Acadian Emerging Markets Portfolio (the
"Portfolio"), a portfolio of UAM Funds, Inc., began operations on June 17,
1993. At April 30, 1996, the UAM Funds were comprised of thirty-seven active
portfolios. The financial statements of the remaining portfolios are presented
separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. 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: Securities listed on a United States securities
exchange for which market quotations are readily available are valued at
the last quoted sales price as of the close of the exchange on the day the
valuation is made or, if no sale occurred on such day, at the bid price on
such day. Securities listed on a foreign exchange are valued at their
closing price. Price information on listed securities is taken from the
exchange where the security is primarily traded. Over-the-counter and
unlisted securities are valued at the current bid price. 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 is 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 continue 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. The Portfolio may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on either
income or gains earned or repatriated. The Portfolio accrues such taxes
when the related income is earned.
Paid in capital, undistributed net investment income and accumulated net
realized gain (loss) have been adjusted for prior year permanent book-tax
differences. Reclassifications between undistributed net investment income
and accumulated net realized gain (loss) arose principally from differing
book and tax treatments for foreign currency transactions;
reclassifications between paid in capital and undistributed net investment
income arose principally from differing book and tax treatments for
deferred organization costs (Note A7).
At April 30, 1996, the Portfolio's cost of investments for Federal income
tax purposes was approximately $49,205,000. Net unrealized appreciation for
Federal income tax purposes aggregated approximately $3,630,000 of which
$7,056,000 related to appreciated securities and $3,426,000 related to
depreciated securities.
For the year ended October 31, 1995, the Portfolio utilized capital loss
carryovers for Federal income tax purposes of approximately $20,000.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolio's custodian bank takes possession of the
underlying securities, the value of which exceeds the principal
19
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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 marked-to-market 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.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Portfolio are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the bid prices of such currencies against U.S. dollars last
quoted by a major bank. The Portfolio does not isolate that portion of
realized or unrealized gains and losses resulting from changes in the
foreign exchange rate from flucuations arising from changes in the market
prices of the securities. Net realized gains and losses on foreign currency
transactions represent net foreign exchange gains or losses from forward
foreign currency exchange contracts, disposition of foreign currencies,
currency gains or losses realized between trade and settlement dates on
securities transactions and the difference between the amount of the
investment income and foreign withholding taxes recorded on the Portfolio's
books and the U.S. dollar equivalent amounts actually received or paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolio may enter
into forward foreign currency exchange contracts to protect the value of
securities held and related receivables and payables against changes in
future foreign exchange rates. A forward currency contract is an agreement
between two parties to buy or sell currency at a set price on a future
date. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is marked-to-market daily using the
forward rate and the change in market value is recorded by the Portfolio as
unrealized gain or loss. The Portfolio recognizes realized gain or loss
when the contract is closed, equal to the difference between the value of
the contract at the time it was opened and the value at the time it was
closed. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts
and are generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolio will normally distribute
substantially all of its net investment income to shareholders annually.
Any realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to permanent differences as presented in Note A2.
7. 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,
except that certain dividends from foreign securities are recorded as soon
as the Portfolio is informed of 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
20
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
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 of the Portfolio have been increased to
include expense offsets for custodian balance credits. Costs incurred by
the Portfolio in connection with its organization have been deferred and
are being amortized on a straight-line basis over a five year period.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Acadian 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 1.00% 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 2.50% of average daily net assets.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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 0.06% of average daily net assets
for the Portfolio. Also effective April 15, 1996, the Administrator has
entered into a Mutual Funds Service Agreement with Chase Global Funds Services
Company ("CGFSC"), a wholly-owned subsidiary of The Chase Manhattan Bank,
N.A., 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.
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $4,232 from the Portfolio as Administrator.
21
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
D. 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.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the Portfolio
made purchases of $13,751,000 and sales of $1,849,000 of investment securities
other than long-term U.S. Government and short-term securities. There were no
purchases and sales of long-term U.S. Government securities.
F. 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.
G. OTHER: At April 30, 1996, 71.0% of total shares outstanding were held by
two record shareholder owning 10% or greater of the aggregate total shares
outstanding.
At April 30, 1996, the net assets of the Portfolio were substantially
comprised of foreign denominated securities and/or currency. Changes in
currency exchange rates will affect the value and investment income from such
securities.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibly lower level of
government supervision and regulation of foreign securities markets and the
possibility of political or economic instability.
22
<PAGE>
- --------------------------------------------------------------------------------
UAM FUNDS
DSI PORTFOLIOS
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Mary Rudie Barneby Director
Director and Executive
Vice President William H. Park
Vice President and
John T. Bennett, Jr. Assistant Treasurer
Director
Karl O. Hartmann
J. Edward Day Secretary
Director
Robert R. Flaherty
Philip D. English Treasurer
Director
Harvey M. Rosen
Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Dewey Square Investors Corporation
One Financial Center
Boston, MA 02111
- --------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- --------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square,
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
UAM FUNDS
DSI PORTFOLIOS
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
UAM FUNDS DSI PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Disciplined Value......................................................... 4
Limited Maturity Bond..................................................... 8
Money Market.............................................................. 13
Statements of Operations.................................................... 15
Statement of Changes in Net Assets
Disciplined Value......................................................... 16
Limited Maturity Bond..................................................... 17
Money Market.............................................................. 18
Financial Highlights
Disciplined Value......................................................... 19
Limited Maturity Bond..................................................... 20
Money Market.............................................................. 21
Notes to Financial Statements............................................... 22
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholders,
DISCIPLINED VALUE PORTFOLIO
The Disciplined Value Portfolio is off to a great start in the new fiscal
year. For the six month period ended April 30, 1996, the Portfolio returned
18.31% versus 13.76% for the S&P 500 Index and 13.03% for the Lipper Equity
Income Funds Average (the Portfolio's category).
In the first calendar quarter of 1996, the stock market posted its fifth
consecutive quarter of 5% plus returns as record cash inflows continued to
power mutual fund investments in the US stock market. In a turnabout from
1995, stock prices rose without the help of lower interest rates.
Economic activity slowed early in the first calendar quarter and evidence of
inventory building began to show up in many sectors. Government procurement
was interrupted as a result of the continuing budget impasse in Washington and
general economic activity was negatively impacted by a series of wide-spread
winter storms in January. This early weakness, however, proved to be short-
lived. Real Gross Domestic Product came in at a surprisingly strong 2.8% for
the quarter and corporations continued to report better than expected
earnings.
The Disciplined Value Portfolio performed very well in this environment. The
biggest contributor to the first calendar quarter performance was the CONSUMER
STAPLES area, by virtue of its largest weighting of any sector in the S&P 500
and the strong performance of the RETAIL sub-sector. Department stores and
specialty retailers rebounded after a weak Christmas season and after very
poor stock price performance in 1995. The Portfolio was well represented in
this area with Kmart (+32%), Sears Roebuck (+26%), and Liz Claiborne (+25%).
Our stock selection in the CAPITAL GOODS sector also was especially good, with
GM Hughes up 29%, United Technologies up 19%, and Varity up 17%. The FINANCIAL
area was very rewarding too, in spite of the higher interest rate environment.
The Portfolio had a solid exposure in this area, with Chase Manhattan
(formerly Chemical Banking), BankAmerica, and American Express all up about
20%.
Our TECHNOLOGY sector selections were mixed. IBM rose 22% and Information
Resources was up 17%, but Xerox fell 8% and Digital Equipment declined 14%. We
sold about half the Digital position in February, when the stock was up 16% on
the year, so the overall Digital position actually had a slightly positive
effect on the portfolio.
The only sector with negative returns in the first calendar quarter was the
UTILITY sector, as both the TELEPHONE and ELECTRIC UTILITY stocks sold off
with the bond market. The Portfolio's exposure was lower than the market here
and it also benefitted from superior stock selection relative to the market.
LIMITED MATURITY BOND PORTFOLIO
For the six month period ended April 30, 1996 non-money market interest rates
increased by 45 to 65 basis points depending on maturity. The yield on a three
year US Treasury note, which is representative of the average maturity in the
Portfolio, increased by 50 basis points to 6.18% during the period. In this
environment of modestly lower bond prices, the Portfolio returned 1.59% for
the six month period compared with the Lipper 1-5 Year Short Investment Grade
Debt Funds Average return of 1.86% and the Merrill Lynch 1-4.99 Year
Corporate/Government Bond Index (gross of fees) return of 1.78%.
We believe that a marked change in market psychology has been the reason for
recent higher interest rates. What has prompted this change? First, varying
economic statistics, including a first quarter increase in Gross Domestic
Product of 2.8%, suggest that economic growth is greater than previously
thought. In general, the bond market
1
<PAGE>
believes that a strengthening economy may portend worsening future inflation.
Increased inflation reduces the purchasing power of bonds causing their prices
to decline. Second, on the inflation front, near record gains in grain prices
coupled with the highest gasoline prices in twelve years and a move to
increase the minimum wage suggest that inflation may creep above three percent
for the first time in six years. Third, earlier optimism that balanced budget
legislation might have been signed into law by now has given way to a
realization that such legislation is dead until 1997 at the earliest. The
change in these economic and political factors has caused investors to
reexamine the aggressiveness of their commitment to the US bond market.
Looking ahead, we believe there is room for rates to rise further in 1996 for
the reasons cited above plus two others outlined below. First, other parts of
the industrialized world (Japan and Western Europe) are taking steps to
reliquify their economies as well. This may result in the first period of
synchronous economic growth in a decade. A worldwide growth policy may
introduce another level of negative implications for investors' inflation
expectation. Second, over the past year foreign central banks, particularly
the Bank of Japan, have sold their currencies to buy US dollars in an attempt
to make their economies more competitive. They, then, have used their dollars
to purchase record amounts of US Treasury securities. We believe this trend is
unsustainable, subject to reversal at any time, and represents a significant
source of potential incremental supply.
Mortgage-backed securities have performed well over the past six months. They
represent 49% of the Portfolio. We own a combination of US, agency-backed
pass-throughs (where the timely payment of principal and interest is insured
by Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation) and collateralized-mortgage obligations (CMOs). As always, we
carefully screen the CMO investment choices, and avoid mortgage derivatives
and any securities which may exhibit unusually volatile price movement.
The Portfolio is allowed to invest in double-B and single-B rated securities
in an amount up to 10% of the market value of the Portfolio. We take advantage
of this provision to use these well-researched, less-than-investment grade
issues as a means of building incremental yield into the portfolio and
reducing the interest rate sensitivity. The largest holding in these rating
categories represents 2.7% of the Portfolio.
MONEY MARKET PORTFOLIO
In December, 1995 and February, 1996 the Federal Reserve lowered the federal
funds rate by 0.25%. These policy moves by the nation's central bank brought
the federal funds rate down to 5.25% and caused most other money market rates
to decline by 25 to 50 basis points during the period. The federal funds rate
is the rate that commercial banks buy and/or sell the excess reserves which
they legally require to manage their business. As of April 30, 1996 the
Portfolio had a 7-day current yield of 5.04% versus 5.08% for the Donoghue/IBC
Taxable Institutions--Only Money Fund Average.
We continue to pursue a strategy of investing in only the highest quality
short-term investments. Within this framework, we seek to find the best
yielding combination of money market securities including commercial paper and
repurchase agreements. At April 30, 1996 73% was invested in commercial paper
and 27% in repurchase agreements. The weighted average maturity at that time
was 15 days.
Sincerely,
/s/ Peter M. Whitman
Peter M. Whitman
President and Chief Investment Officer
2
<PAGE>
DEFINITIONS OF THE COMPARATIVE INDICES
--------------------------------------
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
The Lipper Equity Income Funds Average is an average of 30 funds which seek
relatively high current income and growth of income through investing 60% or
more of their portfolio in equities.
The Lipper 1-5 Year Short Investment Grade Debt Funds Average is an average of
162 funds that invest at least 65% of assets in investment grade debt issues
(rated in top four grades) with dollar-weighted average maturities of 5 years
or less.
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 (rated in the top
four grades).
Donaghue's Money Fund Average is an average of all major money market fund
yields, published weekly for 7- and 30-day yields.
Comparisons of performance assume reinvestment of dividends.
Please note that one can not invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Yields will fluctuate as market conditions change. If it were not for the
Adviser's temporary fee waiver, the yield of the Money Market Portfolio would
be lower. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
An investment in the Money Market Portfolio is neither insured nor guaranteed
by the U.S. Government. There can be no assurance that the Money Market
Portfolio will be able to maintain its net asset value of $1.00 per share.
3
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (88.2%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (1.9%)
Exide Corp. ................................................... 21,000 $ 590
General Motors Corp............................................ 4,900 266
*Varity Corp................................................... 6,800 290
-------
1,146
- --------------------------------------------------------------------------------
BASIC RESOURCES (2.4%)
IMC Global, Inc................................................ 37,900 1,397
- --------------------------------------------------------------------------------
CONSUMER DURABLES (1.8%)
General Motors Corp., Class H.................................. 17,500 1,070
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (7.5%)
Kmart Corp..................................................... 87,000 881
Limited (The), Inc. ........................................... 17,405 361
Liz Claiborne, Inc............................................. 7,000 254
Philip Morris Cos., Inc........................................ 20,000 1,802
*Ryan's Family Steak House, Inc................................ 25,000 240
Sears, Roebuck & Co............................................ 17,500 873
-------
4,411
- --------------------------------------------------------------------------------
ENERGY (8.9%)
British Petroleum Co. plc ADR.................................. 17,607 1,923
Exxon Corp..................................................... 15,500 1,317
Mobil Corp. ................................................... 4,500 517
Texaco, Inc.................................................... 6,500 556
Union Texas Petroleum Holdings, Inc............................ 50,000 969
-------
5,282
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (12.4%)
American Express Co............................................ 6,300 306
BankAmerica Corp............................................... 28,000 2,121
Bank of Boston Corp............................................ 48,800 2,361
Chase Manhattan Corp........................................... 33,000 2,273
DeBartolo Realty Corp.......................................... 15,000 233
-------
7,294
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HEALTH CARE (1.9%)
Baxter International, Inc. .................................... 19,500 $ 863
*Tenent Healthcare Corp. ...................................... 12,200 250
-------
1,113
- --------------------------------------------------------------------------------
INDUSTRIAL (5.2%)
Cooper Industries, Inc. ....................................... 6,500 276
Hercules, Inc. ................................................ 17,000 1,028
Imperial Chemical Industries plc ADR........................... 5,000 275
International Paper Co. ....................................... 7,000 279
Lubrizol Corp. ................................................ 8,000 232
United Technologies Corp. ..................................... 5,000 553
USX-US Steel Group, Inc. ...................................... 13,500 445
-------
3,088
- --------------------------------------------------------------------------------
INSURANCE (7.8%)
Aetna Life & Casualty Co. ..................................... 18,000 1,282
Allstate Corp. ................................................ 49,000 1,905
Torchmark Corp. ............................................... 33,000 1,419
-------
4,606
- --------------------------------------------------------------------------------
MINING (1.6%)
Barrick Gold Corp. ............................................ 30,000 919
- --------------------------------------------------------------------------------
PAPER & PACKAGING (3.8%)
James River Corp. of Virginia.................................. 44,100 1,180
*Jefferson Smurfit Corp. ...................................... 82,000 1,087
-------
2,267
- --------------------------------------------------------------------------------
PHARMACEUTICALS (10.4%)
American Home Products Corp. .................................. 14,000 1,477
Pharmacia & Upjohn, Inc. ...................................... 59,000 2,257
SmithKline Beecham plc ADR..................................... 44,500 2,403
-------
6,137
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
SERVICES (0.8%)
*Information Resources, Inc.................................... 18,200 $ 262
National Service Industries, Inc. ............................. 6,300 233
-------
495
- --------------------------------------------------------------------------------
TECHNOLOGY (9.0%)
*Digital Equipment Corp........................................ 20,600 1,231
International Business Machines Corp........................... 20,000 2,150
*Symantec Corp................................................. 62,000 992
Xerox Corp..................................................... 6,400 938
-------
5,311
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (0.2%)
Lucent Technologies, Inc....................................... 2,895 102
- --------------------------------------------------------------------------------
TRANSPORTATION (0.3%)
Ryder System, Inc. ............................................ 6,600 192
- --------------------------------------------------------------------------------
UTILITIES (12.3%)
AT&T Corp...................................................... 22,000 1,348
GTE Corp. ..................................................... 36,000 1,562
NYNEX Corp..................................................... 46,250 2,272
Telefonos de Mexico S.A. ADR, Class L.......................... 16,000 544
Texas Utilities Co............................................. 38,530 1,551
-------
7,277
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $46,696)............................. 52,107
- --------------------------------------------------------------------------------
PREFERRED STOCKS (1.9%)
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (0.4%)
RJR Nabisco Holdings, Series C, $0.6012........................ 34,600 207
- --------------------------------------------------------------------------------
INDUSTRIAL (1.5%)
WHX Corp. Series A, 6.5%....................................... 19,200 876
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $1,367)........................... 1,083
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENT (8.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (8.5%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $5,021, collateralized by
$3,213 U.S. Treasury Bond, 13.25%, due 5/15/14, valued at
$5,121 (COST $5,020)....................................... $ 5,020 $ 5,020
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.6%) (COST $53,083).................... 58,210
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.4%)
- -------------------------------------------------------------------------------
Cash........................................................ 1
Receivable for Investments Sold............................. 992
Receivable for Portfolio Shares Sold........................ 138
Dividends Receivable........................................ 121
Interest Receivable......................................... 1
Other Assets................................................ 5
Payable for Investments Purchased........................... (351)
Payable for Investment Advisory Fees........................ (36)
Payable for Directors' Fees................................. (1)
Payable for Administrative Fees............................. (8)
Other Liabilities........................................... (19)
-------
843
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 4,682,141 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).. $59,053
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.... $ 12.61
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
ADR--American Depositary Receipt.
7
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (49.4%)
- -------------------------------------------------------------------------------
GOVERNMENT AGENCY-BACKED (35.2%)
Federal Home Loan Mortgage Corp.:
Series 1004 G, PAC, CMO,
7.95%, 11/15/19.............................................. $ 625 $ 632
Series 1049 H, CMO,
8.75%, 2/15/20............................................... 658 661
Series 1098 F, PAC, CMO,
8.00%, 3/15/05............................................... 71 71
Series 1302 PF, PAC, CMO,
7.50%, 2/15/18............................................... 500 505
Series 1332 ZA, PAC, CMO,
6.50%, 1/15/16............................................... 634 632
Series 1773 BC, CMO,
8.50%, 4/15/16............................................... 690 692
Gold, Various Pools
7.50%, 4/1/11-11/1/25........................................ 2,523 2,536
8.50%, 11/1/24............................................... 1,809 1,858
9.00%, 10/1/25............................................... 410 429
Federal National Mortgage Association:
Conventional, Various Pools
7.50%, 2/1/26................................................ 1,101 1,088
9.00%, 6/1/25................................................ 758 796
9.50%, 8/1/21................................................ 715 765
-------
10,665
- -------------------------------------------------------------------------------
NON-GOVERNMENT AGENCY-BACKED (14.2%)
FBC Mortgage Securities Trust 1, Series B, CMO,
9.00%, 5/20/17................................................ 1,059 1,050
Home Mac Mortgage Securities Corp., Series 86-5 C, CMO,
8.55%, 7/1/08................................................. 368 374
MDC Mortgage Funding Corp., Series P-4, CMO,
9.50%, 11/20/17............................................... 362 362
Merrill Lynch Mortgage Investors, Inc., Series 1994-A, REMIC,
CMO, 6.412%, 2/15/09.......................................... 31 30
Merrill Lynch Trust Series 45-F, PAC, CMO,
9.10%, 9/20/14................................................ 570 590
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
NON-GOVERNMENT AGENCY-BACKED--(CONTINUED)
Ryland Acceptance Corp. Series 81-B, PAC, CMO,
9.00%, 1/1/15................................................. $ 382 $ 392
Security Pacific National Bank, CMO,
8.15%, 6/15/20................................................ 380 390
TMS Home Equity Trust, CMO,
6.55%, 9/15/21................................................ 585 567
7.80%, 10/1/21................................................ 525 530
-------
4,285
- -------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $15,156)................. 14,950
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (29.5%)
- -------------------------------------------------------------------------------
CONSTRUCTION (0.8%)
U.S. Home Corp.
7.95%, 3/1/01................................................. 250 237
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (1.8%)
Philip Morris, Inc.
7.50%, 3/15/97................................................ 5 5
9.25%, 12/1/97................................................ 500 522
-------
527
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (0.0%)
Time Warner, Inc.
9.125%, 1/15/13............................................... 5 5
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (10.2%)
American General Corp.
9.625%, 2/1/18................................................ 125 134
First Chicago Corp.
6.83%, 9/8/97................................................. 525 530
Morgan Stanley, Inc.
9.25%, 3/1/98................................................. 900 944
Paine Webber Group, Inc.
7.765%, 8/11/05............................................... 670 674
Phoenix Re Corp.
9.75%, 8/15/03................................................ 750 795
-------
3,077
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- --------------------------------------------------------------------------------
INDUSTRIAL (7.0%)
American Brands, Inc.
8.50%, 10/1/03.................................................. $ 15 $ 16
Arkla, Inc.
9.875%, 2/15/18................................................. 200 197
Crown Paper Co.
11.00%, 9/1/05.................................................. 250 233
Ford Motor Credit
7.50%, 1/15/03.................................................. 10 10
Mobile Telecommunications Technology Corp.
13.50%, 12/15/02................................................ 250 263
News America Holdings, Inc.
8.45%, 8/1/34................................................... 250 267
Occidential Petroleum Corp.
8.50%, 9/15/04.................................................. 475 496
Phillips Petroleum
9.18%, 9/15/21.................................................. 600 643
------
2,125
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.6%)
ITT Corp.
8.55%, 6/15/09.................................................. 450 479
- --------------------------------------------------------------------------------
TRANSPORTATION (1.6%)
Moran Transportation Co.
11.75%, 7/15/04................................................. 500 495
- --------------------------------------------------------------------------------
UTILITIES (6.5%)
Canal Electric
8.85%, 9/1/06................................................... 800 828
Midland Cogeneration Venture Series C-94
10.33%, 7/23/02................................................. 602 632
Philadelphia Electric
8.75%, 4/1/22................................................... 500 501
------
1,961
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $8,975)..................... 8,906
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BOND (2.7%)
- -------------------------------------------------------------------------------
New York City, New York, Series B
9.50%, 6/1/09 (COST $858)..................................... $ 750 $ 828
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES (10.7%)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
7.50%, 7/23/07................................................ 30 30
Federal National Mortgage Association
++Principal Strip,
8/21/01....................................................... 1,300 1,279
U.S. Treasury Bill
0.00%, 7/25/96................................................ 50 49
U.S. Treasury Bond
7.125%, 2/15/23............................................... 5 5
U.S. Treasury Notes
5.75%, 8/15/03................................................ 20 19
6.25%, 2/15/03................................................ 430 423
6.25%, 8/31/96................................................ 15 15
6.50%, 9/30/96................................................ 1,000 1,005
6.875%, 2/28/97............................................... 20 20
6.875%, 7/31/99............................................... 380 386
7.125%, 9/30/99............................................... 5 5
7.25%, 8/15/04................................................ 10 10
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $3,203)....... 3,246
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (0.0%)
- -------------------------------------------------------------------------------
Republic of Iceland
6.125%, 2/1/04 (COST $15)..................................... 15 14
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENT (7.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.2%)
Lehman Brothers, 5.32%, dated 4/30/96, due 5/1/96, to be
repurchased at $2,161, collateralized by $2,405 U.S. Treasury
Bonds, 6.25%, due 8/15/23, valued at $2,205 (COST $2,160)..... 2,160 2,160
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%) (COST $30,367)........................ 30,104
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (0.5%)
- -------------------------------------------------------------------------------
Cash................................................................. $ 10
Interest Receivable.................................................. 347
Receivable for Investments Sold...................................... 305
Receivable for Portfolio Shares Sold................................. 23
Receivable for Daily Variation on Futures Contracts.................. 8
Other Assets......................................................... 6
Payable for Investments Purchased.................................... (505)
Payable for Investment Advisory Fees................................. (11)
Payable for Administrative Fees...................................... (10)
Unrealized Loss on Forward Foreign Currency Contracts................ (9)
Payable for Directors' Fees.......................................... (1)
Other Liabilities.................................................... (15)
-------
148
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 3,238,412 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)......................... $30,252
===============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 9.34
===============================================================================
</TABLE>
+ See Note A to Financial Statements.
++ Callable on 8/21/96. If not called, will start accruing at 8.40%.
CMO-- Collateralized Mortgage Obligation.
PAC-- Planned Amortization Class.
REMIC--Real Estate Mortgage Investment Conduit.
FORWARD FOREIGN CURRENCY CONTRACT INFORMATION: Under the terms of forward
foreign currency contracts open April 30, 1996, the Portfolio is obligated to
deliver or is to receive foreign currency in exchange for U.S. dollars as
indicated below:
<TABLE>
<CAPTION>
Net
Currency to In Exchange Unrealized
Deliver For Settlement Value Gain (Loss)
(000) (000) Date (000) (000)
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases:
US$ 408 FRF 2,071 5/6/96 US$401 US$(7)
301 ITL 468,000 5/7/96 300 (1)
---------
US$(8)
---------
Sales:
FRF 2,071 US$ 407 5/6/96 US$401 6
ITL 468,000 293 5/7/96 300 (7)
---------
US$(1)
---------
Net US$(9)
=================================================================
</TABLE>
FRF --French Franc
ITL--Italian Lira
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
DSI MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (69.7%)
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (8.8%)
Kellogg Co. 5/9/96........................................... $ 4,000 $ 3,995
Ocean Spray Cranberries 5/2/96............................... 4,800 4,799
PepsiCo, Inc. 6/5/96......................................... 2,100 2,089
--------
10,883
- --------------------------------------------------------------------------------
CHEMICALS (4.0%)
Air Products & Chemicals, Inc. 5/17/96....................... 5,000 4,988
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (23.3%)
American Honda Corp. 6/28/96................................. 5,000 4,957
Cooperative Association of Tractor Dealers, Inc. 5/23/96..... 2,000 1,994
Countrywide Funding Corp. 5/8/96............................. 5,000 4,996
CSW Corp. 5/7/96............................................. 4,000 3,996
General Motors Acceptance Corp. 5/31/96...................... 5,000 4,978
Great Western Bank 5/24/96................................... 4,000 3,986
Pearson, Inc. 5/1/96......................................... 4,000 4,000
--------
28,907
- --------------------------------------------------------------------------------
INDUSTRIAL (8.8%)
Echlin, Inc. 5/10/96......................................... 2,941 2,937
Whirlpool Corp. 5/31/96...................................... 4,000 3,982
XEROX Corp. 6/11/96.......................................... 4,000 3,976
--------
10,895
- --------------------------------------------------------------------------------
INSURANCE (9.6%)
Met Life Funding 6/12/96..................................... 4,000 3,975
Providian Corp. 6/3/96....................................... 4,000 3,981
USAA Captial 5/2/96.......................................... 4,000 3,999
--------
11,955
- --------------------------------------------------------------------------------
NEWSPAPER PUBLISHING (4.0%)
Gannett Co. 5/21/96.......................................... 5,000 4,985
- --------------------------------------------------------------------------------
PHARMACEUTICALS (3.2%)
SmithKline Beecham 5/15/96................................... 4,000 3,992
- --------------------------------------------------------------------------------
SERVICES (4.0%)
First Data Corp. 5/7/96...................................... 5,000 4,996
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
DSI MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER--(CONTINUED)
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (4.0%)
BellSouth Corp. 5/8/96..................................... $ 5,000 $ 4,995
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST $86,596)....................... 86,596
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (25.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (25.2%)
Goldman Sachs, 5.25%, dated 4/30/96, due 5/1/96, to be
repurchased at $10,001, collateralized by $8,985 U.S.
Treasury Bonds, 8.125%, due 8/15/21, valued at $10,207.... 10,000 10,000
Lehman Brothers, 5.32%, dated 4/30/96, due 5/1/96, to be
repurchased at $21,403, collateralized by $13,665 U.S.
Treasury Bonds, 13.25%, due 5/15/14, valued at $21,835.... 21,400 21,400
- -------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (COST $31,400)................. 31,400
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (94.9%) (COST $117,996)................... 117,996
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (5.1%)
- -------------------------------------------------------------------------------
Receivable for Portfolio Shares Sold....................... 6,795
Interest Receivable........................................ 5
Other Assets............................................... 7
Dividends Payable.......................................... (465)
Payable for Investment Advisory Fees....................... (19)
Payable for Administrative Fees............................ (12)
Payable for Directors' Fees................................ (1)
Other Liabilities.......................................... (24)
--------
6,286
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 124,281,090 outstanding $0.001 par value
Institutional Class shares (authorized 400,000,000
shares)................................................... $124,282
===============================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.... $ 1.00
===============================================================================
</TABLE>
+See Note A to Financial Statements.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
DSI PORTFOLIOS
STATEMENTS OF OPERATIONS
For the Six Months Ended April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
DSI
DSI LIMITED DSI
DISCIPLINED MATURITY MONEY
VALUE BOND MARKET
(In Thousands) PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............................. $ 628 $ -- $ --
Interest............................... 172 1,155 3,455
- -------------------------------------------------------------------------------
Total Income.......................... 800 1,155 3,455
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees............................ 200 67 $ 246
Less: Fees Waived..................... -- -- (135) 111
-----
Administrative Fees--Note C............ 41 47 71
Custodian Fees......................... 2 5 10
Directors' Fees--Note F................ 2 2 2
Audit Fees............................. 7 8 8
Other Expenses......................... 16 14 28
- -------------------------------------------------------------------------------
Total Expenses........................ 268 143 230
Expense Offset--Note A................. -- @ (2) -- @
- -------------------------------------------------------------------------------
Net Expenses.......................... 268 141 230
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME................... 532 1,014 3,225
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments............................ 5,921 (57) --
Foreign Exchange Transactions.......... -- 4 --
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS).......... 5,921 (53) --
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION):
Investments............................ 2,466 (470) --
Foreign Currency Translations.......... -- (11) --
Futures Contracts...................... -- 8 --
- -------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION)............ 2,466 (473) --
- -------------------------------------------------------------------------------
NET GAIN (LOSS)......................... 8,387 (526) --
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $ 8,919 $ 488 $ 3,225
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
@ Amount represents custodian balance credits of $ 416 and $ 341 for DSI
Disciplined Value Portfolio and DSI Money Market Portfolio, respectively.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,089 $ 532
Net Realized Gain..................................... 4,215 5,921
Net Change in Unrealized Appreciation................. 3,655 2,466
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 8,959 8,919
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,098) (486)
Net Realized Gain..................................... (4,355) (4,252)
- --------------------------------------------------------------------------------
Total Distributions.................................. (5,453) (4,738)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 6,300 5,078
--In Lieu of Cash Distributions..................... 5,430 4,732
Redeemed.............................................. (16,300) (2,876)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... (4,570) 6,934
- --------------------------------------------------------------------------------
Total Increase (Decrease)............................ (1,064) 11,115
Net Assets:
Beginning of Period................................... 49,002 47,938
- --------------------------------------------------------------------------------
End of Period (2)..................................... $ 47,938 $59,053
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued......................................... 585 419
In Lieu of Cash Distributions......................... 554 423
Shares Redeemed....................................... (1,473) (238)
-------- -------
(334) 604
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital....................................... $ 41,127 $48,061
Undistributed Net Investment Income................... 63 109
Accumulated Net Realized Gain......................... 4,087 5,756
Unrealized Appreciation............................... 2,661 5,127
-------- -------
$ 47,938 $59,053
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 2,095 $ 1,014
Net Realized Loss..................................... (127) (53)
Net Change in Unrealized Appreciation (Depreciation).. 722 (473)
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 2,690 488
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (2,011) (997)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 4,784 972
--In Lieu of Cash Distributions....................... 1,947 962
Redeemed.............................................. (8,336) (467)
- -------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... (1,605) 1,467
- -------------------------------------------------------------------------------
Total Increase (Decrease)............................ (926) 958
Net Assets:
Beginning of Period................................... 30,220 29,294
- -------------------------------------------------------------------------------
End of Period (2)..................................... $ 29,294 $ 30,252
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued......................................... 513 103
In Lieu of Cash Distributions......................... 209 103
Shares Redeemed....................................... (886) (49)
-------- --------
(164) 157
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital....................................... $ 30,548 $ 32,015
Undistributed Net Investment Income................... 231 248
Accumulated Net Realized Loss......................... (1,692) (1,745)
Unrealized Appreciation (Depreciation)................ 207 (266)
-------- --------
$ 29,294 $ 30,252
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
DSI MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 6,347 $ 3,225
Net Realized Gain..................................... 2 --
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 6,349 3,225
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (6,347) (3,225)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 604,560 364,876
--In Lieu of Cash Distributions..................... 76 83
Redeemed.............................................. (592,576) (364,824)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 12,060 135
- --------------------------------------------------------------------------------
Total Increase....................................... 12,062 135
Net Assets:
Beginning of Period................................... 112,085 124,147
- --------------------------------------------------------------------------------
End of Period (2)..................................... $ 124,147 $ 124,282
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 604,560 364,876
In Lieu of Cash Distributions......................... 76 83
Shares Redeemed....................................... (592,576) (364,824)
--------- ---------
12,060 135
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital....................................... $ 124,147 $ 124,282
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
------------------------------------------- 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 7.86 $ 10.17 $ 10.62 $ 12.72 $ 11.11 $ 11.76
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.26 0.26 0.22 0.22 0.25 0.12
Net Realized and
Unrealized Gain....... 2.31 0.46 2.09 0.17 1.70 1.88
- ------------------------------------------------------------------------------------
Total from Investment
Operations........... 2.57 0.72 2.31 0.39 1.95 2.00
- ------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.26) (0.27) (0.21) (0.22) (0.25) (0.11)
Net Realized Gain...... -- -- -- (1.78) (1.05) (1.04)
- ------------------------------------------------------------------------------------
Total Distributions... (0.26) (0.27) (0.21) (2.00) (1.30) (1.15)
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 10.17 $ 10.62 $ 12.72 $ 11.11 $ 11.76 $ 12.61
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
TOTAL RETURN............ 32.95% 7.15% 21.92% 3.48% 20.12% 18.31%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Pe-
riod (Thousands)....... $41,558 $37,202 $42,170 $49,002 $47,938 $59,053
Ratio of Expenses to
Average Net Assets..... 1.05% 0.99% 1.04% 1.09% 1.00%# 1.01%#*
Ratio of Net Investment
Income to Average Net
Assets................. 2.60% 2.44% 1.88% 2.02% 2.26% 2.00%*
Portfolio Turnover Rate. 62% 74% 149% 184% 121% 92%
Average Commission Rate
##..................... N/A N/A N/A N/A N/A $0.0586
- ------------------------------------------------------------------------------------
</TABLE>
* Annualized
# For the year ended October 31, 1995 and for the six months ended April
30,1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.99% and 1.00%*, respectively.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
-------------------------------------------- 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.87 $ 10.40 $ 10.56 $ 9.95 $ 9.31 $ 9.51
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.77 0.66 0.68 0.56 0.69 0.32
Net Realized and
Unrealized Gain
(Loss)................ 0.53 0.35 (0.16) (0.70) 0.17 (0.17)
- -------------------------------------------------------------------------------------
Total from Investment
Operations........... 1.30 1.01 0.52 (0.14) 0.86 0.15
- -------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.77) (0.67) (0.70) (0.50) (0.66) (0.32)
Net Realized Gain...... -- (0.18) (0.43) -- -- --
- -------------------------------------------------------------------------------------
Total Distributions... (0.77) (0.85) (1.13) (0.50) (0.66) (0.32)
- -------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 10.40 $ 10.56 $ 9.95 $ 9.31 $ 9.51 $ 9.34
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
TOTAL RETURN............ 13.72% 10.03% 5.22% (1.39)% 9.58% 1.59%
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $34,896 $33,206 $33,724 $30,220 $29,294 $30,252
Ratio of Expenses to
Average Net Assets..... 0.75% 0.72% 0.79% 0.88% 0.88%# 0.96%#*
Ratio of Net Investment
Income to Average Net
Assets................. 7.39% 6.19% 6.50% 5.68% 7.12% 6.83%*
Portfolio Turnover Rate. 306% 238% 167% 274% 126% 77%
- -------------------------------------------------------------------------------------
</TABLE>
* Annualized
# For the periods ended October 31, 1995 and for the six months ended April
30, 1996, the Ratio of Expenses to Average Net Assets excludes the effect
of expense offsets. If expense offsets were included, the Ratio of Expenses
to Average Net Assets would be 0.87% and 0.95%*, respectively.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
DSI MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED OCTOBER 31, APRIL 30,
------------------------------------------------ 1996
1991 1992 1993 1994 1995 (UNAUDITED)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income+. 0.059 0.035 0.026 0.033 0.053 0.026
- -----------------------------------------------------------------------------------------
Total from Investment
Operations........... 0.059 0.035 0.026 0.033 0.053 0.026
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.059) (0.035) (0.026) (0.033) (0.053) (0.026)
- -----------------------------------------------------------------------------------------
Total Distributions... (0.059) (0.035) (0.026) (0.033) (0.053) (0.026)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
TOTAL RETURN............ 6.10% 3.66% 2.63% 3.30% 5.48%++ 2.64%++
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $168,490 $182,807 $188,419 $112,085 $124,147 $124,282
Ratio of Expenses to
Average Net Assets+.... 0.68% 0.64% 0.58% 0.56% 0.50%# 0.38%#*
Ratio of Net Investment
Income to Average Net
Assets+................ 5.98% 3.65% 2.60% 3.07% 5.35% 5.25%*
- -----------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Net of voluntarily waived fees of $0.001 per share for the year ended
October 31, 1995 and $0.001 for the six months ended April 30, 1996.
++ Total return would have been lower had certain expenses not been waived for
the periods indicated.
# For the year ended October 31, 1995 and for the six months ended April 30,
1996, the Ratio of Expenses to Average Net Assets excludes the effect of
expense offsets. If expense offsets were included, the Ratio of Expenses to
Average Net Assets would be 0.49% and 0.38%*, respectively.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds"), were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The DSI Disciplined Value Portfolio, DSI
Limited Maturity Bond Portfolio and DSI Money Market Portfolio (the
"Portfolios"), portfolios of UAM Funds, Inc., began operations on December 12,
1989, December 18, 1989 and December 28, 1989, respectively. The DSI
Disciplined Value Portfolio is authorized to offer two separate classes of
shares--Institutional Class Shares and Institutional Service Class Shares. No
shares of the Portfolio's Institutional Service Class have been issued as of
April 30, 1996. At April 30, 1996, the UAM Funds were comprised of thirty-
seven active portfolios. The financial statements of the remaining portfolios
are presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the
Portfolios in the preparation of their 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: Equity securities listed on a securities exchange
for which market quotations are readily available are valued at the last
quoted sales price as of the close of the exchange on the day the valuation
is made or, if no sale occurred on such day, at the bid price on such day.
Price information on listed securities is taken from the exchange where the
security is primarily traded. Over-the-counter and unlisted equity
securities are valued at the current bid price. Fixed income securities are
stated on the basis of valuations provided by brokers and/or a pricing
service which uses information with respect to transactions in fixed income
securities, quotations from dealers, market transactions in comparable
securities and various relationships between securities in determining
value. Short-term investments that have remaining maturities of sixty days
or less at time of purchase are valued at amortized cost, if it
approximates market value. The value of other assets and securities for
which no quotations are readily available is determined in good faith at
fair value using methods determined by the Board of Directors.
2. FEDERAL INCOME TAXES: It is each Portfolio's intention to continue 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.
Undistributed net investment income and accumulated net realized gain have
been adjusted for prior year permanent book and tax differences.
Reclassifications arose principally from differing book and tax treatments
for paydown losses on mortgage-backed securities.
At April 30, 1996, cost of investments and unrealized appreciation
(depreciation) of investments for Federal income tax purposes was:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
DSI PORTFOLIOS (000) (000) (000) (000)
- -------------- -------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Disciplined Value............. $ 53,083 $5,500 $(373) $5,127
Limited Maturity Bond......... 30,367 155 (418) (263)
Money Market.................. 117,996 -- -- --
</TABLE>
22
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
At October 31, 1995, DSI Limited Maturity Bond Portfolio had available
capital loss carryforwards of approximately $8,000, $1,607,000 and $69,000
which will expire on October 31, 2001, October 31, 2002 and October 31,
2003, respectively.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolios' 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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolios have 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.
4. FOREIGN CURRENCY TRANSACTION: The books and records of the DSI
Disciplined Value Portfolio and the DSI Limited Maturity Bond Portfolios'
are maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the bid prices of such currencies against U.S. dollars last
quoted by a major bank. The DSI Disciplined Value Portfolio and the DSI
Limited Maturity Bond Portfolios do not isolate that portion of realized or
unrealized gains and losses resulting from changes in the foreign exchange
rate from fluctuations arising from changes in the market prices of the
securities. Net realized gains and losses on foreign currency transactions
represent net foreign exchange gains or losses from forward foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between trade and settlement dates on securities
transactions and the difference between the amount of the investment income
and foreign withholding taxes recorded on the DSI Disciplined Value
Portfolio and the DSI Limited Maturity Bond Portfolios books and the U.S.
dollar equivalent amounts actually received or paid.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The DSI Disciplined Value
Portfolio and DSI Limited Maturity Bond Portfolio may enter into forward
foreign currency exchange contracts to protect the value of securities held
and related receivables and payables against changes in future foreign
exchange rates. A forward currency contract is an agreement between two
parties to buy or sell currency at a set price on a future date. The market
value of the contract will fluctuate with changes in currency exchange
rates. The contract is marked-to-market daily using the forward rate and
the change in market value is recorded by the DSI Disciplined Value
Portfolio and DSI Limited Maturity Bond Portfolio as unrealized gains or
losses. The DSI Disciplined Value Portfolio and DSI Limited Maturity Bond
Portfolio recognize realized gains or losses, when the contract is closed,
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. Risks may arise upon
entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and are generally
limited to the amount of unrealized gain on the contracts, if any, at the
date of default. Risks may also arise from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
6. FUTURES CONTRACTS: The DSI Disciplined Value Portfolio and the DSI
Limited Maturity Bond Portfolio's purchases and sales of futures contracts
are designed to hedge a portion of its investments against changes in value
or as an alternative to purchasing or selling actual securities. Upon
entering into a futures
23
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
contract, DSI Disciplined Value Portfolio and DSI Limited Maturity Bond
Portfolio are required to deposit with a broker an amount in cash or
securities ("initial margin") equal to a certain percentage of the purchase
price indicated in the futures contract. Subsequent payments ("variation
margin") are made or received by DSI Disciplined Value Portfolio and DSI
Limited Maturity Bond Portfolio each day and are recorded for financial
reporting purposes as unrealized appreciation or depreciation. When futures
contracts are closed, the difference between the opening value at the date
of purchase and the value at closing is recorded as realized gain or loss
in the statement of operations. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on
which they are traded. Futures contracts involve market risk in excess of
the amounts recognized in the statement of net assets. Risks arise from the
possible movements in security values underlying these instruments. The
change in value of futures contracts primarily corresponds with the value
of their underlying instruments, which may not correlate with the change in
value of the hedged investments. In addition, there is a risk that DSI
Disciplined Value and DSI Limited Maturity Bond Portfolio may not be able
to enter into a closing contract transaction because of an illiquid
secondary market.
The Portfolio had the following futures contracts open at April 30, 1996:
<TABLE>
<CAPTION>
DSI LIMITED MATURITY BOND
PORTFOLIO
-------------------------
AGGREGATE UNREALIZED
NUMBER OF FACE VALUE EXPIRATION APPRECIATION
CONTRACTS CONTRACTS (000) DATE (000)
--------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury Notes.......... 21 $2,266 June 1996 $8
===========
</TABLE>
7. DISTRIBUTIONS TO SHAREHOLDERS: The DSI Money Market Portfolio will
normally distribute substantially all of its net investment income to
shareholders monthly. The DSI Disciplined Value and DSI Limited Maturity
Bond Portfolios will normally distribute substantially all of their net
investment income to shareholders quarterly. Any realized net capital gains
will normally be distributed annually. All distributions are recorded on
the ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments for the recognition
of losses on investments and permanent differences as presented in Footnote
A2.
8. 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. Discounts and premiums
on securities purchased are amortized over their respective lives. Most
expenses of the UAM Funds can be directly attributed to a particular
portfolio. Expenses which cannot be directly attributed are apportioned
among the portfolios of the UAM Funds based on their relative net assets.
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
24
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
company, based on their relative net assets. Custodian fees for each
Portfolio have been increased to include expense offsets for custodian
balance credits.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Dewey Square Investors Corporation ("the Adviser"), a wholly-owned subsidiary
of United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolios at a fee calculated at an annual rate of 0.75% of
the first $500 million of average daily net assets and 0.65% of average daily
net assets in excess of $500 million for DSI Disciplined Value Portfolio;
0.45% of the first $500 million of average daily net assets, 0.40% of the next
$500 million of average daily net assets and 0.35% of average daily net assets
in excess of $1 billion for DSI Limited Maturity Bond Portfolio; and 0.40% of
the first $500 million of average daily net assets and 0.35% of average daily
net assets in excess of $500 million for DSI Money Market Portfolio. In
addition, effective July 1, 1995, the Adviser has voluntarily agreed to waive
a portion of its advisory fees and to assume expenses, if necessary, in order
to keep the DSI Money Market Portfolio's total annual operating expenses,
after the effect of expense offset arrangements, from exceeding 0.18% of
average daily net assets.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate assets; plus 0.07% of the next $2 billion of
the combined aggregate net assets; plus 0.05% 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 0.06%, 0.04% and 0.02% of average daily net assets for
DSI Disciplined Value Portfolio, DSI Limited Maturity Bond Portfolio and DSI
Money Market Portfolio, respectively. Also effective April 15, 1996, the
Administrator has entered into a Mutual Funds Service Agreement with Chase
Global Funds Services Company ("CGFSC"), a wholly-owned subsidiary of The
Chase Manhattan Bank, N.A., 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.
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.
25
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $4,452, $3,442 and $5,736 from DSI Disciplined Value Portfolio, DSI
Limited Maturity Bond Portfolio and DSI Money Market Portfolio, respectively,
as Administrator.
D. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc. (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
E. PURCHASES AND SALES: For the period ended April 30, 1996, purchases and
sales of investment securities other than long-term U.S. Government and short-
term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
DSI PORTFOLIOS (000) (000)
- -------------- --------- -------
<S> <C> <C>
Disciplined Value............................................. $46,822 $44,898
Limited Maturity Bond......................................... 9,994 6,194
</TABLE>
There were no purchases or sales of long-term U.S. Government Securities for
the DSI Disciplined Value Portfolio. Purchases and sales of long-term U.S.
Government securities were approximately $8,482,000 and $14,211,000,
respectively, for DSI Limited Maturity Bond Portfolio.
F. 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.
G. LINE OF CREDIT: The Portfolios, along with certain other portfolios of UAM
Funds, collectively entered into an agreement which enables them to
participate in a $100 million unsecured line of credit with several banks.
Borrowings will be made solely to temporarily finance the repurchase of
portfolio shares. Interest is charged to each participating portfolio based on
its borrowings at a rate per annum equal to the Federal Funds Rate plus 0.75%.
In addition, a commitment fee of 1/10th of 1% per annum, payable at the end of
each calendar quarter, is accrued by each participating portfolio based on
their average daily unused portion of the line of credit. For the period ended
April 30, 1996, there were no borrowings under the agreement.
H. OTHER: At April 30, 1996, the percentage of total shares outstanding held
by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio was as follows:
<TABLE>
<CAPTION>
NO. OF %
DSI PORTFOLIOS SHAREHOLDERS OWNERSHIP
- -------------- ------------ ---------
<S> <C> <C>
Disciplined Value........................................ 2 57.5%
Limited Maturity Bond.................................... 1 52.0
Money Market............................................. 1 91.8
</TABLE>
26
<PAGE>
- -------------------------------------------------------------------------------
SAMI PORTFOLIOS UAM FUNDS
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President and Chairman Director
Mary Rudie Barneby Peter M. Whitman, Jr.
Director and Director
Executive Vice President
John T. Bennett, Jr. William H. Park
Director Vice President and
Assistant Treasurer
J. Edward Day Karl O. Hartmann
Director Secretary
Philip D. English Robert R. Flaherty
Director Treasurer
Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Spectrum Asset Management, Inc.
Four High Ridge Park
Stamford, CT 06905
- -------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
211 Congress Street
Boston, MA 02110
- -------------------------------------------------------------------------------
This report has been prepared for shareholders and may be distributed to
others only if preceded or accompanied by a current prospectus.
- -------------------------------------------------------------------------------
UAM FUNDS
SAMI
PORTFOLIOS
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
UAM FUNDS SAMI PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder Letter.......................................................... 1
Statement of Net Assets
SAMI Preferred Stock Income............................................... 3
Enhanced Monthly Income................................................... 6
Statements of Operations.................................................... 8
Statement of Changes in Net Assets
SAMI Preferred Stock Income............................................... 9
Enhanced Monthly Income................................................... 10
Financial Highlights
SAMI Preferred Stock Income............................................... 11
Enhanced Monthly Income................................................... 12
Notes to Financial Statements............................................... 13
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
DEAR SHAREHOLDER:
SAMI PREFERRED STOCK INCOME PORTFOLIO
Over the three months ended April 30, 1996, the total net assets of SAMI
Preferred Stock Income Portfolio (the "Portfolio") decreased from $33.6
million to $32.7 million. This, coupled with the $0.2 million decrease in the
first fiscal quarter, gives the Portfolio a $0.9 million decrease in assets
year to date. Although assets declined minimally during the second quarter and
year to date, we continue to have a big push on the marketing effort in order
to build up the asset base.
The total return for the quarter ended April 30, 1996 was 3.35% compared to
1.17% for the three-month Treasury Bills based on the Salomon Brothers 1-3
year Treasury Index. On a taxable equivalent basis, corporate tax paying
investors qualifying for the 70% dividends received deduction (DRD) would have
needed 3.69% for the quarter in order to achieve the same after tax return
earned on the Portfolio. The total return for the six months ended April 30,
1996 was 3.25% compared to 2.66% for the three-month Treasury Bills based on
the Salomon Brothers 1-3 year Treasury Index. This would gross up to 4.42% for
fully taxable clients qualifying for the 70% DRD. We believe the quarter's
performance was made possible by a combination of holding the right stocks and
managing the hedge effectively. The Portfolio was positioned in preferred
stocks that were able to take advantage of spreads tightening between the
underlying securities (preferred stocks) and the hedge (Treasury Notes and
Bonds). Given the technicals in the preferred stock market (supply vs.
demand), we believed that the stocks would outperform Treasuries regardless of
the direction of interest rates. As a result, we invested in stocks with good
convexity to take advantage of the upside potential relative to our hedging
instrument.
Interest rates rose significantly over the entire yield curve during the
second fiscal quarter. The 30 year Treasury Bond rose almost 1% over the time
period discussed. Our ongoing strategy of shorting Treasury futures and buying
put options on those futures protected the Portfolio's principal value in this
difficult environment for fixed-income securities. We are now deploying the
gains from our hedge in more preferred stocks at even higher current yields.
Looking ahead, the technicals of the preferred stock market continue to be
strong. New issuance is minimal and many issuers continue to redeem, exchange
or tender for outstanding stock.
In the coming months, we plan to add to the Portfolio's bank securities
holdings. Given the continued pressure on the utility industry with the
prospect of increased competition getting close to reality, we believe it is
prudent to diversify up to 25% of the Portfolio in preferred stocks of
investment grade banks. We will continue to maintain at least 65% of the
assets in utilities, but reduce the exposure from its current level of 100%.
Although the fate of the White House proposal to reduce the DRD from 70% to
50% has not been determined to date and probably won't be until after the
election in November, we continue to see strong support for our efforts to
keep the DRD at 70%.
1
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
During the period since inception on November 15, 1995 to April 30, 1996, the
total net assets of the Enhanced Monthly Income Portfolio (the "Portfolio")
grew and remained stable at $1.9 million.
The total return for the Portfolio for the second fiscal quarter ended April
30, 1996 was 2.08% compared to 1.17% for the three month Treasury Bills based
on the Salomon Brothers 1-3 year Treasury Index. For the period since
inception to April 30, 1996, the total return for the Portfolio was 4.23%
compared to 3.22% for the Smith 3 month Treasury Bills based on the Salomon
Brothers 1-3 year Treasury Index. The Portfolio outperformed the Benchmark
Index as a result of successful execution of the investment strategy. Despite
a difficult market for fixed income securities (30 year Treasury Bond yields
rose almost 1% and, therefore, prices fell), we were able to achieve above-
market returns by maintaining our ongoing strategy of shorting Treasury
futures and/or buying puts on Treasury futures. We are now deploying the gains
from our hedge in more fixed income securities at even higher yields.
Looking ahead, our strategy continues to be geared toward finding those fixed
income securities with the greatest value and maintaining a hedge to help
minimize the interest rate risk. The prospect of continued above-market
performance should help in our efforts to grow the Portfolio this year.
Sincerely,
/s/ Scott T. Fleming /s/ Mark A. Lieb
Scott T. Fleming Mark A. Lieb
Chairman President
DEFINITION OF THE COMPARATIVE INDEX
-----------------------------------
The Salomon Brothers 1-3 Year Treasury Index includes only U.S. Treasury Notes
and Bonds with maturities one year or greater and less than three years.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers on behalf of the SAMI Preferred
Stock Income Portfolio, total return for the SAMI Preferred Stock Income
Portfolio would have been lower. If the Adviser did not have temporary fee
waivers and did not assume expenses on behalf of the Enhanced Monthly Income
Portfolio, total return for the Enhanced Monthly Income Portfolio would have
been lower. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
2
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (87.5%)
- --------------------------------------------------------------------------------
FINANCIAL (3.1%)
Travelers Group, Series A, 8.125%.............................. 40,000 $ 1,028
- --------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (84.4%)
Alabama Power Co., 6.40%....................................... 13,600 305
Appalachian Power Co., 7.80%................................... 3,500 368
Atlantic City Electric Co., 4.75%.............................. 8,800 552
Baltimore Gas & Electric Co., 6.99%............................ 15,000 1,481
Boston Gas Co., Series A, 6.421%............................... 40,000 980
Central Illinois Light Co., 5.85%.............................. 10,000 982
Empire District Electric Co., 8.125%........................... 115,365 1,188
Florida Power & Light Co., Series U, 6.75%..................... 15,000 1,436
Georgia Power Co., $4.92....................................... 6,210 427
Gulf Power Co., 5.16%.......................................... 1,638 117
Hawaiian Electric Co., Series R, 8.75%......................... 5,270 553
Indianapolis Power & Light Co., 8.20%.......................... 7,310 742
Interstate Power Co., 6.40%.................................... 12,500 616
Jersey Central Power & Light Co., 8.65%........................ 2,500 261
Kentucky Utility Co., 6.53%.................................... 12,330 1,162
Montana Power Co., $6.875...................................... 14,500 1,374
NICOR, Inc., 4.48%............................................. 36,000 1,404
Northern States Power Co.-Minnesota, Series I, $7.00........... 5,000 481
Pacific Enterprises, Inc., $4.36............................... 21,130 1,281
Penn Power & Light, 6.75%...................................... 7,500 701
Phillips Gas Co., Series A, 9.32%.............................. 37,340 971
PSI Energy Co., 6.875%......................................... 13,900 1,340
Public Service Electric & Gas Co., 4.08%....................... 14,615 804
Puget Sound Power & Light Co., 4.84%........................... 3,200 262
San Diego Gas & Electric Co., $1.70............................ 15,900 378
Southern California Gas Co., 7.75%............................. 46,000 1,173
Union Electric Co., $4.56...................................... 15,800 1,019
Utilicorp United, Inc., $2.05.................................. 46,995 1,191
Virginia Electric & Power Co., $7.05........................... 7,500 740
Washington Natural Gas Co., Series II, 7.45%................... 30,000 735
Western Resources, Inc., 8.50%................................. 13,000 1,380
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (CONTINUED)
Wisconsin Power & Light Co., 4.76%.......................... 6,300 $ 436
WPS Resources Corp., 6.88%.................................. 7,500 734
------
27,574
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $28,665)........................ 28,602
- -------------------------------------------------------------------------------
<CAPTION>
NO. OF
CONTRACTS
- -------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED PUT OPTIONS (0.4%)
- -------------------------------------------------------------------------------
*U.S. Treasury Bond expiring 9/96, strike price $106........ 63 92
*U.S. Treasury Bond expiring 9/96, strike price $110........ 10 32
- -------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS (COST $124).......................... 124 124
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (13.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (13.2%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $4,301, collateralized by
$4,438 U.S. Treasury Notes 6.375%, due 8/15/02, valued at
$4,386 (COST $4,300)....................................... $4,300 4,300
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.1%) (COST $33,089).................... 33,026
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.1%)
- -------------------------------------------------------------------------------
Cash........................................................ 74
Margin Deposits on Futures Contracts........................ 400
Dividends Receivable........................................ 124
Receivable for Daily Variation Margin on Futures............ 115
Interest Receivable......................................... 1
Other Assets................................................ 1
Payable for Investments Purchased........................... (1,029)
Payable for Investment Advisory Fees........................ (15)
Payable for Administrative Fees............................. (7)
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Payable for Directors' Fees...................................... $ (1)
Other Liabilities................................................ (10)
-------
(347)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 3,548,393 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)....... $32,679
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.......... $ 9.21
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non-Income Producing Security.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (88.9%)
- --------------------------------------------------------------------------------
BANKING--FOREIGN (3.6%)
Banco Bilbao Vizcaya International, Series B, 9.00%.............. 2,600 $ 70
- --------------------------------------------------------------------------------
BANKING--NATIONAL (17.1%)
BankAmerica Corp., Series L, 8.16%............................... 2,700 69
Chase Manhattan Corp.-New, Series H, 8.375%...................... 3,600 92
Citicorp, Series 22, 7.75%....................................... 3,500 88
First Chicago NBD Corp., Series E, 8.45%......................... 3,300 85
------
334
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (13.6%)
ComEd Financing I, 8.48%......................................... 3,500 88
Household Capital Trust I, 8.25%................................. 3,600 91
Lehman Brothers Holdings, Inc., Series A, 8.30%.................. 3,600 87
------
266
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (4.5%)
Pacific Telesis Finance, 7.56%................................... 3,600 87
- --------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (50.1%)
Alabama Power Capital Trust I, 7.375%............................ 550 13
Carolina Power & Light Co., $7.95................................ 900 91
Cincinnati Gas & Electric Co., 8.28%............................. 3,600 90
Columbus Southern Power Corp., Series A, 8.375%.................. 3,500 88
Delmarva Power & Light Co., 5.00%................................ 458 33
IES Utilities, Inc., 7.875%...................................... 3,600 87
Ohio Power Co., 8.16%............................................ 3,600 89
PacifiCorp, Series B, 8.55%...................................... 2,000 51
Phillips Gas Co., Series A, 9.32%................................ 3,500 91
Sierra Pacific Power Co., Series G, $4.12........................ 1,850 94
Southwest Gas Capital I, 9.13%................................... 2,800 73
TU Electric Capital III, 8.00%................................... 3,600 88
Virginia Power Capital Trust, 8.05%.............................. 3,600 91
------
979
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $1,767).............................. 1,736
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NO. OF VALUE
CONTRACTS (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED PUT OPTIONS (1.4%)
- -------------------------------------------------------------------------------
*U.S. Treasury Bond expiring 9/96, strike price $106........ 14 $ 21
*U.S. Treasury Bond expiring 9/96, strike price $108........ 2 4
*U.S. Treasury Bond expiring 9/96, strike price $110........ 1 3
- -------------------------------------------------------------------------------
TOTAL PURCHASED PUT OPTIONS (COST $22)....................... 28
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (8.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (8.6%)
J.P. Morgan Securities, Inc., 5.05%, dated 4/30/96, due
5/1/96, to be repurchased at $168, collateralized by $106
U.S. Treasury Bonds 13.25%, due 5/15/14, valued at $169
(COST $ 168)............................................... $168 168
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.9%) (COST $1,957)...................... 1,932
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.1%)
- -------------------------------------------------------------------------------
Margin Deposits on Futures Contracts........................ 10
Receivable for Daily Variation Margin on Futures............ 10
Receivable due from Investment Adviser...................... 4
Dividend Receivable......................................... 4
Payable for Administrative Fees............................. (3)
Payable for Directors' Fees................................. (1)
Other Liabilities........................................... (3)
------
21
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 191,939 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).. $1,953
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE..... $10.17
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
*Non Income-Producing Security.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
SAMI PORTFOLIOS
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SAMI PREFERRED STOCK ENHANCED MONTHLY
INCOME PORTFOLIO INCOME PORTFOLIO
SIX MONTHS NOVEMBER 15, 1995*
ENDED TO
(In Thousands) APRIL 30, 1996 APRIL 30, 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................................. $1,073 $49
Interest.................................................. 83 11
- ---------------------------------------------------------------------------------------------------------------
Total Income............................................. 1,156 60
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees............................................... $115 $ 5
Less: Fees Waived........................................ (18) 97 (5) --
---- ---
Administrative Fees--Note C............................... 38 13
Custodian Fees............................................ 4 5
Audit Fees................................................ 6 6
Legal Fees................................................ 2 2
Registration & Filing Fees................................ 4 3
Printing Fees............................................. 8 5
Directors' Fees--Note F................................... 2 1
Other Expenses............................................ 4 1
Expenses Assumed by the Adviser--Note B................... -- (24)
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................... 165 12
Expense Offset--Note A.................................... -- (3)
- ---------------------------------------------------------------------------------------------------------------
Net Expenses............................................. 165 9
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME...................................... 991 51
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments............................................... 914 36
Futures................................................... (778) 3
- ---------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN.................................... 136 39
- ---------------------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments............................................... (2,022) (25)
Futures................................................... 1,971 13
- ---------------------------------------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION). (51) (12)
- ---------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FUTURES CONTRACTS.............. 85 27
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $1,076 $78
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
OCTOBER 31, APRIL 30, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.............................. $ 3,867 $ 991
Net Realized Gain (Loss)........................... (6,101) 136
Net Change in Unrealized Appreciation (Deprecia-
tion)............................................. 5,514 (51)
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Opera-
tions............................................ 3,280 1,076
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.............................. (4,279) (1,055)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.................................... 4,052 1,500
--In Lieu of Cash Distributions.................. 4,249 969
Redeemed........................................... (64,734) (3,600)
- --------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions...... (56,433) (1,131)
- --------------------------------------------------------------------------------
Total Decrease..................................... (57,432) (1,110)
Net Assets:
Beginning of Period................................ 91,221 33,789
- --------------------------------------------------------------------------------
End of Period (2).................................. $ 33,789 $32,679
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued...................................... 443 164
In Lieu of Cash Distributions...................... 466 108
Shares Redeemed.................................... (7,063) (392)
- --------------------------------------------------------------------------------
(6,154) (120)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital.................................... $ 40,756 $39,625
Undistributed Net Investment Income................ 226 162
Accumulated Net Realized Loss...................... (8,049) (7,913)
Unrealized Appreciation............................ 856 805
- --------------------------------------------------------------------------------
$ 33,789 $32,679
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NOVEMBER 15, 1995*
TO
APRIL 30,
1996
(In Thousands) (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income...................................... $ 51
Net Realized Gain.......................................... 39
Net Change in Unrealized Depreciation...................... (12)
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations...... 78
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income...................................... (47)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular............................................ 1,875
--In Lieu of Cash Distributions.......................... 47
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions.............. 1,922
- --------------------------------------------------------------------------------
Total Increase............................................. 1,953
Net Assets:
Beginning of Period........................................ --
- --------------------------------------------------------------------------------
End of Period (2).......................................... $1,953
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued.............................................. 187
In Lieu of Cash Distributions.............................. 5
- --------------------------------------------------------------------------------
192
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital............................................ $1,922
Undistributed Net Investment Income........................ 4
Accumulated Net Realized Gain.............................. 39
Unrealized Depreciation.................................... (12)
- --------------------------------------------------------------------------------
$1,953
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JUNE 23, SIX MONTHS
1992** YEARS ENDED OCTOBER 31, ENDED
TO OCTOBER 31, ---------------------------- APRIL 30, 1996
1992 1993 1994 1995 (UNAUDITED)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 10.09 $ 9.98 $ 9.29 $ 9.21
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.14+ 0.60+ 0.60 0.67 0.27+
Net Realized and
Unrealized Gain
(Loss)................ 0.03 (0.07) (0.71) (0.08) 0.02
- --------------------------------------------------------------------------------------
Total from Investment
Operations........... 0.17 0.53 (0.11) 0.59 0.29
- --------------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.08) (0.61) (0.58) (0.67) (0.29)
In Excess of Net
Realized Gain......... -- (0.03) -- -- --
- --------------------------------------------------------------------------------------
Total Distributions... (0.08) (0.64) (0.58) (0.67) (0.29)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 10.09 $ 9.98 $ 9.29 $ 9.21 $ 9.21
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
TOTAL RETURN............ 1.70%++ 5.47%++ (1.15)% 6.67% 3.25%++
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $23,904 $49,671 $91,221 $33,789 $32,679
Ratio of Expenses to
Average Net Assets..... 0.97%*+ 0.82%+ 0.89% 0.98%# 0.99%*+
Ratio of Net Investment
Income to Average Net
Assets................. 6.36%*+ 6.10%+ 6.45% 7.03% 6.01%*+
Portfolio Turnover Rate. 16% 144% 65% 44% 31%
Average Commission Rate
##..................... N/A N/A N/A N/A $0.0343
- --------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser for the
period ended October 31, 1992, the year ended October 31, 1993 and the six
months ended April 30, 1996 of $0.02, $0.01 and $0.005 per share,
respectively.
++ Total return would have been lower had certain fees not been waived and
expenses assumed during the period.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be 0.98% for the year ended October 31, 1995.
## For fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ENHANCED MONTHLY INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NOVEMBER 15,
1995**
TO APRIL 30,
1996
(UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............................. $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+........................................... 0.27
Net Realized and Unrealized Gain................................. 0.15
- -------------------------------------------------------------------------------
Total from Investment Operations................................ 0.42
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income............................................ (0.25)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.................................... $ 10.17
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN++.................................................... 4.23%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)............................. $ 1,953
Ratio of Expenses to Average Net Assets+.......................... 1.31%*#
Ratio of Net Investment Income to Average Net Assets+............. 6.05%*
Portfolio Turnover Rate........................................... 121%
Average Commission Rate........................................... $0.0244
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser for the
period ended April 30, 1996, was $0.15 per share.
++ Total return would have been lower had certain fees not been waived and
expenses assumed during the period.
# The Ratio of Expenses to Average Net Assets excludes the effect of expense
offsets. If expense offsets were included, the Ratio of Expenses to Average
Net Assets would be 1.00%*.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
SAMI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
UAM Funds, Inc. and UAM Funds Trust (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act of 1940, as amended, as open-end
management investment companies. The SAMI Preferred Stock Income Portfolio and
the Enhanced Monthly Income Portfolio (the "Portfolios"), portfolios of UAM
Funds, Inc., began operations on June 23, 1992 and November 15, 1995,
respectively. At April 30, 1996, the UAM Funds were comprised of thirty-seven
active portfolios. The financial statements of the remaining portfolios are
presented separately.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the
Portfolios in the preparation of their 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: Securities listed on a securities exchange for which
market quotations are readily available are valued at the last quoted sales
price as of the close of the exchange on the day the valuation is made or,
if no sale occurred on such day, at the mean of the bid and asked prices on
such day. Price information on listed securities is taken from the exchange
where the security is primarily traded. Prices for preferred stocks,
obtained from independent sources, which are not considered reasonable by
the Investment Adviser are valued based on methods approved by the Board of
Directors. Over-the-counter and unlisted securities are valued at the mean
of the current bid and asked prices. 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 is
determined in good faith at fair value using methods determined by the
Board of Directors.
2. FEDERAL INCOME TAXES: It is each 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.
Paid in capital, undistributed net investment income and accumulated net
realized loss have been adjusted for prior year permanent book-tax
differences for the SAMI Preferred Stock Income Portfolio.
At April 30, 1993, cost of investments and unrealized appreciation
(depreciation) of investments for Federal Income Tax purposes were:
<TABLE>
<CAPTION>
NET
APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
(000) (000) (000) (000)
------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
SAMI Preferred Stock In-
come Portfolio........... $33,089 $492 $(555) $(63)
Enhanced Monthly Income
Portfolio................ 1,957 7 (32) (25)
</TABLE>
At October 31, 1995, the SAMI Preferred Stock Income Portfolio had
available a capital loss carryover for Federal income tax purposes of
approximately $295,000 and $8,940,000 which will expire on October 31, 2001
and October 31, 2003, respectively.
13
<PAGE>
SAMI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Portfolios' 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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Portfolios have 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.
4. FUTURES CONTRACTS: The Portfolios' purchases and sales of futures
contracts are designed to hedge a portion of their investments against
changes in value or as an alternative to purchasing or selling actual
securities. Upon entering into a futures contract, the Portfolios are
required to deposit with a broker an amount in cash or securities ("initial
margin") equal to a certain percentage of the purchase price indicated in
the futures contract. Subsequent payments ("variation margin") are made or
received by the Portfolios each day and are recorded for financial
reporting purposes as unrealized appreciation or depreciation. When futures
contracts are closed, the difference between the opening value at the date
of purchase and the value at closing is recorded as realized gain or loss
in the statement of operations. Futures contracts are valued at the
settlement price established each day by the board of trade or exchange on
which they are traded. Futures contracts involve market risk in excess of
the amounts recognized in the statement of net assets. Risks arise from the
possible movements in security values underlying these instruments. The
change in value of futures contracts primarily corresponds with the value
of their underlying instruments, which may not correlate with the change in
value of the hedged investments. In addition, there is risk that the
Portfolios may not be able to enter into a closing transaction because of
an illiquid secondary market.
The Portfolios had the following futures contracts open at April 30, 1996:
SAMI PREFERRED STOCK INCOME PORTFOLIO
<TABLE>
<CAPTION>
NET
UNREALIZED
AGGREGATE APPRECIATION
NUMBER OF FACE VALUE EXPIRATION (DEPRECIATION)
CONTRACTS CONTRACTS (000) DATE (000)
--------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury 10 Year Note.... 29 $ 3,118 June 1996 $ 96
U.S. Treasury Long Bond....... 152 16,589 June 1996 772
----
$868
====
</TABLE>
ENHANCED MONTHLY INCOME PORTFOLIO
<TABLE>
<CAPTION>
NET
UNREALIZED
AGGREGATE APPRECIATION
NUMBER OF FACE VALUE EXPIRATION (DEPRECIATION)
CONTRACTS CONTRACTS (000) DATE (000)
--------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury Long Bond....... 2 $218 June 1996 $13
===
</TABLE>
14
<PAGE>
SAMI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
5. PURCHASED AND WRITTEN OPTIONS: The Portfolios may write covered call and
put options. Premiums are received and are recorded as liabilities, and
subsequently adjusted to the current value of the options written. Premiums
received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or are canceled
in closing purchase transactions are offset against the proceeds or amount
paid on the transaction to determine the realized gain or loss. By writing
a call option, a Portfolio foregoes in exchange for the premium the
opportunity for capital appreciation above the exercise price should the
market price of the underlying security increase. Possible losses from
written options may be unlimited.
The Portfolios may also purchase call and put options on their portfolio
securities. The Portfolios may purchase call and put options to close out
covered call and put positions or to protect against an increase in the
price of the security it anticipates purchasing. Possible losses from
purchased options cannot exceed the total amount invested.
Use of put and call options could result in losses to the Portfolios, force
the purchase or sale of portfolio securities at inopportune times or for
prices higher or lower than current market value, or cause the Portfolios
to hold a security it might otherwise not purchase or sell. Losses
resulting from the use of options will reduce the Portfolios' net asset
value, and possible income, and the losses may be greater than if options
had not been used.
6. DISTRIBUTIONS TO SHAREHOLDERS: Each Portfolio will normally distribute
substantially all of its net investment income to shareholders monthly. Any
realized net capital gains will normally be distributed annually. All
distributions are recorded on ex-dividend date.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments.
7. 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. Discounts and premiums
on securities purchased are amortized over their respective lives. Most
expenses of the UAM Funds can be directly attributed to a particular
portfolio. Expenses which cannot be directly attributed are apportioned
among the portfolios of the UAM Funds based on their relative net assets.
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 each Portfolio have been increased
to include expense offsets for custodian balance credits.
Prior year permanent book-tax differences, if any, are not included in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. ADVISORY SERVICES: Under the terms of investment advisory agreements,
Spectrum Asset Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolios for a fee calculated at an annual rate of 0.70% of
average daily net
15
<PAGE>
SAMI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
assets of the SAMI Preferred Stock Income Portfolio and 0.60% of average daily
net assets of the Enhanced Monthly Income Portfolio. The Adviser has
voluntarily agreed to waive a portion of its advisory fees and to assume
expenses, if necessary, in order to keep the Portfolios' total annual
operating expenses, after the effect of expense offset arrangements, from
exceeding 0.99% and 1.00% of average daily net assets, respectively.
C. ADMINISTRATIVE 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 an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% 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 0.06% and 0.04% of average daily
net assets for the SAMI Preferred Stock Income Portfolio and Enhanced Monthly
Income Portfolio, respectively. Also effective April 15, 1996, the
Administrator has entered into a Mutual Funds Service Agreement with Chase
Global Funds Services Company ("CGFSC"), a wholly-owned subsidiary of The
Chase Manhattan Bank, N.A., 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.
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.
For the period April 15, 1996 to April 30, 1996, UAM Fund Services, Inc.
earned $1,034 and $3,772 from SAMI Preferred Stock Income Portfolio and
Enhanced Monthly Income Portfolio, respectively, as Administrator.
D. DISTRIBUTION SERVICES: UAM Fund Distributors, Inc., (the "Distributor"), a
wholly-owned subsidiary of UAM, distributes the shares of the Portfolios. The
Distributor does not receive any fee or other compensation with respect to the
Portfolios.
E. PURCHASES AND SALES: For the period ended April 30, 1996, the purchases and
sales of investment securities other than long-term U.S. Government and Agency
securities and short-term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
--------- ------
<S> <C> <C>
SAMI Preferred Stock Income Portfolio.......................... $9,947 $9,427
Enhanced Monthly Income Portfolio.............................. 3,242 1,483
</TABLE>
16
<PAGE>
SAMI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
There were no purchases and sales of long-term U.S. Government and Agency
securities during the period ended April 30, 1996.
F. 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.
G. CONCENTRATION OF CREDIT: The Portfolios invest primarily in preferred and
fixed income securities in the utilities industry. The Portfolios are more
susceptible to economic factors adversely affecting the utilities industry
than portfolios that are not concentrated in this industry to the same extent.
H. LINE OF CREDIT: The SAMI Preferred Stock Income Portfolio, along with
certain other portfolios of UAM Funds, collectively entered into an agreement
which enables them to participate in a $100 million unsecured line of credit
with several banks. Borrowings will be made solely to temporarily finance the
repurchase of portfolio shares. Interest is charged to each participating
portfolio based on its borrowings at a rate per annum equal to the Federal
Funds Rate plus 0.75%. In addition, a commitment fee of 1/10 of 1% per annum,
payable at the end of each calendar quarter, is accrued by each participating
portfolio based on their average daily unused portion of the line of credit.
During the period ended April 30, 1996, there were no borrowings under the
agreement.
I. OTHER: At April 30, 1996, the percentage of total shares outstanding held
by record shareholders owning 10% or greater of the aggregate total shares
outstanding for each Portfolio were:
<TABLE>
<CAPTION>
NO. OF %
SHAREHOLDERS OWNERSHIP
------------ ---------
<S> <C> <C>
SAMI Preferred Stock Income Portfolio.................... 5 90.2%
Enhanced Monthly Income Portfolio........................ 2 85.4%
</TABLE>
The Portfolios placed a portion of their portfolio transactions with the
Adviser, which is a registered dealer. The commissions paid to the Adviser for
the six months ended April 30, 1996 amounted to approximately $5,800 and
$2,800 for SAMI Preferred Stock Income Portfolio and Enhanced Monthly Income
Portfolio, respectively. During the six months ended April 30, 1996 the
Adviser waived a portion of their commissions, amounting to approximately
$6,800 and $700 for SAMI Preferred Stock Income Portfolio and Enhanced Monthly
Income Portfolio, respectively.
17
<PAGE>
- --------------------------------------------------------------------------------
AEW COMMERCIAL MORTGAGE
SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer Peter M. Whitman, Jr.
Director, President Director
and Chairman
Mary Rudie Barneby William H. Park
Director and Vice President and
Executive Vice President Assistant Treasurer
John T. Bennett, Jr. Karl O. Hartmann
Director Secretary
J. Edward Day Robert R. Flaherty
Director Treasurer
Philip D. English Harvey M. Rosen
Director Assistant Secretary
William A. Humenuk
Director
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Aldrich, Eastman & Waltch L.P.
225 Franklin Street
Boston, MA 02110
- --------------------------------------------------------------------------------
ADMINISTRATOR
UAM Fund Services, Inc.
211 Congress Street
Boston, MA 02110
- --------------------------------------------------------------------------------
CUSTODIAN
The Bank of New York
60 Wall Street
New York, NY 10260
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young LLP
2600 One Commerce Square
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1996
<PAGE>
May 15, 1996
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
Dear Shareholder,
The AEW Commercial Mortgage Securities Fund, Inc. (the "Fund") is a non-
diversified, closed-end management investment company which was initially
capitalized on December 21, 1994 with the sale of 10,011,100 shares of common
stock which generated proceeds of $100,111,000. There are limited restrictions
on the credit quality of the Fund's investments. The weighted average credit
quality of the Fund is to be BB-(Ba3) or better based on ratings from the
nationally recognized credit rating agencies. The Fund's portfolio currently
has an average credit rating of BBB-.
As of April 30, 1996, the Fund had a total market value of $117.3 million
($133.5 million face amount). Of that amount, investments in Commercial
Mortgage Backed Securities ("CMBS") totaled a market value of $100.4 million
($116.1 million face amount). An amount of $0.97 million was invested during
the quarter in $1.0 million face amount of CBM Funding Corp 96-1, Class C
rated BBB. An additional $2.3 million was invested in Treasury securities with
a face amount of $2.1 million to minimize cash exposure of the Fund.
The CMBS portion of the Fund's portfolio currently has a BB average credit
rating, a 5.03 year modified adjusted duration, and a pricing yield of 11.23%
(which is approximately 485 basis points above Treasuries and 229 basis points
above the Lehman Brothers BB Corporate Bond Index). The CMBS held by the Fund
are backed by mortgage loans secured by apartments (47%), retail (25%), office
(10%), hospitality (8%), industrial (4%) and other property types (6%). By
state, the mortgage collateral is located in Texas (18%), California (17%),
Florida (9%), New York (7%), Indiana (4%), Illinois (4%), Ohio (4%), and
Michigan (4%), with the remainder (33%) disbursed throughout 44 other states.
For the period from inception (December 21, 1994) through April 30, 1996, the
Fund generated an average annual total return of 13.17% after fees. This was
below our benchmark, the Lehman Brothers BB Corporate Bond Index, which
generated a return of 15.97% during a similar period. (The return for the
benchmark has been calculated excluding the partial period December 21 through
December 31, 1994.) For the six month period ended April 30, 1996, the Fund
had a return of 2.26% compared to 3.21% for the Index. The performance since
inception lags the benchmark by 280 basis points due to the high percentage of
U.S. Treasury bond holdings during the investment phase and a tightening in
the corporate bond market during the first calendar quarter of 1996. For the
12 month period ended March 31, 1996, the Fund had a return of 12.76% compared
to 14.86% for the Index. For the period from inception through March 31, 1996,
the Fund's average annualized return was 18.54% compared to 22.22% for the
Index.
Aldrich, Eastman & Waltch, L.P.
LOGO
Clifford M. Brown
Director
1
<PAGE>
DEFINITION OF COMPARATIVE INDEX
Lehman Brothers BB Corporate Bond Index--includes all fixed-rate issues with a
maximum quality rating of Ba1 or lower by Moody's Investors Service
("Moody's") and a minimum of $100 million in outstanding principal. If a
Moody's rating is unavailable, the issues must be rated BB+ or lower by
Standard & Poor's Corporation or by another rating service. The bonds must
have at least one year to maturity and be non-callable.
Comparisons of performance assume reinvestment of dividends.
Please note that one cannot invest in an unmanaged index.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results. If
the Adviser did not have temporary fee waivers, total returns for the Fund
would have been lower. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
2
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
April 30, 1996 (Unaudited)
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -----------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (84.8%)
- -----------------------------------------------------------------------
FINANCIAL SERVICES (84.8%)
#(S)++American Southwest Financial Securities Corp.,
1995-C1 Class B3 9.872%, 6/17/05 (acquired 8/2/95,
Cost $13,021)........................................$14,600.$ 12,944
#(S)++American Southwest Financial Securities Corp.,
1995-C1 Class B4 9.872%, 6/17/05 (acquired 8/2/95,
Cost $9,061)..........................................11,700 9,060
#(S)++Asset Securitization Corp.,
1995-D1 Class A4 7.59%, 8/11/27 (acquired 8/4/95,
Cost $3,031).......................................... 3,326 3,003
#(S)++Bellaire Finance Corp.,
REMIC Class D 9.90%, 2/1/08 (acquired 1/24/95, Cost
$2,998)............................................... 3,000 3,135
#(S)++Bellaire Finance Corp.,
REMIC Class E 12.74%, 2/1/08 (acquired 1/24/95, Cost
$1,678)............................................... 1,688 1,764
#(S)++CBM Funding Corp.,
1996-1 Class C 7.86%, 2/1/13 (acquired 1/16/96-
4/5/96, Cost $3,032).................................. 3,000 2,894
#(S)++CBM Funding Corp.,
1996-1 Class D 8.645%, 2/1/08 (acquired 1/16/96,
Cost $989)............................................ 960 926
++CS First Boston Mortgage Securities Corp.,
1995-WF1 Class D 7.532%, 12/21/27................... 3,000 2,847
#(S)++CS First Boston Mortgage Securities Corp. & DLJ
Mortgage Acceptance Corp.,
REMIC 1995-T1 Class D 8.37%, 2/25/10 (acquired
2/23/95, Cost $4,580)................................. 5,839 4,832
#(S)++CS First Boston Mortgage Securities Corp. & DLJ
Mortgage Acceptance Corp.,
REMIC 1995-T1 Class E 8.37%, 2/25/10 (acquired
2/23/95, Cost $7,676).................................11,087 8,142
#(S)++CS First Boston Mortgage Securities Corp. & DLJ
Mortgage Acceptance Corp.,
REMIC 1995-T1 Class F 8.37%, 2/25/10 (acquired
2/23/95, Cost $3,959)................................. 9,425 4,000
#(S)++DLJ Mortgage Acceptance Corp.,
1995-CF2 Class B1 7.50%, 12/17/27 (acquired
12/11/95, Cost $2,016)................................ 2,000 1,901
#(S)++DLJ Mortgage Acceptance Corp.,
1995-CF2 Class B2 8.81%, 12/17/27 (acquired
12/11/95, Cost $2,008)................................ 2,000 1,929
++Federal Deposit Insurance Corp.,
REMIC Trust 1994-C1 Class IIE 8.70%, 9/25/25........ 3,035 3,025
++Kidder Peabody Acceptance Corp.,
REMIC 1993-M1 Class C 7.15%, 4/25/25................ 2,000 1,779
#(S)++LB Mortgage Trust,
1992-M1 Class B 8.00%, 2/25/24 (acquired 8/22/95,
Cost $2,933).......................................... 3,000 2,921
#(S)++Lennar Central Partners, L.P.,
1994-1 Class E 10.92%, 9/15/04 (acquired 1/20/95,
Cost $4,795).......................................... 5,000 5,000
#(S)++Lennar U.S. Partners, L.P.,
1995-1 Class D 8.05%, 5/15/03 (acquired 4/18/95,
Cost $3,978).......................................... 4,000 4,015
</TABLE>
3
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
--------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--
(CONTINUED)
--------------------------------------------
#(S)++Lennar U.S.
Partners, L.P.,
1995-1 Class E 9.75%,
5/15/05 (acquired
4/18/95, Cost $1,989)......$2,000 $ 2,008
#(S)++Lennar U.S.
Partners, L.P.,
1995-1 Class F 11.70%,
5/15/05 (acquired
4/18/95, Cost $3,979)...... 4,000 4,015
++Merrill Lynch Mortgage
Investors, Inc.,
1995-C2 Class D 8.15%,
6/15/21.................. 1,939 1,937
++Mortgage Capital
Funding, Inc.,
1995-MC1 Class A4 8.35%,
5/25/27.................. 4,576 4,538
#(S)++Prudential
Securities Secured
Financing Corp.,
1995-MC2 Class F 8.567%,
12/26/22 (acquired
12/20/95, Cost $5,464)..... 5,557 5,126
#(S)++Resolution Trust
Corp.,
1992-C8 Class D 8.835%,
12/25/23 (acquired
11/22/95, Cost $3,737)..... 3,521 3,547
++Resolution Trust Corp.,
1995-C1 Class D 6.90%,
2/25/27.................. 2,000 1,847
++Resolution Trust Corp.,
1995-C1 Class E 6.90%,
2/25/27.................. 2,843 2,292
#(S)++SKW II Real Estate,
L.P.,
Class D 9.30%, 4/15/05
(acquired 4/20/95, Cost
$1,000).................... 1,000 1,002
--------------------------------------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(COST $100,495)........... 100,429
--------------------------------------------
U.S. GOVERNMENT SECURITIES (13.6%)
--------------------------------------------
U.S. TREASURY NOTES (13.6%)
7.375%, 11/15/97.......... 1,000 1,021
7.75%, 11/30/99........... 5,150 5,377
7.875%, 11/15/04.......... 9,040 9,725
--------------------------------------------
TOTAL U.S. GOVERNMENT
SECURITIES
(COST $15,471)............ 16,123
--------------------------------------------
SHORT-TERM INVESTMENT (0.6%)
--------------------------------------------
REPURCHASE AGREEMENT (0.6%)
J.P. Morgan Securities,
Inc. 5.05%, dated
4/30/96, due 5/1/96, to
be repurchased at $703,
collateralized by $634
U.S. Treasury Bonds
8.125%, 8/15/19, valued
at $718 (COST $703)....... 703 703
--------------------------------------------
TOTAL INVESTMENTS (99.0%)
(COST $116,669)........... 117,255
--------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
VALUE
(000)+
- --------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (1.0%)
- --------------------------------------------------------------------------------
Interest Receivable.................................................. $ 1,357
Other Assets......................................................... 17
Payable for Investment Advisory Fees................................. (172)
Payable for Administrative Fees...................................... (13)
Payable for Directors' Fees.......................................... (1)
Other Liabilities.................................................... (16)
--------
1,172
- --------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 11,566,487 outstanding $0.01 par value shares
(15,000,000 shares authorized)...................................... $118,427
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE............................................. $ 10.24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
# 144A Security. Certain conditions for public sale may exist.
(S) Restricted as to public resale. Value of restricted securities at April 30,
1996 was approximately $82,164 or 69.4% of net assets. (Cost $81,924)
++Security is deemed illiquid.
REMIC--Real Estate Mortgage Investment Conduit.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1996
(In Thousands) (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest..................................................... $ 5,745
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee................................................... $ 385
Less: Fee Waived............................................ (37) 348
-----
Administrative Fees--Note C.................................. 68
Insurance.................................................... 34
Directors' Fees--Note E...................................... 2
Other Expenses............................................... 23
- -------------------------------------------------------------------------------
Net Expenses................................................ 475
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME......................................... 5,270
- -------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.............................. 1,158
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON
INVESTMENTS.................................................. (3,797)
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS....................................... (2,639)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $ 2,631
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS
DECEMBER 21, ENDED
1994** TO APRIL 30,
OCTOBER 31, 1996
(In Thousands) 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................ $ 7,768 $ 5,270
Net Realized Gain.................................... 3,534 1,158
Net Change in Unrealized Appreciation (Depreciation) 4,383 (3,797)
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations......................................... 15,685 2,631
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (7,328) (5,555)
Net Realized Gain.................................... -- (3,561)
- --------------------------------------------------------------------------------
Total Distributions................................. (7,328) (9,116)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular...................................... 100,111 --
--In Lieu of Cash Distributions.................... 7,328 9,116
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions........ 107,439 9,116
- --------------------------------------------------------------------------------
Total Increase...................................... 115,796 2,631
Net Assets:
Beginning of Period.................................. -- 115,796
- --------------------------------------------------------------------------------
End of Period (2).................................... $115,796 $118,427
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 10,011 --
In Lieu of Cash Distributions......................... 693 862
-------- --------
10,704 862
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $107,439 $116,555
Undistributed Net Investment Income................... 440 155
Accumulated Net Realized Gain......................... 3,534 1,131
Unrealized Appreciation............................... 4,383 586
-------- --------
$115,796 $118,427
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1996
(In Thousands) (UNAUDITED)
- -------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Proceeds from Sales of Investments............................ $ 16,153
Purchases of Investments...................................... (22,565)
Net Decrease in Short-Term Investments........................ 912
Interest Income Received...................................... 5,973
Operating Expenses Paid....................................... (474)
- -------------------------------------------------------------------------------
Net Cash Used for Operating Activities....................... (1)
- -------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Fund Shares Sold.............................................. --
- -------------------------------------------------------------------------------
Net Cash Provided by Financing Activities..................... --
- -------------------------------------------------------------------------------
Net Decrease in Cash.......................................... (1)
CASH AT BEGINNING OF PERIOD.................................... 1
- -------------------------------------------------------------------------------
CASH AT END OF PERIOD.......................................... $ --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM OP-
ERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations.......... $ 2,631
Net Purchases (Sales) of Investments.......................... (5,516)
Net Realized Gain on Investments.............................. (1,158)
Change in Unrealized Appreciation (Depreciation).............. 3,797
Net Increase in Receivables Pertaining to Investing and Oper-
ating Activities............................................. 361
Net Decrease in Payables Pertaining to Investing and Operating
Activities................................................... (32)
(Accretion)/Amortization and Other Non-Cash Income............ (84)
- -------------------------------------------------------------------------------
Net Cash Used for Operating Activities........................ $ (1)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 21, ENDED
1994** TO APRIL 30,
OCTOBER 31, 1996
1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................. $ 10.00 $ 10.82
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income+............................... 0.75 0.47
Net Realized and Unrealized Gain (Loss).............. 0.78 (0.22)
- --------------------------------------------------------------------------------
Total From Investment Operations.................... 1.53 0.25
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................ (0.71) (0.50)
Net Realized Gain.................................... -- (0.33)
- --------------------------------------------------------------------------------
Total Distributions................................. (0.71) (0.83)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........................ $ 10.82 $ 10.24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Net Asset Value (1)++................................ 15.69% 2.26%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (Thousands)................. $115,796 $118,427
Ratio of Net Expenses to Average Net Assets+.......... 0.80%* 0.80%*
Ratio of Net Investment Income to Average Net Assets+. 8.30%* 8.89%*
Portfolio Turnover Rate............................... 72% 14%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees of $.005 and $.003 per share for the period
ended October 31, 1995 and the six months ended April 30, 1996,
respectively.
++ Total return would have been lower had certain fees not been waived during
the period.
(1) Total investment return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund
during the period, and assumes dividends and distributions, if any, were
reinvested. The Fund's shares are issued in a private placement and are
not traded, therefore market value total investment return is not
calculated.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
AEW Commercial Mortgage Securities Fund, Inc. (the "Fund") was organized on
December 15, 1994 and is registered under the Investment Company Act of 1940,
as amended, as a non-diversified, closed-end management investment company.
The Fund began operations on December 21, 1994.
The Fund's common stock is not registered under the Securities Act of 1933.
The Fund may be converted at any time to an open-end investment company by an
amendment to its Articles of Incorporation.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles for
investment companies. Such policies are consistently followed by the Fund 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: Commercial mortgage-backed securities and other
fixed income securities are stated on the basis of valuations provided by
brokers and/or a pricing service which uses information with respect to
transactions in such securities, quotations from dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term investments that have remaining
maturities of sixty days or less at time of purchase are valued at
amortized cost, if it approximates market value.
The value of collateralized mortgage obligations for which no quotations
are readily available are determined in good faith at fair value using
methods approved by the Board of Directors. Quotations obtained from one or
more principal market makers are used to value the securities and are
reviewed by the investment adviser based on factors including yield,
duration, weighted average life and spread in relation to treasury
securities. At April 30, 1996, prices of securities, whose total value
represented 85% of net assets, were available only from a principal market
maker. These prices may differ from the value that would have been used had
a broader market for the securities existed and the differences could be
material to the financial statements.
2. FEDERAL INCOME TAXES: It is the Fund's intention to continue 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 April 30, 1996, the Fund's cost of investments for Federal income tax
purposes was approximately $116,669,000. Net unrealized appreciation for
Federal income tax purposes aggregated approximately $586,000, of which
$1,914,000 related to appreciated securities and $1,328,000 related to
depreciated securities.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, the Fund'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 marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund 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.
10
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
4. RESTRICTED SECURITIES: The Fund is permitted to invest in privately
placed restricted securities. These securities may be resold in
transactions exempt from registration. Disposal of these securities may
involve time consuming negotiations and expense and prompt sale at an
acceptable price may be difficult.
5. DISTRIBUTIONS TO SHAREHOLDERS: The Fund 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. Under the Fund's Automatic Dividend Reinvestment Plan,
all dividends and capital gains distributions are automatically reinvested
in additional shares. Shareholders who do not elect to participate in such
Plan will receive their dividends and distributions in cash unless the
Board of Directors elects to pay such distribution in shares of the Fund's
common stock.
The amount and character of income and capital gain distributions to be
paid are determined in accordance with Federal income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing book and tax treatments in the timing of the
recognition of gains or losses on investments.
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. Interest income is recognized on the accrual basis.
Discounts and premiums on securities purchased are amortized over their
respective lives. Certain expenses are apportioned among the Fund and the
portfolios of the UAM Funds, Inc. and the UAM Funds Trust (collectively the
"UAM Funds"), affiliated open-end management investment companies, based on
their relative net assets.
B. ADVISORY SERVICES: Under the terms of an investment advisory agreement,
Aldrich, Eastman & Waltch, L.P. (the "Adviser"), provides investment advisory
services to the Fund for a fee calculated at an annual rate of 0.65% 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 Fund's total annual operating expenses from exceeding 0.80% of
average daily net assets. United Asset Management Corporation ("UAM") is a
limited partner of the Adviser.
C. ADMINISTRATIVE 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 Fund and the UAM Funds under an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Adminstrator is entitled to
receive annual fees, computed daily and payable monthly, of 0.19% of the first
$200 million of the combined aggregate net assets; plus 0.11% of the next $800
million of the combined aggregate net assets; plus 0.07% of the next $2
billion of the combined aggregate net assets; plus 0.05% of the combined
aggregate net assets in excess of $3 billion. The fees are allocated among the
Fund and the portfolios of the UAM Funds 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. In addition, the Administrator receives a Fund-
specific fee of 0.04% of average daily net assets for the Fund. Also effective
April 15, 1996, the Administrator has entered into a Mutual Funds Service
Agreement with Chase Global Funds Services Company ("CGFSC"), a wholly-owned
subsidiary of The Chase Manhattan Bank, N.A., 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.
11
<PAGE>
AEW COMMERCIAL MORTGAGE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
Prior to April 15, 1996, CGFSC served as the administrator to the Fund and the
UAM Funds. 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 Fund and the UAM Funds, 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.
For the period April 15, 1995 to April 30, 1996, UAM Fund Services, Inc.
earned $6,866 from the Fund as Administrator.
D. PURCHASES AND SALES: For the period ended April 30, 1996, the Fund made
purchases of approximately $20,246,000 and sales of approximately $296,000 of
investment securities other than long-term U.S. Government and Agency and
short-term securities. Purchases and sales of long-term U.S. Government and
Agency securities totaled approximately $2,319,000 and $15,841,000,
respectively.
E. DIRECTORS' FEES: Each director, who is not an officer or affiliated person,
receives $2,000 per meeting attended, which is allocated proportionally among
the Fund and the active portfolios of the UAM Funds, plus a quarterly retainer
of $150 for the Fund and each active portfolio of the UAM Funds, and
reimbursement of expenses incurred in attending Board meetings.
F. REPURCHASE OF SHARES: The Fund may periodically make a tender offer to
repurchase its outstanding shares of common stock at a price equal to the net
asset value at the time of repurchase. The Fund may elect to make such tender
offer to all shareholders not earlier than two years after another such offer.
G. OTHER: At April 30, 1996, 99.9% of the total shares outstanding were held
by one record shareholder.
12
