<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
SIRACH 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
Sirach Capital Management, Inc.
3323 One Union Square
Seattle, Washington 98101
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
UAM FUNDS SIRACH PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Sirach Special Equity Portfolio........................................... 10
Sirach Growth Portfolio................................................... 15
Sirach Strategic Balanced Portfolio....................................... 21
Sirach Fixed Income Portfolio............................................. 28
Sirach Short-Term Reserves Portfolio...................................... 31
Statements of Operations.................................................... 33
Statement of Changes in Net Assets
Sirach Special Equity Portfolio........................................... 34
Sirach Growth Portfolio................................................... 35
Sirach Strategic Balanced Portfolio....................................... 36
Sirach Fixed Income Portfolio............................................. 37
Sirach Short-Term Reserves Portfolio...................................... 38
Financial Highlights
Sirach Special Equity Portfolio........................................... 39
Sirach Growth Portfolio................................................... 40
Sirach Strategic Balanced Portfolio....................................... 41
Sirach Fixed Income Portfolio............................................. 42
Sirach Short-Term Reserves Portfolio...................................... 43
Notes to Financial Statements............................................... 44
Report of Independent Accountants........................................... 48
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholders:
The fiscal year ended October 31, 1995 was a welcome respite from the
difficult environment experienced during fiscal 1994. In an environment in
which the economy slowed, inflation remained subdued, and profit growth was
strong, both the equity and fixed income markets performed well. The Federal
Reserve (the "Fed") loosened monetary policy helping interest rates to fall,
while corporate America's long preoccupation with cost-cutting has helped fuel
earnings growth.
Looking forward, as economic growth remains slow, pressure on corporate
profitably increases. As this occurs, fewer companies will be able to deliver
on their earnings prospects. We believe this may make growth stocks even more
attractive. In an environment of decelerating earnings growth and low interest
rates, the market should reward those companies that consistently deliver
superior earnings gains.
SIRACH SPECIAL EQUITY PORTFOLIO
Following a weak 1994, market indices advanced strongly in fiscal 1995. The
past twelve months once again saw large cap stocks lead the market with the
S&P 500 Index gaining 26.41% and the Dow Jones Industrial Average advancing
24.97%. Both the S&P Midcap 400 Index and the Russell 2000 Small Cap Index
lagged the S&P 500 Index returning 21.21% and 18.35% respectively. The Sirach
Special Equity Portfolio ended the year with a healthy 25.31% net return and
assets of $498.0 million. Beginning with this report, we are now comparing the
Sirach Special Equity Portfolio's performance to the S&P Midcap 400 Index
rather than the NASDAQ Composite Index. The S&P Midcap 400 Index is a better
benchmark for the type of securities we hold in the Sirach Special Equity
Portfolio.
The Portfolio's strong performance can be attributed primarily to Technology,
which has been our largest sector throughout the year and Consumer Cyclical
(which includes Lodging & Restaurants, Retail and Textiles & Apparel), which
has overtaken Healthcare as our second largest sector.
Technology has evolved to the point where it is increasingly influencing our
lives in every way, broadening in applications and improving the quality of
our lives. Demand for new technologies has accelerated causing shortages of
products in many areas. Supply is struggling to catch up with demand and as it
does over time certain sectors of technology will become increasingly
volatile. Our current focus is to find the true secular growth companies as
opposed to cyclical growth, which will become increasingly important as the
economy weakens.
The Healthcare sector has been volatile this year. We reduced our exposure by
nearly 50% midway through the year and have added back gradually since then.
Margins at many healthcare companies have peaked and as Congress focuses on
curtailing the growth of Medicare expenses and as HMO's focus on controlling
provider costs, companies with expanding margins and positive earnings
surprise potential will be even tougher to find. We believe that those
characteristics will be found in medical device and drug companies with rich
new product pipelines and niche service companies in consolidating sectors of
healthcare, and are positioning the Portfolio accordingly.
The Finance sector (which includes Banks, Financial Services, Insurance and
Real Estate Investment Trusts) has performed well this year, second only to
Technology in terms of absolute performance as interest rates have declined,
merger and acquisition activity in the banking industry has accelerated and
niche specialty finance companies have captured market share. Though it has
grown to become our third largest sector we still
1
<PAGE>
remain underweighted relative to the indices impairing relative performance.
We will add to this sector only as we find companies with earnings growth
exceeding expectations.
Since May, when the first signs of a slowing economy appeared, true secular
growth stocks have outperformed their more cyclical counterparts. The
investment environment for continued outperformance remains strong. As the
economy slows, earnings expectations in general are revised downward and a
premium is paid for those companies which can grow revenues and earnings
regardless of the economic cycle. Sirach will continue to focus on the highest
quality growth stocks which exhibit strong consistent earnings growth,
earnings acceleration and positive earnings surprise.
SIRACH GROWTH PORTFOLIO
The Sirach Growth Portfolio ended fiscal 1995, with net assets of $114.8
million. While Technology and Finance were drags on the Portfolio early in the
fiscal year, they proved to be very strong performers for the full year. An
environment of lower interest rates and strong demand for loans and financial
services has propelled earnings higher for the Financial sector. Mergers have
been another driver to the strong performance from this group. The Technology
sector has also experienced very strong demand. The uses and benefits of
technology continue to expand as companies strive to improve efficiencies and
gain control over expenses. The same benefits are seen by consumers as they
are able to utilize technological advances to improve their quality of life.
Finance (which includes Banks, Financial Services and Insurance) and
Technology (which includes Electronics, Office Equipment, Technology and
Telecommunications) are the largest and third largest portfolio weightings,
respectively.
The second largest weighting at year end was the Consumer Cyclical sector
(which includes Lodging & Restaurants, Retail and Textiles & Apparel). This
sector weighting was increased throughout the year with emphasis in the
media/leisure and specialty retailing industries. Many retailing stocks did
poorly this year. We were able to identify companies that serve special niches
and offer unique products and this delivered very solid earnings gains.
Recently we have built positions in the Consumer Staples sector. These
companies are in industries such as foods and beverages which offer
predictable, steady growth of earnings at a time when such characteristics are
becoming harder to deliver.
While still having exposure to some economically sensitive issues, our
holdings in such industries as chemicals and metals have been reduced in favor
of companies with more consistent earnings growth. Utilities and Energy
companies remain the most underweighted sectors relative to the S&P 500 Index.
As noted in our Semi-Annual Report, it is often difficult to find companies in
these sectors that meet our requirements for consistent earnings growth,
accelerating earnings, and potential positive earnings growth, accelerating
earnings, and potential positive earnings surprise.
Our disciplines lead us to companies that should consistently deliver expected
earnings in a slow growth economy. We believe the market should increasingly
reward such companies.
SIRACH STRATEGIC BALANCED PORTFOLIO
The Sirach Strategic Balanced Portfolio had net assets of $95.8 million on
October 31, 1995. Asset allocation was 43% common stocks, 49% fixed income and
the remainder in cash equivalents.
2
<PAGE>
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 Sirach Fixed Income Portfolio had net assets of $15.4 million on October
31, 1995. The Fed's six interest rate hikes, which contributed to the
difficult market environment in 1994, set the stage for this year's strong
performance. Long-term interest rates fell 164 basis points to close the
fiscal year yielding 6.33%.
The Fed appears to have successfully engineered a "soft landing" and after-
cutting short-term rates in July, the risk of a recession has diminished.
Meanwhile, inflation remains subdued. The surge in commodity prices earlier in
the year has since flattened out and consumer prices and wage inflation remain
benign. Globally, the theme is much the same.
During the past year, the Portfolio maintained a neutral weighting in
corporates due to historically tight spreads. Unfortunately, spreads remained
firm and the opportunity for additional income was not captured. Sector
overweightings in the mortgage and asset-backed sectors helped supplement
income. First quarter performance benefited from portfolio duration at 110% of
the market. In the second quarter, the balance of the Home Holdings, Inc.
7.00% 12/15/98 was sold because the quality had fallen below investment grade.
This sale cost the Portfolio approximately 30 basis points in performance. In
the first week of May, heavy cash flows into the Portfolio were not invested
fast enough to capture the five point rally in the bond market. As a result,
performance lagged in both the fiscal second and third quarters. The Portfolio
recorded a respectable fiscal fourth quarter versus the general market.
The Portfolio owns 6.5% and 7% GNMA Mortgage-Backed Securities for additional
yield and quality. While these securities can be more volatile due to
prepayment uncertainties, they have produced superior returns to higher
quality corporates and agencies.
We expect that economic growth will average around 2.5% for the next several
quarters and that inflation will remain subdued. The budget and debt ceiling
debate in Washington, while creating some short term volatility, should have a
positive long-term impact on debt reduction and the debt markets. With high
inflation-adjusted short-term yields, the Fed has room to lower rates again,
particularly if a budget accord is reached.
Against this backdrop, the Portfolio has a market neutral maturity structure
and an average duration of 105% of the Lehman Brothers Government/Corporate
Index. On a dollar duration basis, the Portfolio is underweighted in U.S.
Treasuries and agencies in favor of the mortgage and asset-backed sectors. The
quality of the Portfolio remains very high.
3
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
The Sirach Short-Term Reserves Portfolio had net assets of $18.5 million on
October 31, 1995. This Portfolio is designed to return a consistent and
conservative return as shown in its performance during the last fiscal year.
The quality of the Portfolio was very high throughout the year with an average
85% weighting in U.S. Government and Agency issues. The Portfolio's average
maturity at the beginning of the year was under four months but was extended
to six months after the last Fed rate hike in February. We intend to stay with
a quality oriented strategy.
Sincerely,
SIRACH CAPITAL MANAGEMENT, INC.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Without the Adviser's temporary fee waivers (also expenses assumed by the
Adviser) total returns for the Sirach Special Equity, Growth, Strategic
Balanced and 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $500,000 PURCHASE IN
SIRACH SPECIAL EQUITY PORTFOLIO, THE S&P MIDCAP 400 INDEX AND THE
NASDAQ COMPOSITE INDEX.
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR 5 YEARS SINCE 10/2/89*
-----------------------------------
25.31% 22.75% 15.73%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sirach
Special NASDAQ+
Equity Composite S&P Midcap
Portfolio+ Index 400 Index
<S> <C> <C> <C>
10/2/89* 500,000 500,000 500,000
10/31/89 483,500 481,700 478,950
10/31/90 436,235 346,200 414,771
10/31/91 711,630 574,050 677,943
10/31/92 772,135 639,850 740,449
10/31/93 1,017,745 823,900 899,868
10/31/94 970,100 828,185 921,285
10/31/95 1,215,640 1,103,639 1,116,689
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
Definition of the Comparative Index
-----------------------------------
NASDAQ Composite Index is a market capitalization, price only, unmanaged index
that tracks the performance of domestic common stocks traded on the regular
NASDAQ market as well as National Market System traded foreign common stocks and
ADRs.
The S&P Midcap 400 Index consists of 400 domestic stock chosen for market size
(medium market capitalization of $993 million as of February 1995), liquidity
and industry group representation. It is a market-weighted index with each stock
affecting the index in proportion to its market value.
Please note that one can not invest in an unmanaged index.
5
<PAGE>
Performance Comparison
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN
SIRACH GROWTH PORTFOLIO AND THE STANDARD & POOR'S 500 INDEX (S&P 500).
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 12/1/93*
-----------------------------------
19.33% 8.18%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sirach
Growth S&P 500
Portfolio+ Index+
<S> <C> <C>
12/1/93* 100,000 100,000
10/31/94 97,420 104,860
10/31/95 116,250 132,554
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
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.
Please note that one can not invest in an unmanaged index.
6
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $500,000 PURCHASE IN
SIRACH STRATEGIC BALANCED PORTFOLIO, THE STANDARD & POOR'S 500 INDEX
(S&P 500) AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX.
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 12/1/93*
-----------------------------------
19.10% 7.14%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sirach
Strategic Lehman Brothers+
Balanced S&P 500+ Government/
Portfolio+ Index Corporate Index
<S> <C> <C> <C>
12/1/93* 100,000 100,000 100,000
10/31/94 95,810 104,860 96,450
10/31/95 114,114 132,554 112,036
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
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.
Please note that one can not invest in an unmanaged index.
7
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN
SIRACH FIXED INCOME PORTFOLIO AND THE LEHMAN BROTHERS GOVERNMENT/
CORPORATE INDEX.
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 12/1/93*
-----------------------------------
14.75% 5.00%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sirach
Fixed Lehman Brothers+
Income Government/
Portfolio+ Corporate Index
<S> <C> <C>
12/1/93* 100,000 100,000
10/31/94 95,670 96,450
10/31/95 109,787 112,036
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
Definition of the Comparative Index
-----------------------------------
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 can not invest in an unmanaged index.
8
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN
SIRACH SHORT-TERM RESERVES PORTFOLIO AND THE SALOMON BROTHERS
3-MONTH TREASURY BILL INDEX.
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 12/1/93*
-----------------------------------
5.83% 4.73%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sirach
Short-Term Salomon Brothers
Reserves 3-Month Treasury
Portfolio+ Bill Index
<S> <C> <C>
12/1/93* 100,000 100,000
10/31/94 103,240 103,630
10/31/95 109,259 109,506
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
Definition of the Comparative Index
-----------------------------------
The Salomon Brothers 3-month Treasury Bill Index is a return equivalent of yield
averages of the last three 3-month Treasury Bill issues.
Please note that one can not invest in an unmanaged index.
9
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (86.1%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.2%)
Watkins-Johnson Co............................................ 22,600 $ 1,088
- --------------------------------------------------------------------------------
BANKS (1.5%)
Peoples Heritage Financial Group, Inc......................... 224,000 4,284
Union Planters Corp........................................... 105,000 3,216
--------
7,500
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (0.1%)
Redhook Ale Brewery, Inc...................................... 12,500 369
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (5.7%)
Harnischfeger Industries, Inc................................. 197,500 6,221
*Sanifill, Inc................................................ 229,000 7,213
*Tetra Tech, Inc.............................................. 258,500 5,655
United Waste Systems, Inc..................................... 233,000 9,204
--------
28,293
- --------------------------------------------------------------------------------
ELECTRONICS (5.5%)
*Adaptec, Inc................................................. 153,000 6,828
*Input/Output, Inc............................................ 145,000 5,419
*Maxim Integrated Products, Inc............................... 42,300 3,159
*Mentor Graphics Corp......................................... 139,000 2,936
*Microchip Technology, Inc.................................... 66,800 2,647
*Sierra Semiconductor Corp.................................... 50,200 907
*Trident Microsystems, Inc.................................... 177,000 5,310
--------
27,206
- --------------------------------------------------------------------------------
ENERGY (1.8%)
Camco International, Inc...................................... 168,000 3,843
*Smith International, Inc..................................... 316,000 5,056
--------
8,899
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (2.7%)
*Credit Acceptance Corp....................................... 232,000 5,365
Mercury Finance Co............................................ 224,000 4,312
North American Mortgage Co.................................... 191,000 3,939
--------
13,616
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HEALTH CARE (10.1%)
*Circon Corp.................................................. 172,800 $ 3,920
*Daig Corp.................................................... 176,100 3,962
Daniel Industries............................................. 226,000 2,995
Enterprise Systems, Inc....................................... 44,400 1,032
*HealthCare COMPARE Corp...................................... 52,000 1,931
*Nellcor Puritan Bennett, Inc................................. 124,852 7,210
*OrNda Healthcorp............................................. 234,000 4,153
*Pacific Physician Services, Inc.............................. 310,700 4,952
*PhyCor, Inc.................................................. 328,125 12,018
*Physicians Health Services, Inc. Class A..................... 52,000 1,729
*Renal Treatment Centers, Inc................................. 55,100 1,970
*Respironics, Inc............................................. 104,600 2,301
*Steris Corp.................................................. 55,600 1,870
Total Renal Care Holdings, Inc................................ 19,400 395
--------
50,438
- --------------------------------------------------------------------------------
INSURANCE (4.2%)
American Bankers Insurance Group, Inc......................... 102,500 3,665
*American Travellers Corp..................................... 222,000 4,995
Reliastar Financial Corp...................................... 120,000 5,010
USF&G Corp.................................................... 97,600 1,635
United Dental Care, Inc....................................... 74,700 2,278
Vesta Insurance Group, Inc.................................... 82,800 3,343
--------
20,926
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (6.8%)
Applebee's International, Inc................................. 323,500 9,038
La Quinta Motor Inns, Inc..................................... 332,200 8,554
*Lone Star Steakhouse & Saloon................................ 31,000 1,197
*Outback Steakhouse, Inc...................................... 197,000 6,181
Papa John's International Inc................................. 135,800 5,262
*Prime Hospitality Corp....................................... 376,000 3,713
--------
33,945
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (1.3%)
*Comverse Technology, Inc..................................... 283,400 $ 6,430
- --------------------------------------------------------------------------------
PHARMACEUTICALS (2.9%)
Dura Pharmaceuticals, Inc..................................... 155,500 4,587
*Watson Pharmaceuticals, Inc.................................. 219,000 9,855
--------
14,442
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (3.9%)
Duke Realty Investments, Inc.................................. 197,600 6,052
Storage Equities, Inc......................................... 329,000 6,045
Storage Trust Realty.......................................... 150,000 2,944
Sunstone Hotel Investors, Inc................................. 273,000 2,508
Weeks Corp.................................................... 90,200 2,075
--------
19,624
- --------------------------------------------------------------------------------
RETAIL (8.8%)
*CDW Computer Centers, Inc.................................... 98,000 4,814
*Corporate Express, Inc....................................... 249,400 6,484
*Eckerd Corp.................................................. 144,600 5,730
Fastenal Co................................................... 136,500 4,752
*General Nutrition Cos., Inc.................................. 385,000 9,529
US Office Products Co......................................... 140,700 2,392
*Viking Office Products, Inc.................................. 127,500 5,681
Zale Corp..................................................... 293,000 4,340
--------
43,722
- --------------------------------------------------------------------------------
SERVICES (3.0%)
*Accustaff, Inc............................................... 34,000 1,521
Paychex, Inc.................................................. 145,400 6,334
*Robert Half International, Inc............................... 199,500 7,282
--------
15,137
- --------------------------------------------------------------------------------
TECHNOLOGY (19.0%)
*Alantec Corp................................................. 202,500 7,163
*Altera Corp.................................................. 104,100 6,305
CBT Group plc ADR............................................. 90,700 4,081
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
TECHNOLOGY--(CONTINUED)
*Glenayre Technologies, Inc................................... 55,475 $ 3,585
*LAM Research Corp............................................ 79,000 4,809
Linear Technology, Inc........................................ 129,000 5,660
*Macromedia, Inc.............................................. 288,400 10,599
*McAfee Associates, Inc....................................... 127,000 7,429
*Medic Computer Systems, Inc.................................. 82,600 4,409
*NetManage, Inc............................................... 286,000 5,845
*Network General Corp......................................... 142,100 5,879
*Optical Data Systems, Inc.................................... 177,800 5,345
*Parametric Technology Co..................................... 137,100 9,160
*Quick Response Services, Inc................................. 200,500 5,088
*SPSS, Inc.................................................... 136,000 2,321
*Tellabs, Inc................................................. 38,800 1,324
*Tencor Instruments........................................... 128,800 5,506
--------
94,508
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (5.6%)
*ADC Telecommunications, Inc.................................. 115,000 4,600
*Cellular Communications, Inc., Class A....................... 97,500 5,247
*Digi International, Inc...................................... 124,200 3,353
HBO & Co...................................................... 114,600 8,094
*Network Equipment Technologies............................... 110,700 3,612
*Tekelec...................................................... 195,000 2,876
--------
27,782
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (2.7%)
*Nautica Enterprises, Inc..................................... 191,450 6,581
*Nine West Group, Inc......................................... 158,000 7,031
--------
13,612
- --------------------------------------------------------------------------------
TRANSPORTATION (0.3%)
*Covenant Transport, Inc., Class A............................ 113,000 1,469
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $345,935)............................ 429,006
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (14.7%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (14.7%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $73,055, collateralized by
$73,586 United States Treasury Notes, 6.50%, due 4/30/97,
valued at $74,506 (COST $73,044)............................ $73,044 $ 73,044
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%) (COST $418,979)................... 502,050
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.8%)
- -------------------------------------------------------------------------------
Receivable for Investments Sold............................. 8,366
Dividends Receivable........................................ 146
Interest Receivable......................................... 11
Other Assets................................................ 22
Payable for Investments Purchased........................... (11,046)
Payable to Custodian Bank................................... (1,079)
Payable for Investment Advisory Fees........................ (299)
Payable for Administrative Fees............................. (49)
Payable for Directors' Fees................................. (2)
Other Liabilities........................................... (94)
--------
(4,024)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 26,492,098 outstanding $0.001 par value
Institutional Class shares (authorized 50,000,000 shares).. $498,026
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE..... $ 18.80
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (84.3%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.7%)
Loral Corp..................................................... 39,800 $ 1,179
Rockwell International Corp.................................... 32,900 1,464
Watkins-Johnson Co. ........................................... 10,000 481
--------
3,124
- --------------------------------------------------------------------------------
AUTOMOTIVE (1.1%)
General Motors Corp., Class E.................................. 27,000 1,272
- --------------------------------------------------------------------------------
BANKS (8.7%)
BankAmerica Corp............................................... 28,500 1,639
Bank of Boston Corp............................................ 22,100 983
Citicorp Bank.................................................. 19,199 1,245
First Bank System, Inc. ....................................... 29,700 1,478
Standard Federal Bancorporation................................ 27,627 981
Suntrust Banks, Inc. .......................................... 17,500 1,129
Union Planters Corp............................................ 20,000 613
Washington Federal, Inc. ...................................... 84,895 1,947
--------
10,015
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (5.1%)
ConAgra, Inc................................................... 32,600 1,259
CPC International, Inc......................................... 19,500 1,294
PepsiCo, Inc. ................................................. 33,700 1,778
Sysco Corp. ................................................... 51,600 1,567
--------
5,898
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (1.8%)
Capital Cities/ABC, Inc........................................ 3,800 451
*Viacom, Inc., Class B......................................... 33,100 1,655
--------
2,106
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (3.3%)
AlliedSignal, Inc.............................................. 30,300 1,288
Case Corp...................................................... 44,800 1,708
Harnischfeger Industries, Inc. ................................ 11,000 347
*Sanifill, Inc................................................. 15,000 472
--------
3,815
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CHEMICALS (3.7%)
Eastman Chemical Co............................................ 28,800 $ 1,714
Potash Corp. of Saskatchewan, Inc. ............................ 18,700 1,302
Praxair, Inc................................................... 45,300 1,223
--------
4,239
- --------------------------------------------------------------------------------
CONSUMER STAPLES (1.2%)
Gillette Co.................................................... 12,100 585
Procter & Gamble Co. .......................................... 9,600 778
--------
1,363
- --------------------------------------------------------------------------------
ELECTRONICS (4.9%)
*Adaptec, Inc. ................................................ 15,000 669
*Arrow Electronics, Inc........................................ 18,000 913
General Electric Co. .......................................... 29,800 1,885
Motorola, Inc. ................................................ 18,100 1,188
Philips Electronics N.V. ADR................................... 24,000 927
--------
5,582
- --------------------------------------------------------------------------------
ENERGY (5.4%)
Atlantic Richfield Co.......................................... 7,900 843
British Petroleum Co. plc ADR.................................. 15,400 1,359
Halliburton Co. ............................................... 35,300 1,465
USX-Marathon Group............................................. 74,500 1,323
Williams Cos, Inc.............................................. 30,300 1,170
--------
6,160
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (3.2%)
Capital One Financial Corp..................................... 47,300 1,159
MBNA Corp...................................................... 25,100 926
MGIC Investment Corp........................................... 18,400 1,046
Mercury Finance Co. ........................................... 25,000 481
--------
3,612
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HEALTH CARE (3.5%)
Columbia/HCA Healthcare Corp. ................................. 27,800 $ 1,366
*Nellcor Puritan Bennett, Inc.................................. 18,000 1,039
*PhyCor, Inc................................................... 14,625 536
*Vencor, Inc................................................... 40,500 1,124
--------
4,065
- --------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.5%)
Black & Decker Corp. .......................................... 51,900 1,758
- --------------------------------------------------------------------------------
INSURANCE (4.0%)
Aflac, Inc..................................................... 26,100 1,064
American General Corp.......................................... 32,500 1,068
American International Group, Inc.............................. 22,000 1,856
USF&G Corp. ................................................... 38,000 637
--------
4,625
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (2.7%)
La Quinta Motor Inns, Inc...................................... 30,000 772
Marriott International, Inc.................................... 32,000 1,180
McDonald's Corp................................................ 27,900 1,144
--------
3,096
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT (2.7%)
*Bay Networks, Inc............................................. 15,300 1,016
Hewlett-Packard Co............................................. 9,600 889
International Business Machines Corp........................... 11,700 1,138
--------
3,043
- --------------------------------------------------------------------------------
PAPER & PACKAGING (0.6%)
Georgia Pacific Corp........................................... 7,800 644
- --------------------------------------------------------------------------------
PHARMACEUTICALS (6.4%)
Abbott Laboratories............................................ 31,951 1,270
*Amgen, Inc.................................................... 30,900 1,485
Johnson & Johnson.............................................. 15,000 1,222
Merck & Co., Inc............................................... 20,300 1,167
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
PHARMACEUTICALS--(CONTINUED)
Pfizer, Inc. .................................................. 12,900 $ 740
Schering-Plough Corp. ......................................... 26,200 1,405
-------
7,289
- --------------------------------------------------------------------------------
RETAIL (9.3%)
*Corporate Express, Inc. ...................................... 47,000 1,222
*Eckerd Corp. ................................................. 27,300 1,082
Fastenal Co. .................................................. 16,000 557
*General Nutrition Cos., Inc. ................................. 52,000 1,287
*Price/Costco, Inc. ........................................... 122,100 2,083
*Safeway, Inc. ................................................ 25,500 1,205
*Starbucks Corp. .............................................. 15,000 590
Walgreen Co. .................................................. 44,500 1,268
Wal-Mart Stores, Inc. ......................................... 61,600 1,332
-------
10,626
- --------------------------------------------------------------------------------
SERVICES (4.6%)
*CUC International, Inc........................................ 35,850 1,241
Equifax, Inc. ................................................. 24,000 936
First Data Corp. .............................................. 18,250 1,207
Paychex, Inc. ................................................. 28,000 1,220
*Robert Half International, Inc. .............................. 20,000 730
-------
5,334
- --------------------------------------------------------------------------------
TECHNOLOGY (0.7%)
*Microsoft Corp., Inc. ........................................ 7,500 751
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (3.9%)
*ADC Telecommunications, Inc. ................................. 13,300 532
*DSC Communications Corp. ..................................... 22,400 830
HBO & Co. ..................................................... 7,500 530
Nokia Corp. ADR................................................ 9,600 535
Vodafone Group plc ADR......................................... 10,044 411
*WorldCom, Inc. ............................................... 50,300 1,647
-------
4,485
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (1.4%)
*Nautica Enterprises, Inc. ................................. 19,500 $ 670
*Nine West Group, Inc....................................... 22,000 979
--------
1,649
- -------------------------------------------------------------------------------
TRANSPORTATION (1.9%)
*AMR Corp................................................... 14,500 957
Illinois Central Corp. ..................................... 32,700 1,251
--------
2,208
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $84,957)........................... 96,759
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (15.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (15.2%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $17,513, collateralized by
$11,242 United States Treasury Bonds, 12.50%, due 8/15/14,
valued at $17,861 (COST $17,510)............................ $17,510 17,510
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%) (COST $102,467).................... 114,269
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
- -------------------------------------------------------------------------------
Cash........................................................ 179
Receivable for Investments Sold............................. 1,424
Dividends Receivable........................................ 46
Interest Receivable......................................... 3
Other Assets................................................ 4
Payable for Investments Purchased........................... (736)
Payable to Custodian Bank................................... (296)
Payable for Investment Advisory Fees........................ (65)
Payable for Administrative Fees............................. (11)
Payable for Directors' Fees................................. (1)
Other Liabilities........................................... (29)
--------
518
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 10,109,209 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)....... $114,787
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.......... $ 11.35
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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.
20
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (43.3%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.5%)
Loral Corp..................................................... 20,000 $ 593
Rockwell International Corp.................................... 10,500 467
Watkins-Johnson Co............................................. 8,000 385
-------
1,445
- -------------------------------------------------------------------------------
AUTOMOTIVE (0.4%)
General Motors Corp., Class E.................................. 8,500 401
- -------------------------------------------------------------------------------
BANKS (4.9%)
BankAmerica Corp............................................... 12,500 719
Bank of Boston Corp............................................ 12,900 574
Citicorp Bank.................................................. 9,551 620
First Bank System, Inc......................................... 14,500 721
Standard Federal Bancorporation................................ 13,923 494
Suntrust Banks, Inc............................................ 5,000 322
Union Planters Corp............................................ 10,000 306
Washington Federal, Inc........................................ 41,319 948
-------
4,704
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.1%)
ConAgra, Inc................................................... 17,250 666
CPC International, Inc......................................... 7,500 498
PepsiCo, Inc................................................... 9,000 475
Sysco Corp..................................................... 13,500 410
-------
2,049
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (0.8%)
Capital Cities/ABC, Inc........................................ 1,600 190
*Viacom, Inc., Class B......................................... 11,500 575
-------
765
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (1.7%)
AlliedSignal, Inc.............................................. 10,500 446
Case Corp...................................................... 16,000 610
Harnischfeger Industries, Inc.................................. 5,000 158
*Sanifill, Inc................................................. 12,000 378
-------
1,592
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CHEMICALS (1.6%)
Eastman Chemical Co............................................ 9,500 $ 565
Potash Corp. of Saskatchewan, Inc. ............................ 6,150 428
Praxair, Inc. ................................................. 19,950 539
-------
1,532
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (0.7%)
Gillette Co. .................................................. 7,100 343
Procter & Gamble Co. .......................................... 3,550 288
-------
631
- -------------------------------------------------------------------------------
ELECTRONICS (2.6%)
*Adaptec, Inc. ................................................ 10,500 469
*Arrow Electronics, Inc. ...................................... 6,500 330
General Electric Co. .......................................... 11,500 727
Motorola, Inc. ................................................ 5,150 338
Philips Electronics N.V. ADR................................... 16,000 618
-------
2,482
- -------------------------------------------------------------------------------
ENERGY (2.5%)
Atlantic Richfield Co.......................................... 2,000 214
British Petroleum Co. plc ADR.................................. 7,650 675
Halliburton Co. ............................................... 17,500 726
USX-Marathon Group............................................. 16,500 293
Williams Cos, Inc. ............................................ 12,000 463
-------
2,371
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (1.6%)
Capital One Financial Corp. ................................... 23,000 563
MBNA Corp...................................................... 9,000 332
Mercury Finance Co. ........................................... 17,000 327
MGIC Investment Corp. ......................................... 5,500 313
-------
1,535
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
HEALTH CARE (1.8%)
Columbia/HCA Healthcare Corp................................... 11,250 $ 553
*Nellcor Puritan Bennett, Inc.................................. 9,000 520
*PhyCor, Inc................................................... 6,750 247
*Vencor, Inc................................................... 16,000 444
-------
1,764
- -------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (0.7%)
Black & Decker Corp............................................ 19,000 644
- -------------------------------------------------------------------------------
INSURANCE (1.6%)
Aflac, Inc..................................................... 6,000 244
American General Corp.......................................... 11,500 378
American International Group, Inc.............................. 7,000 591
USF&G Corp. ................................................... 19,700 330
-------
1,543
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (1.5%)
La Quinta Motor Inns, Inc...................................... 15,000 386
Marriott International, Inc.................................... 12,500 461
McDonald's Corp. .............................................. 13,900 570
-------
1,417
- -------------------------------------------------------------------------------
OFFICE EQUIPMENT (1.6%)
*Bay Networks, Inc............................................. 6,000 398
Hewlett-Packard Co............................................. 7,100 658
International Business Machines Corp........................... 4,800 467
-------
1,523
- -------------------------------------------------------------------------------
PAPER & PACKAGING (0.3%)
Georgia Pacific Corp........................................... 3,500 289
- -------------------------------------------------------------------------------
PHARMACEUTICALS (3.7%)
Abbott Laboratories............................................ 19,049 757
*Amgen, Inc.................................................... 14,000 673
Johnson & Johnson.............................................. 8,650 705
Merck & Co., Inc............................................... 9,450 543
Pfizer, Inc. .................................................. 3,900 224
Schering-Plough Corp. ......................................... 11,800 633
-------
3,535
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
RETAIL (5.2%)
*Corporate Express, Inc. ...................................... 27,000 $ 702
*Eckerd Corp. ................................................. 10,500 416
Fastenal Co. .................................................. 11,000 383
*General Nutrition Cos., Inc. ................................. 26,000 643
*Price/Costco, Inc. ........................................... 45,900 783
*Safeway, Inc. ................................................ 10,000 473
*Starbucks Corp. .............................................. 10,000 393
Walgreen Co. .................................................. 21,000 599
Wal-Mart Stores, Inc. ......................................... 28,500 616
-------
5,008
- -------------------------------------------------------------------------------
SERVICES (2.7%)
*CUC International, Inc. ...................................... 8,500 294
Equifax, Inc. ................................................. 7,500 292
First Data Corp. .............................................. 11,900 787
Paychex, Inc. ................................................. 19,000 828
*Robert Half International, Inc. .............................. 10,000 365
-------
2,566
- -------------------------------------------------------------------------------
TECHNOLOGY (0.2%)
*Microsoft Corp., Inc. ........................................ 2,250 225
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.1%)
*ADC Telecommunications, Inc. ................................. 8,000 320
*DSC Communications Corp. ..................................... 7,900 293
HBO & Co. ..................................................... 6,000 424
Nokia Corp. ADR................................................ 3,500 195
Vodafone Group plc ADR......................................... 4,706 192
*WorldCom, Inc. ............................................... 18,500 606
-------
2,030
- -------------------------------------------------------------------------------
TEXTILES & APPAREL (0.7%)
*Nautica Enterprises, Inc. .................................... 7,500 258
*Nine West Group, Inc. ........................................ 9,000 400
-------
658
- -------------------------------------------------------------------------------
TRANSPORTATION (0.8%)
*AMR Corp. .................................................... 5,500 363
Illinois Central Corp. ........................................ 12,000 459
-------
822
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $34,596).............................. 41,531
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (10.2%)
- -------------------------------------------------------------------------------
BANKS (1.6%)
NCNB Corp. 10.50%, 3/15/99..................................... $ 964 $ 979
Washington Mutual, Inc. 7.25%, 8/15/05......................... 500 513
-------
1,492
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (0.6%)
Time Warner Entertainment 8.375%, 3/15/23...................... 600 623
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (4.3%)
Associates Corp. of North America 8.125%, 1/15/98.............. 900 937
Associates Corp. of North America 6.375%, 8/15/98.............. 1,250 1,258
Ford Capital BV 9.50%, 6/1/10.................................. 800 975
Paine Webber Group 8.25%, 5/1/02............................... 850 913
-------
4,083
- -------------------------------------------------------------------------------
INDUSTRIAL (2.6%)
Hanson Overseas 6.75%, 9/15/05................................. 950 950
News America Holdings 7.75%, 1/20/24........................... 675 668
Occidential Petroleum Corp. 11.125%, 6/1/19.................... 750 885
-------
2,503
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.1%)
GTE Corp. 8.85%, 3/1/98........................................ 1,050 1,106
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $9,674)............................. 9,807
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (29.9%)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (8.6%)
6.875%, 8/15/25................................................ 2,325 2,495
8.125%, 8/15/19................................................ 4,725 5,684
-------
8,179
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (21.3%)
5.125%, 11/30/98............................................... 2,975 2,926
6.75%, 6/30/99................................................. 3,300 3,405
6.875%, 2/28/97................................................ 8,450 8,584
7.25%, 5/15/04................................................. 4,450 4,815
7.50%, 11/15/01................................................ 650 703
-------
20,433
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $27,601)................. 28,612
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
AGENCY SECURITIES (4.6%)
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (4.6%)
6.50%, 8/15/23 Pool #354638................................... $ 910 $ 884
6.50%, 5/15/24 Pool #388335................................... 582 566
7.00%, 5/15/24 Pool #376510................................... 2,963 2,946
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $4,059).......................... 4,396
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (3.1%)
- -------------------------------------------------------------------------------
Chase Manhattan Grantor Trust, 1995-A, Class A 6.00%, 9/17/01. 1,451 1,453
NationsBank Credit Card Master Trust, 1995-1, Class A 6.45%,
4/15/03...................................................... 850 861
Standard Credit Card Master Trust, 1995-9, Class A 6.55%,
10/7/07...................................................... 675 679
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $2,971).................... 2,993
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (1.7%)
- -------------------------------------------------------------------------------
International Bank for Reconstruction & Development 7.625%,
1/19/23...................................................... 650 715
Ontario Province, Canada 11.50%, 3/10/13...................... 775 894
- -------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $1,592)................... 1,609
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (6.7%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (6.7%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $6,394, collateralized by $4,177
United States Treasury Bonds, 11.25%, due 2/15/15, valued at
$6,521 (COST $6,393).......................................... 6,393 6,393
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%) (COST $86,886)....................... 95,341
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
- -------------------------------------------------------------------------------
Cash.......................................................... 1
Receivable for Investments Sold............................... 1,473
Interest Receivable........................................... 786
Dividends Receivable.......................................... 24
Other Assets.................................................. 4
Payable for Investments Purchased............................. (1,708)
Payable for Investment Advisory Fees.......................... (53)
Payable for Administrative Fees............................... (10)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (23)
-------
493
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 8,913,179 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)...................... $95,834
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE........... $ 10.75
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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.
27
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (20.8%)
- -------------------------------------------------------------------------------
BANKS (3.0%)
NCNB Corp. 10.50%, 3/15/99..................................... $ 261 $ 265
Washington Mutual, Inc. 7.25%, 8/15/05......................... 200 205
-------
470
- -------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (1.5%)
Time Warner Entertainment 8.375%, 3/15/23...................... 225 234
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (9.1%)
Associates Corp. of North America 8.125%, 1/15/98.............. 350 364
Associates Corp. of North America 6.375%, 8/15/98.............. 400 402
Ford Capital BV 9.50%, 6/1/10.................................. 300 366
Paine Webber Group 8.25%, 5/1/02............................... 250 268
-------
1,400
- -------------------------------------------------------------------------------
INDUSTRIAL (5.3%)
Hanson Overseas 6.75%, 9/15/05................................. 300 300
News America Holdings 7.75%, 1/20/24........................... 225 223
Occidential Petroleum Corp. 11.125%, 6/1/19.................... 250 295
-------
818
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.9%)
GTE Corp. 8.85%, 3/1/98........................................ 275 290
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $3,166)............................. 3,212
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (53.3%)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (17.9%)
8.125%, 8/15/19................................................ 1,450 1,744
6.875%, 8/15/25................................................ 950 1,020
-------
2,764
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (35.4%)
6.875%, 2/28/97................................................ 1,250 1,270
5.125%, 11/30/98............................................... 1,300 1,279
6.75%, 6/30/99................................................. 1,025 1,058
7.50%, 11/15/01................................................ 475 513
7.25%, 5/15/04................................................. 1,250 1,352
-------
5,472
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $7,908).................. 8,236
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
AGENCY SECURITIES (7.5%)
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (7.5%)
6.50%, 8/15/23 Pool #354638................................... $ 257 $ 250
6.50%, 5/15/24 Pool #388335................................... 167 163
7.00%, 5/15/24 Pool #376510................................... 747 742
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $1,074).......................... 1,155
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (6.4%)
- -------------------------------------------------------------------------------
Chase Manhattan Grantor Trust, 1995-A, Class A 6.00%, 9/17/01. 459 460
NationsBank Credit Card Master Trust, 1995-1, Class A 6.45%,
4/15/03...................................................... 275 279
Standard Credit Card Master Trust, 1995-9, Class A 6.55%,
10/7/07...................................................... 250 251
- -------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $983)...................... 990
- -------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS (3.1%)
- -------------------------------------------------------------------------------
International Bank for Reconstruction & Development 7.625%,
1/19/23...................................................... 200 220
Ontario Province, Canada 11.50%, 3/10/13...................... 225 260
- -------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS (COST $471)..................... 480
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (8.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (8.5%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $1,306, collateralized by $1,183
United States Treasury Bonds, 7.25%, due 5/15/16, valued at
$1,332 (COST $1,306).......................................... 1,306 1,306
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%) (COST $14,908)....................... 15,379
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.4%)
- -------------------------------------------------------------------------------
Cash.......................................................... 2
Receivable for Investments Sold............................... 292
Interest Receivable........................................... 247
Other Assets.................................................. 1
Payable for Investments Purchased............................. (451)
Payable for Administrative Fees............................... (6)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (24)
-------
60
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 1,561,904 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)...... $15,439
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE......... $ 9.88
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
AGENCY SECURITIES (55.8%)
- -------------------------------------------------------------------------------
FEDERAL FARM CREDIT BANK (5.4%)
5.60%, 7/1/96.................................................. $1,000 $ 1,001
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK (31.7%)
Zero Coupon, 1/19/96........................................... 1,500 1,481
Zero Coupon, 1/25/96........................................... 1,500 1,480
Zero Coupon, 2/13/96........................................... 1,500 1,476
Zero Coupon, 10/21/96.......................................... 1,500 1,420
-------
5,857
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (18.7%)
Zero Coupon, 12/8/95........................................... 1,500 1,491
Zero Coupon, 5/9/96............................................ 1,000 971
++4.69%, 5/23/96............................................... 1,000 999
-------
3,461
- -------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $10,319).......................... 10,319
- -------------------------------------------------------------------------------
CORPORATE BOND (9.2%)
- -------------------------------------------------------------------------------
General Motors Acceptance Corp.
5.95%, 2/23/96 (COST $1,695).................................. 1,700 1,701
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (16.4%)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (16.4%)
6.125%, 7/31/96................................................ 2,000 2,008
6.875%, 2/28/97................................................ 1,000 1,016
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $3,021).................. 3,024
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (18.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (10.3%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $1,901, collateralized by $1,677
United States Treasury Bonds, 7.50%, due 11/15/16, valued at
$1,939......................................................... 1,901 1,901
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION (8.0%)
U.S. Treasury Bill, 12/28/95................................... 1,500 1,487
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,389)...................... 3,388
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.7%) (COST $18,424)........................ 18,432
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (0.3%)
- -------------------------------------------------------------------------------
Cash.......................................................... $ 6
Interest Receivable........................................... 80
Other Assets.................................................. 1
Payable for Investment Advisory Fees.......................... (6)
Payable for Administrative Fees............................... (6)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (17)
-------
57
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,844,827 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $18,489
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 10.02
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements
++Variable/floating rate security--rate disclosed is as of October 31, 1995
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
SIRACH PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1995
<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> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............. $ 2,016 $ 913 $ 554 $ -- $ --
Interest............... 5,555 1,209 3,578 931 1,270
- --------------------------------------------------------------------------------------------------------
Total Income.......... 7,571 2,122 4,132 931 1,270
- --------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note
B
Basic Fees............ $3,571 $595 $617 $88 $87
Less: Fees Waived..... -- 3,571 -- 595 -- 617 (82) 6 (76) 11
------ ---- ---- --- ---
Administrative
Fees--Note C.......... 605 111 120 60 57
Custodian Fees......... 25 17 19 1 4
Registration and Filing
Fees.................. 17 16 15 11 12
Audit Fees............. 24 13 14 12 13
Legal Fees............. 37 7 7 1 2
Printing Fees.......... 6 6 6 6 5
Directors' Fees--Note
F..................... 14 4 5 3 3
Other Expenses......... 56 18 22 3 5
- --------------------------------------------------------------------------------------------------------
Total Expenses........ 4,355 787 825 103 112
Expense Offset--Note A. (25) (17) (6) (1) (3)
- --------------------------------------------------------------------------------------------------------
Net Expenses.......... 4,330 770 819 102 109
- --------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME... 3,241 1,352 3,313 829 1,161
- --------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
ON INVESTMENTS......... 104,351 4,964 4,167 83 (3)
- --------------------------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION ON
INVESTMENTS............ 10,095 9,582 8,906 977 25
- --------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS. 114,446 14,546 13,073 1,060 22
- --------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $117,687 $15,898 $16,386 $1,889 $1,183
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,343 $ 3,241
Net Realized Gain..................................... 30,428 104,351
Net Change in Unrealized Appreciation (Depreciation).. (55,797) 10,095
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (24,026) 117,687
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (629) (3,406)
Net Realized Gain..................................... (55,865) (30,438)
- --------------------------------------------------------------------------------
Total Distributions.................................. (56,494) (33,844)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 80,169 50,511
--In Lieu of Cash Distributions..................... 55,988 33,371
Redeemed.............................................. (70,247) (183,167)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... 65,910 (99,285)
- --------------------------------------------------------------------------------
Total Decrease........................................ (14,610) (15,442)
Net Assets:
Beginning of Period................................... 528,078 513,468
- --------------------------------------------------------------------------------
End of Period (2)..................................... $513,468 $ 498,026
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 4,905 3,143
In Lieu of Cash Distributions......................... 3,422 2,298
Shares Redeemed....................................... (4,075) (10,848)
- --------------------------------------------------------------------------------
4,252 (5,407)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $409,620 $ 310,335
Undistributed Net Investment Income................... 714 549
Accumulated Net Realized Gain......................... 30,158 104,071
Unrealized Appreciation............................... 72,976 83,071
- --------------------------------------------------------------------------------
$513,468 $ 498,026
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
SIRACH GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 874 $ 1,352
Net Realized Gain (Loss).............................. (5,463) 4,964
Net Change in Unrealized Appreciation................. 2,220 9,582
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (2,369) 15,898
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (682) (1,406)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 111,936 52,374
--In Lieu of Cash Distributions..................... 678 1,348
Redeemed.............................................. (28,619) (34,371)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 83,995 19,351
- --------------------------------------------------------------------------------
Total Increase........................................ 80,944 33,843
Net Assets:
Beginning of Period................................... -- 80,944
- --------------------------------------------------------------------------------
End of Period (2)..................................... $ 80,944 $114,787
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 11,235 4,952
In Lieu of Cash Distributions......................... 71 130
Shares Redeemed....................................... (2,927) (3,352)
- --------------------------------------------------------------------------------
8,379 1,730
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $ 83,995 $103,346
Undistributed Net Investment Income................... 192 138
Accumulated Net Realized Loss......................... (5,463) (499)
Unrealized Appreciation............................... 2,220 11,802
- --------------------------------------------------------------------------------
$ 80,944 $114,787
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 2,749 $ 3,313
Net Realized Gain (Loss).............................. (6,688) 4,167
Net Change in Unrealized Appreciation (Depreciation).. (451) 8,906
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (4,390) 16,386
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (2,355) (3,308)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 121,864 24,186
--In Lieu of Cash Distributions..................... 2,355 3,308
Redeemed.............................................. (17,910) (44,302)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... 106,309 (16,808)
- --------------------------------------------------------------------------------
Total Increase (Decrease)............................. 99,564 (3,730)
Net Assets:
Beginning of Period................................... -- 99,564
- --------------------------------------------------------------------------------
End of Period (2)..................................... $ 99,564 $ 95,834
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 12,270 2,482
In Lieu of Cash Distributions......................... 251 336
Shares Redeemed....................................... (1,869) (4,557)
- --------------------------------------------------------------------------------
10,652 (1,739)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $106,309 $ 89,501
Undistributed Net Investment Income................... 394 399
Accumulated Net Realized Loss......................... (6,688) (2,521)
Unrealized Appreciation (Depreciation)................ (451) 8,455
- --------------------------------------------------------------------------------
$ 99,564 $ 95,834
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 639 $ 829
Net Realized Gain (Loss).............................. (713) 83
Net Change in Unrealized Appreciation (Depreciation).. (506) 977
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (580) 1,889
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (546) (832)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 19,156 4,809
--In Lieu of Cash Distributions..................... 546 832
Redeemed.............................................. (6,398) (3,437)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 13,304 2,204
- --------------------------------------------------------------------------------
Total Increase........................................ 12,178 3,261
Net Assets:
Beginning of Period................................... -- 12,178
- --------------------------------------------------------------------------------
End of Period (2)..................................... $12,178 $15,439
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 1,932 503
In Lieu of Cash Distributions......................... 58 88
Shares Redeemed....................................... (660) (359)
- --------------------------------------------------------------------------------
1,330 232
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $13,304 $15,508
Undistributed Net Investment Income................... 93 90
Accumulated Net Realized Loss......................... (713) (630)
Unrealized Appreciation (Depreciation)................ (506) 471
- --------------------------------------------------------------------------------
$12,178 $15,439
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 738 $ 1,161
Net Realized Loss..................................... -- (3)
Net Change in Unrealized Appreciation (Depreciation).. (17) 25
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 721 1,183
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (634) (1,160)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 35,068 11,897
--In Lieu of Cash Distributions..................... 634 1,158
Redeemed.............................................. (14,418) (15,960)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... 21,284 (2,905)
- --------------------------------------------------------------------------------
Total Increase (Decrease)............................. 21,371 (2,882)
Net Assets:
Beginning of Period................................... -- 21,371
- --------------------------------------------------------------------------------
End of Period (2)..................................... $ 21,371 $ 18,489
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 3,503 1,186
In Lieu of Cash Distributions......................... 63 116
Shares Redeemed....................................... (1,435) (1,588)
- --------------------------------------------------------------------------------
2,131 (286)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $ 21,284 $ 18,379
Undistributed Net Investment Income................... 104 105
Accumulated Net Realized Loss......................... -- (3)
Unrealized Appreciation (Depreciation)................ (17) 8
- --------------------------------------------------------------------------------
$ 21,371 $ 18,489
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
SIRACH SPECIAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------
1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR.................. $8.58 $13.90 $15.03 $19.10 $16.10
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OP-
ERATIONS
Net Investment Income
(Loss).................. 0.07 0.05 (0.01) 0.04 0.11
Net Realized and
Unrealized Gain (Loss).. 5.33 1.13 4.68 (0.90) 3.65
- --------------------------------------------------------------------------------
Total From Investment
Operations............. 5.40 1.18 4.67 (0.86) 3.76
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.... (0.08) (0.05) (0.01) (0.02) (0.11)
Net Realized Gain........ -- -- (0.59) (2.12) (0.95)
- --------------------------------------------------------------------------------
Total Distributions..... (0.08) (0.05) (0.60) (2.14) (1.06)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR..................... $13.90 $15.03 $19.10 $16.10 $18.80
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.............. 63.13% 8.50% 31.81% (4.68)% 25.31%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Year
(Thousands).............. $255,118 $358,714 $528,078 $513,468 $498,026
Ratio of Expenses to Aver-
age Net Assets........... 0.92% 0.90% 0.89% 0.88% 0.85%#
Ratio of Net Investment
Income (Loss) to Average
Net Assets............... 0.61% 0.38% (0.03)% 0.27% 0.64%
Portfolio Turnover Rate... 85% 122% 102% 107% 137%
- --------------------------------------------------------------------------------
</TABLE>
# For the year ended October 31, 1995, 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.
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
SIRACH GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $10.00 $9.66
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................. 0.10 0.15
Net Realized and Unrealized Gain (Loss)............... (0.36) 1.70
- -------------------------------------------------------------------------------
Total From Investment Operations..................... (0.26) 1.85
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................................. (0.08) (0.16)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD......................... $9.66 $11.35
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN........................................... (2.58)% 19.33%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).................. $80,944 $114,787
Ratio of Expenses to Average Net Assets................ 0.92%* 0.86%#
Ratio of Net Investment Income to Average Net Assets... 1.13%* 1.48%
Portfolio Turnover Rate................................ 141% 119%
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
# For the year ended October 31, 1995, 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%.
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
SIRACH STRATEGIC BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $10.00 $9.35
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................. 0.27 0.36
Net Realized and Unrealized Gain (Loss)................ (0.69) 1.39
- --------------------------------------------------------------------------------
Total From Investment Operations...................... (0.42) 1.75
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.................................. (0.23) (0.35)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......................... $9.35 $10.75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN............................................ (4.19)% 19.10%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)................... $99,564 $95,834
Ratio of Expenses to Average Net Assets................. 0.90%* 0.87%#
Ratio of Net Investment Income to Average Net Assets.... 3.05%* 3.49%
Portfolio Turnover Rate................................. 158% 158%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
# For the year ended October 31, 1995, 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%.
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
SIRACH FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $10.00 $9.16
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+............................. 0.48 0.58
Net Realized and Unrealized Gain (Loss)............ (0.91) 0.73
- -------------------------------------------------------------------------------
Total From Investment Operations.................. (0.43) 1.31
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.............................. (0.41) (0.59)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD...................... $9.16 $9.88
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN........................................ (4.33)%++ 14.75%++
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)............... $12,178 $15,439
Ratio of Expenses to Average Net Assets+............ 0.75%* 0.76%#
Ratio of Net Investment Income to Average Net As-
sets+.............................................. 5.37%* 6.13%
Portfolio Turnover Rate............................. 230% 165%
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.08
and $.06, respectively, for the period ended October 31, 1994 and the year
ended October 31, 1995.
++ 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, 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%.
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
SIRACH SHORT-TERM RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DECEMBER 1,
1993** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $10.00 $10.03
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+.............................. 0.34 0.59
Net Realized and Unrealized Loss.................... (0.02) (0.02)
- -------------------------------------------------------------------------------
Total From Investment Operations................... 0.32 0.57
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income............................... (0.29) (0.58)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD....................... $10.03 $10.02
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN......................................... 3.24%++ 5.83%++
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)................ $21,371 $18,489
Ratio of Expenses to Average Net Assets+............. 0.50%* 0.52%#
Ratio of Net Investment Income to Average Net As-
sets+............................................... 3.53%* 5.34%
Portfolio Turnover Rate.............................. 13% 38%
- -------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.04
and $.04, respectively, for the period ended October 31, 1994 and the year
ended October 31, 1995.
++ 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, 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%.
The accompanying notes are an integral part of the financial statements.
43
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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. No shares of the Portfolios'
Institutional Service Class have been issued as of the date of this report. At
October 31, 1995, the UAM Funds were comprised of thirty-four 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.
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 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 permanent book-tax differences.
At October 31, 1995, cost and unrealized appreciation (depreciation) of
investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
NET
COST APPRECIATION DEPRECIATION APPRECIATION
SIRACH PORTFOLIOS (000) (000) (000) (000)
----------------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Special Equity............. $419,021 $92,481 $(9,452) $83,029
Growth..................... 102,580 13,413 (1,724) 11,689
Strategic Balanced......... 87,054 8,944 (657) 8,287
Fixed Income............... 14,912 468 (1) 467
Short-Term Reserves........ 18,424 12 (4) 8
</TABLE>
44
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At October 31, 1995, the following portfolios had 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: Any distributions from net investment
income are normally declared and paid 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 determined based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized using 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.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income 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:
45
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<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/or assume certain expenses, if necessary, if the annual operating
expenses, after the effects of expense offsets arrangement, of Sirach Fixed
Income Portfolio and Sirach Short-Term Reserves Portfolio exceed 0.75% and
0.50%, respectively, of average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolios are charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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. During the year ended October 31, 1995, purchases and
sales of investment securities other than U.S. Government and Agency
securities and short-term securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
SIRACH PORTFOLIOS (000) (000)
----------------- --------- --------
<S> <C> <C>
Special Equity............................................ $558,640 $595,903
Growth.................................................... 111,032 85,688
Strategic Balanced........................................ 84,745 140,266
Fixed Income.............................................. 9,243 9,556
Short-Term Reserves....................................... -- 1,250
</TABLE>
46
<PAGE>
SIRACH PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Purchases and sales of long-term U.S. Government securities were $52,557,000
and $6,452,000, respectively, for Sirach Strategic Balanced Income Portfolio,
$12,595,000 and $11,038,000, respectively, for Sirach Fixed Income Portfolio
and $1,019,000 and $727,000, respectively, for Sirach Short-Term Reserves
Portfolio. There were no purchases or sales of long-term government securities
for Sirach Special Equity Portfolio and Sirach Growth 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 the UAW Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement of expenses
incurred in attending Board meetings.
G. LINE OF CREDIT. The Sirach 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.
H. OTHER. At October 31, 1995, 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>
Growth.............................................. 1 15.1%
Fixed Income........................................ 2 29.5%
Short-Term Reserves................................. 3 71.7%
</TABLE>
47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Sirach Special Equity Portfolio
Sirach Growth Portfolio
Sirach Strategic Balanced Portfolio
Sirach Fixed Income Portfolio
Sirach Short-Term Reserves Portfolio
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Sirach Special Equity Portfolio, Sirach Growth Portfolio, Sirach Strategic
Balanced Portfolio, Sirach Fixed Income Portfolio and Sirach Short-Term
Reserves Portfolio (the "Portfolios"), Portfolios of the UAM Funds, Inc., at
October 31, 1995, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolios' management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
Sirach Special Equity Portfolio hereby designates $30,438,000 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
Federal income tax return. For the period ended October 31, 1995, the
percentage of dividends paid that qualify for the 70% dividend received
deduction for corporate shareholders is 26.1% for Sirach Special Equity
Portfolio, 67.1% for Sirach Growth Portfolio and 16.8% for Sirach Strategic
Balanced Portfolio.
48
<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
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholders:
Performance results for the ICM Fixed Income Portfolio are shown below. For
the quarter ended October 31, 1995, the Portfolio returned 3.53% versus 3.52%
for the Lehman Brothers Aggregate Index. A strong finish helped boost the
Portfolio to the best fiscal year performance in its three year history. For
the fiscal year ended October 31, 1995 the Portfolio returned 15.11% versus
15.65% for the Benchmark Index. Performance is presented after investment
advisory and administration fees. Before fees, the Portfolio returned 3.65%
for the quarter and 15.75% for the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
1 YEAR
3 MONTHS ENDED
ENDED OCTOBER
OCTOBER OCTOBER 31,
1995 31, 1995 1995
------- -------- -------
<S> <C> <C> <C>
ICM Fixed Income Portfolio............................. 1.36% 3.53% 15.11%
Lehman Brothers Aggregate Index........................ 1.30% 3.52% 15.65%
</TABLE>
THE FIXED INCOME MARKET--ANNUAL REVIEW Sharply lower interest rates propelled
the Lehman Brothers Aggregate Index to its highest return in ten years.
Following the 1994 mid-November Treasury refunding, which supplied almost $30
billion in bonds to the market, interest rates began a steady downward trend.
By November 1995, yields had fallen by almost 200 basis points across the
Treasury maturity spectrum. During this period, yields on Treasury Two-Year
Notes, for example, declined from 7.75% to 5.50%, while yields on 30 Year
Bonds fell from 8.18% to 6.33%.
The bull market of 1995 did not begin in the most favorable environment for
bonds. The market initiated a rally in November despite a sixth Federal
Reserve Bank tightening, derivative risk management concerns, and GDP growth
that exceeded 5%. But, by the spring, mounting inventories of productive
goods, slower job growth and sluggish economies overseas provided solid
fundamental reasons to own fixed income securities. Market participants
relieved the buying pressure only briefly in July by selling bonds in order to
take profits and prepare for more Treasury supply in August. However, evidence
that the U.S. economy has achieved a "soft landing" (defined as a sustainable,
non-inflationary economic growth rate) and the perception that Congress and
the President will agree to a credible deficit reduction package fueled late
summer buying, which brought rates to their current low levels.
MARKET SECTOR REVIEW Although Treasury securities led the way, corporate bonds
benefited the most during the year. Lower overall yields and narrower credit
spreads to Treasuries combined to push corporate security returns to the top
of the relative performance chart. Salomon Brothers estimates that the Y-T-D
duration-adjusted performance for the corporate sector reached 129 basis
points above Treasuries by the end of October. In the mortgage-backed market,
yield spreads widening to Treasuries late in the summer erased the strong
relative performance experienced earlier in the year. Market participants
required higher yields to offset prepayment risk and the uncertainty
surrounding accounting and regulatory rule changes for some insurance
companies and banks.
The U.S. market was a winner globally as well. Only Japan, Belgium and Finland
posted currency-hedged returns significantly higher than the U.S. market over
the year ended October 31, 1995, according to Lehman Brothers.
THE ICM FIXED INCOME PORTFOLIO OVERVIEW Although we are very pleased to report
a 15.11% return for the fiscal year, we accomplished only one of the two
performance goals we established internally for the Portfolio. The goal we
achieved was to deliver a return, before fees, that exceeded the Benchmark
Index. We cleared this hurdle by 10 basis points. The other objective, which
we did not achieve, was to deliver a return, net of fees,
1
<PAGE>
higher than the Benchmark Index. We will continue to make adjustments and
improve our process in order to accomplish both goals during fiscal year 1996.
As always, our attempts to improve performance are considered within the
context of minimizing risk.
Shareholders benefited from a major adjustment we initiated in April: a
reduction in the maximum shareholder fee, from 84 to 50 basis points annually.
This change makes the Portfolio fee structure extremely competitive,
especially for a fund that offers tactical foreign allocation.
QUARTERLY REVIEW Maintaining more interest rate risk than the market index
provided a lift to performance over the past quarter. Domestic interest rate
exposure on average exceeded index duration by around 5%. The foreign
allocation, down from a high of 15% in August to 3%, contributed positively to
performance as well. On the domestic front, the Portfolio experienced a few
shifts in sector allocation. In order to increase yield and exposure to an
undervalued sector, we increased mortgage holdings from 22% to 27%. Corporate
holdings also increased to a near-market weighting of 18%. Foreign
allocations, which included French and Canadian 10 Year Notes, provided
positive quarterly returns, although political instability and market concerns
about the future of the European Monetary Union hurt French bond performance
relative to the U.S. Canadian notes purchased in September, on the other hand,
provided strong relative performance after buyers found the 200 basis points
yield spread above U.S. Treasuries ample compensation for the political risks
surrounding the Quebec sovereignty referendum.
DERIVATIVE SECURITIES The Portfolio uses the following derivative instruments:
Futures, Options, Collateralized Mortgage Obligations (CMOs) and Mortgage
Pass-through Securities. At quarter end, October 31, 1995, the Portfolio held
interest rate futures on U.S. Five-Year Notes. These instruments provide a
hedge against declining interest rates. Put options, which composed less than
1% of the Portfolio, will help offset possible price declines in the 30 Year
Treasury Bond until late November. At that time, new option positions will be
considered. The Portfolio also purchased in late October Australia 10 year
bond futures in order to benefit from better prospective performance abroad.
Collateralized Mortgage Obligations composed 8% of the Portfolio. Most of
these issues maintain simple structures and none is levered. The well-seasoned
collateral underlying most of these CMOs enhances their appeal as substitutes
for mortgage pass-throughs. The allocation to mortgage pass-throughs (18%) has
provided high relative income, superior credit quality and liquidity.
OUTLOOK In this low inflation environment, we remain constructive on the bond
market. Current events, however, compel us to remain neutral on the near-term
expectation of significantly lower rates. Intense negotiations and
brinkmanship in Washington relating to the government debt ceiling, a deficit
reduction package and the current budget may raise the political risk premium
on U.S. Treasury yields. In addition, evidence that most market participants
are at least fully invested ahead of inevitable Treasury debt supply clouds
the technical picture as well. The relatively flat shape of the yield curve
also leaves little margin for error if events heat up in Washington or the
economy shows more signs of life; we are, after all, currently growing at a 2-
3% real rate. An unbiased forecast extracted from the current curve reflects a
sanguine view on long-term rates, and prices on Federal Funds futures for
settlement next spring already reflect a 50 basis points reduction on
overnight rates.
A neutral/slightly long posture on interest rate risk means that we must work
extra hard to find other ways to add value to the Portfolio. Several sectors
may provide these opportunities. If mortgage pass-through yield spreads
continue to widen to Treasuries, we will increase the allocation to this
sector. Wider spreads will amply
2
<PAGE>
compensate investors for assuming current prepayment and market uncertainty.
The foreign market also continues to provide opportunity on a selective basis.
High real yields in Canada, Germany, and France are attractive, especially
against the backdrop of political uncertainty and higher volatility in the U.S.
market.
Respectfully submitted,
/s/ Dan Shackelford
Dan Shackelford, CFA
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Without the Adviser's temporary fee waiver (also expenses assumed by the
Adviser), 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE ICM FIXED
INCOME PORTFOLIO AND THE LEHMAN BROTHERS AGGREGATE INDEX.
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
----------------------------------------
1 YEAR SINCE 11/3/92*
----------------------------------------
15.11% 6.70%
----------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
11/3/92* 10/31/93 10/31/94 10/31/95
------- -------- -------- --------
<S> <C> <C> <C> <C>
ICM FIXED INCOME PORTFOLIO+ 100,000 110,380 105,490 121,430
LEHMAN BROTHERS AGGREGATE INDEX+ 100,000 111,870 107,760 124,624
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions.
Definition of the Comparative Index
-----------------------------------
The Lehman Brothers Aggregate 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.
Please note that one can not invest in an unmanaged index.
4
<PAGE>
ICM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (18.0%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (11.6%)
American General Finance
8.125%, 8/15/09............................................... $ 250 $ 279
Associates Corp. of North America
8.375%, 1/15/98............................................... 25 26
Commercial Credit Corp.
8.70%, 6/15/09................................................ 100 118
Ford Motor Credit Corp.
6.70%, 8/2/00................................................. 250 254
General Electric Capital Corp.
8.85%, 4/1/05................................................. 350 406
General Motors Acceptance Corp.
8.875%, 6/1/10................................................ 50 60
Household Finance Corp.
8.875%, 7/5/99................................................ 50 51
Morgan Stanley, Inc.
5.65%, 6/15/97................................................ 350 348
Norwest Financial, Inc.
6.23%, 9/1/98................................................. 300 301
U.S. West Capital, Inc.
8.40%, 9/15/99................................................ 100 107
-------
1,950
- -------------------------------------------------------------------------------
INDUSTRIAL (2.9%)
American Home Products
7.70%, 2/15/00................................................ 250 264
Dow Chemical Co.
8.55%, 10/15/09............................................... 25 29
EG & G, Inc.
6.80%, 10/15/05............................................... 200 199
-------
492
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (2.6%)
Boeing Co.
7.95%, 8/15/24................................................ $ 250 $ 282
Ryder System, Inc.
7.30%, 10/30/00............................................... 150 156
-------
438
- -------------------------------------------------------------------------------
UTILITIES (0.9%)
Commonwealth Edison Co.
8.00%, 10/15/03............................................... 10 11
General Telephone of California
7.75%, 12/1/98................................................ 100 100
General Telephone of Wisconsin
7.50%, 3/1/02................................................. 10 10
New York Electric & Gas
6.50%, 9/1/98................................................. 15 15
Ohio Power Co.
7.75%, 10/1/02................................................ 10 10
-------
146
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $2,913)................... 3,026
- -------------------------------------------------------------------------------
YANKEE BOND (0.7%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (0.7%)
InterAmerica Development Bank
8.40%, 9/1/09 (COST $109)..................................... 100 117
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE PASS THROUGH SECURITIES (18.4%)
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (4.2%)
Pool #E48794, 15 yr. Guarantee
6.50%, 7/1/08................................................. 115 115
Pool #E00292, Gold
6.50%, 4/1/09................................................. 319 317
Pool #845640
*7.833%, 8/1/23................................................ 270 276
-------
708
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE PASS THROUGH SECURITIES--(CONTINUED)
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (7.1%)
Pool #55343
9.50%, 10/1/17................................................ $ 19 $ 20
Pool #50993
7.00%, 2/1/24................................................. 457 453
Pool #311025
8.00%, 5/1/25................................................. 445 457
Pool #322345
7.50%, 9/1/25................................................. 250 253
-------
1,183
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (7.1%)
Pool #17084
8.00%, 9/15/07................................................ 28 28
Pool #20335
8.00%, 10/15/07............................................... 41 43
Pool #400216
7.00%, 5/15/09................................................ 228 232
Pool #109599
12.00%, 1/15/14............................................... 61 70
Pool #311575
7.50%, 2/15/23................................................ 399 405
Pool #780241
8.00%, 9/15/25................................................ 399 411
-------
1,189
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE PASS THROUGH SECURITIES
(COST $3,071).................................................. 3,080
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (8.3%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (8.2%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.3%)
Series 1544-E
6.25%, 6/15/08................................................ $ 200 $ 200
Series 1003-C
8.50%, 12/15/16............................................... 14 14
-------
214
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (6.9%)
Series 1991 21-H
7.00%, 12/25/19............................................... 203 204
Series G92-30 H
7.00%, 1/25/20................................................ 46 46
Series G92-15 G PAC (11)
7.00%, 4/25/20................................................ 295 294
Series G19-H PAC
8.40%, 6/25/20................................................ 200 214
Series G92-11 J PAC (11)
7.00%, 4/25/21................................................ 400 394
-------
1,152
-------
1,366
- -------------------------------------------------------------------------------
OTHER (0.1%)
FBC Mortgage Securities Trust Series 7-B
*6.463%, 1/25/17............................................... 2 2
Morgan Stanley Mortgage Trust Series Y3
8.95%, 3/1/16................................................. 22 23
-------
25
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $1,421)......... 1,391
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY SECURITIES (51.0%)
- -------------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION (1.5%)
*5.77%, 3/3/97.............................................. $ 250 $ 250
- -------------------------------------------------------------------------------
U.S. TREASURY BOND (16.1%)
7.50%, 11/15/16............................................ 2,405 2,708
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (33.4%)
**6.75%, 2/28/97............................................ 1,700 1,725
5.875%, 7/31/97............................................ 390 392
5.125%, 3/31/98............................................ 470 464
5.125%, 4/30/98............................................ 1,000 987
6.375%, 7/15/99............................................ 200 204
7.50%, 11/15/01............................................ 650 703
6.375%, 8/15/02............................................ 1,035 1,063
7.25%, 8/15/04............................................. 50 54
-------
5,592
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $8,275).... 8,550
- -------------------------------------------------------------------------------
CONTRACTS
- -------------------------------------------------------------------------------
PURCHASED OPTION (0.0%)
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION
#U.S. Long Bond put, expiring 12/95, strike price U.S. $114
(COST $2).................................................. 114 1
- -------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (2.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.6%)
J.P. Morgan Securities, Inc. 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $270, collateralized by $239
U.S. Treasury Bond 7.50%, due 11/15/16, valued at $276...... $ 270 270
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATION (0.6%)
**U.S. Treasury Bill, 11/2/95............................... 100 100
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $370)..................... 370
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.6%) (COST $16,161)..................... 16,535
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (1.4%)
- -------------------------------------------------------------------------------
Interest Receivable........................................... $ 231
Receivable from Investment Adviser............................ 17
Other Assets.................................................. 13
Payable for Administrative Fees............................... (7)
Payable for Daily Variation on Futures Contracts.............. (3)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (20)
-------
230
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,606,703 outstanding $0.001 par value
Institutional Class shares (authorized 50,000,000 shares).... $16,765
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 10.43
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
* Variable/floating rate security--rate disclosed is as of October 31, 1995.
** A portion of this security was pledged to cover margin requirements for
open futures contracts.
# Non-income producing security.
PAC Planned Amortization Class
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ICM FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
ENDED
OCTOBER 31,
(In Thousands) 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $1,008
- -------------------------------------------------------------------------------
Total Income............................................... 1,008
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees................................................. $ 76
Less: Fees Waived.......................................... (76) --
----
Administrative Fees--Note C................................. 82
Printing Fees .............................................. 17
Audit Fees.................................................. 13
Custodian Fees.............................................. 12
Registration and Filing Fees................................ 5
Directors' Fees--Note F..................................... 3
Legal Fees.................................................. 2
Other Expenses.............................................. 2
Expenses Assumed by the Adviser--Note B..................... (41)
- -------------------------------------------------------------------------------
Total Expenses............................................. 95
Expense Offset--Note A...................................... (2)
- -------------------------------------------------------------------------------
Net Expenses............................................... 93
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME........................................ 915
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS):
Investments................................................. (9)
Written Options............................................. 1
Futures Contracts........................................... 38
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS, WRITTEN OPTIONS AND
FUTURES CONTRACTS .......................................... 30
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS
AND FUTURES CONTRACTS....................................... 1,098
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS, WRITTEN OPTIONS AND FUTURES
CONTRACTS................................................... 1,128
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......... $2,043
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
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>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 686 $ 915
Net Realized Gain (Loss).............................. (218) 30
Net Change in Unrealized Appreciation (Depreciation).. (1,083) 1,098
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (615) 2,043
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (626) (813)
Net Realized Gain..................................... (113) --
In Excess of Net Realized Gain........................ (6) --
- --------------------------------------------------------------------------------
Total Distributions.................................. (745) (813)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 3,189 7,677
--In Lieu of Cash Distributions..................... 709 788
Redeemed.............................................. (2,402) (5,531)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 1,496 2,934
- --------------------------------------------------------------------------------
Total Increase........................................ 136 4,164
Net Assets:
Beginning of Year..................................... 12,465 12,601
- --------------------------------------------------------------------------------
End of Year (2)....................................... $12,601 $16,765
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued........................................ 313 750
In Lieu of Cash Distributions........................ 72 78
Shares Redeemed...................................... (243) (541)
- --------------------------------------------------------------------------------
142 287
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital...................................... $13,438 $16,379
Undistributed Net Investment Income.................. -- 134
Accumulated Net Realized Loss........................ (111) (120)
Unrealized Appreciation (Depreciation)............... (726) 372
- --------------------------------------------------------------------------------
$12,601 $16,765
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</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
1992** TO OCTOBER 31,
OCTOBER 31, -------------------
1993 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 10.00 $ 10.58 $ 9.55
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+.................... 0.51 0.52 0.59
Net Realized and Unrealized Gain (Loss)... 0.51 (0.98) 0.82
- -------------------------------------------------------------------------------
Total from Investment Operations......... 1.02 (0.46) 1.41
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income..................... (0.44) (0.48) (0.53)
Net Realized Gain......................... -- (0.09) --
- -------------------------------------------------------------------------------
Total Distributions...................... (0.44) (0.57) (0.53)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $ 10.58 $ 9.55 $ 10.43
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN............................... 10.38%++ (4.43)%++ 15.11%++
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)...... $12,465 $12,601 $16,765
Ratio of Expenses to Average Net Assets+... 0.84%* 0.84% 0.63%#
Ratio of Net Investment Income to Average
Net Assets+............................... 5.41%* 5.26% 6.04%
Portfolio Turnover Rate.................... 65% 82% 49%
- -------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $0.03,
$0.04 and $0.08 per share for the period ended October 31, 1993, and the
years ended October 31, 1994 and 1995, 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 0.61%.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 the UAM Funds, Inc., began operations on November
3, 1992. At October 31, 1995, the UAM Funds were comprised of thirty-four
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.
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 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 October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $16,172,000. Net unrealized appreciation for Federal income tax
purposes aggregated $363,000, of which $411,000 related to appreciated
securities and $48,000 related to depreciated securities.
For the year ended October 31, 1995, the Portfolio had a capital loss
carryover for Federal income tax purposes of approximately $110,000, which
will expire 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 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.
14
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 October 31, 1995:
<TABLE>
<CAPTION>
NET
NUMBER AGGREGATE UNREALIZED
OF FACE VALUE EXPIRATION GAIN (LOSS)
CONTRACTS CONTRACTS (000) DATE (000)
--------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Purchases:
Australian 10 Year Bond......... 5 A$ 603 Dec-95 US$(3)
U.S. Treasury 5 Year Note....... 5 US$542 Dec-95 1
-----
US$(2)
=====
</TABLE>
A$--Australian Dollar
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--(CONTINUED)
During the 12 months ended October 31, 1995, 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, 1994.................. 0 $0
Options written during the period........................ 5 2
Options cancelled in closing transactions during the
period.................................................. (5) (2)
--- ---
Options outstanding at October 31, 1995.................. 0 $ 0
=== ===
</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: Any distributions from net investment
income are declared and paid quarterly. Any realized net capital gains will
be distributed annually. All distributions are recorded on ex-dividend
date.
The amount and character of income and capital gain distributions 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 have been adjusted to include
expense offsets for custodian balance credits.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income per share in the financial highlights.
B. ADVISORY SERVICES. Investment Counselors of Maryland, Inc. (the "Adviser"),
a wholly-owned subsidiary of United Asset Management Corporation (UAM),
provides investment advisory services to the Portfolio under an Investment
Advisory Agreement. Under the terms of the agreement, the Adviser is paid a
fee calculated at an annual rate of 0.50% of the Portfolio's average daily net
assets. Effective April 1, 1995, 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 offsets arrangements, from
exceeding 0.50% of average daily net assets. Prior to April 1, 1995, the
Adviser had 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 annual operating expenses, after the effects of expense offsets
arrangements, from exceeding 0.84% of average daily net assets.
16
<PAGE>
ICM FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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. During the year ended October 31, 1995, the Portfolio
made purchases of $1,727,000 and sales of $713,000 of investment securities
other than U.S. Government and Agency and short-term securities. Purchases and
sales of long-term U.S. Government and Agency securities totaled $8,948,000
and $5,830,000, 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement of expenses
incurred in attending board meetings.
G. LINE OF CREDIT. The ICM Fixed Income Portfolio, 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 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.
H. OTHER. At October 31, 1995, 59.5% of total shares outstanding were held by
four record shareholders owning 10% or greater of the aggregate total shares
outstanding.
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
ICM Fixed Income Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
ICM Fixed Income Portfolio (the "Portfolio"), a Portfolio of UAM Funds, Inc.,
at October 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995, by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse llp
Boston, Massachusetts
December 14, 1995
18
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
RICE, HALL, JAMES SMALL CAP
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
Rice, Hall, James & Associates
600 West Broadway, Suite 1000San Diego, CA 92101
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholders:
October 31, 1995 marked the year-end for the Rice, Hall, James Small Cap
Portfolio. We are extremely satisfied with the fourth quarter and year-end
results as outlined below:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
QUARTER YEAR 7/1/94* YEAR 7/1/94*
ENDED ENDED THROUGH ENDED THROUGH
10/31/95 10/31/95 10/31/95 9/30/95 9/30/95
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
RHJ Small Cap Portfolio.............. +5.10% +42.59% +58.85% +49.73% +47.80%
Russell 2000......................... -0.75% +18.35% +26.07% +23.04% +24.63%
S & P 500............................ +4.10% +26.41% +35.55% +29.71% +28.01%
Value Line**......................... -1.79% +10.15% +15.47% +14.97% +16.07%
</TABLE>
- --------
* Commencement of Operations
** excludes dividend income
We were pleased to register a +5.10% gain for the quarter ended October 31,
1995, while the Russell 2000 had a return of -0.75%. The Standard & Poor's 500
Index, representative of large capitalization stocks, continued with the
quarter's best performance of the major indices at +4.10%.
For the year ended October 31, 1995, the Portfolio produced an impressive gain
of +42.59%, comfortably outdistancing the indices in the above table. While we
might reasonably expect to outperform the Standard & Poor's 500 Index over
time due to the small cap nature of the Portfolio, it should be noted that
prices of small company stocks are generally more volatile than those of large
company stocks, continuing to widen the performance spread between the
Portfolio and the Russell 2000 is a much more difficult challenge.
Our research focus remains on smaller capitalized companies ($40 million to
$500 million) where we believe fundamental change will provide a catalyst to
upward movement in the stock price. Ideally we look for companies that have
strong positions in unique market niches and well above-average management
teams. Maximum capital appreciation is the primary goal of the Portfolio,
current income generation is not a consideration and volatility may be high.
No derivative investments were used during this period.
For the fiscal year just ended, technology holdings represented the highest
percentage commitment in the Portfolio. At year end, our commitment to this
sector was 19% of the Portfolio's net assets virtually unchanged from the
previous quarter in spite of the fact that substantial gains were realized
from this sector. No other industry represented more than 12% in the 67 stock
portfolio; however, basic resources, retail and consumer non-durables
represented just over 26% in aggregate. No single holding represented more
than 3.5% of the total Portfolio's net assets.
We remarked last quarter that the powerful moves in the technology stocks
raised a yellow flag, but that we still felt, the high technology weighting
would positively effect the Portfolio's return, albeit with greater
volatility.
1
<PAGE>
Certainly, the last quarter demonstrated increased volatility in the
technology area, particularly on the downside. We believe that this correction
in the sector is healthy and provides numerous opportunities for purchase,
however selectivity has become more important than ever. We have no intention
of reducing exposure to the technology sector at this time, but will continue
to search for unrecognized opportunities in all industries.
Sincerely,
Rice, Hall, James & Associates
DEFINITIONS OF THE COMPARATIVE INDICES
--------------------------------------
Note: The Russell 2000 is defined under the performance comparison line graph.
The S&P 500 Index is an unmanaged index composed of 400 industrial, 40
financial, 40 utilities and 20 transportation stocks.
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
total return for the Portfolio would have been lower had certain fees not been
waived or expenses assumed by the Adviser. 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF CHANGES IN VALUE OF $100,000 PURCHASED IN THE
RICE, HALL, JAMES SMALL CAP PORTFOLIO AND THE RUSSELL 2000 INDEX
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS**
FOR PERIOD ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1 YEAR SINCE 7/1/94*
- --------------------------------------------------------------------------------
<S> <C>
42.59% 41.46%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RICE,HALL, JAMES RUSSELL 2000
SMALL CAP PORTFOLIO INDEX
<S> <C> <C>
7/1/94* 100,000 100,000
10/31/94 111,400 106,510
10/35/95 158,845 126,055
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
**Total return of the Portfolio reflects fees waived and expenses assumed by the
Adviser. Without such waiver of fees and expenses assumed, total return would
be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce to performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities in
the index.
Definition of the Comparative Index
-----------------------------------
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.
Please note that one can not invest in an unmanaged index.
3
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.4%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.2%)
*Whittaker Corp. .............................................. 11,000 $ 219
- -------------------------------------------------------------------------------
BANKS (1.0%)
Lafayette American Bank and Trust Co. ......................... 20,000 180
- -------------------------------------------------------------------------------
BASIC RESOURCES (9.8%)
*Dravo Corp. .................................................. 15,000 186
Harmon Industries, Inc. ....................................... 18,000 255
Layne, Inc. ................................................... 27,000 223
NN Ball & Roller, Inc. ........................................ 10,000 208
*Park-Ohio Industries.......................................... 20,000 275
*Richey Electronics, Inc. ..................................... 17,000 145
Universal Stainless & Alloy Products, Inc. .................... 20,000 250
*Whitehall Corp. .............................................. 8,000 299
-------
1,841
- -------------------------------------------------------------------------------
CONSTRUCTION (2.5%)
Cavalier Homes, Inc. .......................................... 15,625 265
Monarch Cement Co. ............................................ 17,200 215
-------
480
- -------------------------------------------------------------------------------
CONSUMER DURABLES (5.2%)
*First Alert, Inc. ............................................ 18,000 274
*Temtex Industries, Inc. ...................................... 42,500 175
TurboChef, Inc. ............................................... 13,000 341
Wynn's International, Inc. .................................... 7,000 193
-------
983
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (5.2%)
Opta Food Ingredients, Inc. ................................... 20,000 295
Riser Foods, Inc., Class A..................................... 20,000 275
Seaboard Corp. ................................................ 600 158
Unimark Group, Inc. ........................................... 30,000 263
-------
991
- -------------------------------------------------------------------------------
ELECTRONICS (6.0%)
*Burr-Brown Corp. ............................................. 9,000 279
*Franklin Electronic Publishers, Inc. ......................... 6,000 248
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
ELECTRONICS--(CONTINUED)
Nimbus CD International, Inc. .................................. 40,000 $ 320
*Tower Semiconductor Ltd. ...................................... 10,000 296
------
1,143
- -------------------------------------------------------------------------------
ENERGY (6.3%)
*Belden & Blake Corp. .......................................... 15,000 218
*Chieftain International, Inc. ................................. 20,100 281
*Nuevo Energy Co. .............................................. 17,000 376
*Seitel, Inc. .................................................. 12,500 323
------
1,198
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (1.4%)
Sirrom Capital Corp. ........................................... 15,000 264
- -------------------------------------------------------------------------------
HEALTH CARE (8.9%)
Jones Medical Industries, Inc. ................................. 22,000 426
Metra Biosystems, Inc. ......................................... 14,000 256
*North American Vaccine, Inc. .................................. 25,000 262
Orthologic Corp. ............................................... 30,000 285
*Royce Laboratories, Inc. ...................................... 30,000 238
*Theragenics Corp. ............................................. 40,000 215
------
1,682
- -------------------------------------------------------------------------------
LODGING & RESTAURANTS (3.9%)
*Amerihost Properties, Inc. .................................... 30,000 210
*Logan's Roadhouse, Inc. ....................................... 18,000 270
*Red Lion Hotels, Inc. ......................................... 13,000 257
------
737
- -------------------------------------------------------------------------------
RETAIL (11.5%)
*Books-A-Million, Inc. ......................................... 11,000 139
*Cole National Corp., Class A................................... 20,000 245
*Creative Computers, Inc. ...................................... 5,000 143
Eastbay, Inc. .................................................. 25,000 525
*Egghead, Inc. ................................................. 40,000 275
Piercing Pagoda, Inc. .......................................... 18,000 252
Regis Corp. .................................................... 10,000 228
*Quicksilver, Inc. ............................................. 12,000 372
------
2,179
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SERVICES (4.7%)
*Daisytek International Corp. ................................. 7,000 $ 198
*Golf Enterprises, Inc. ....................................... 22,000 226
*Rural/Metro Corp. ............................................ 10,000 240
Strategic Distribution, Inc. .................................. 30,500 221
-------
885
- -------------------------------------------------------------------------------
TECHNOLOGY (18.7%)
*Applied Digital Access, Inc. ................................. 20,000 235
*Aura Systems, Inc. ........................................... 40,000 198
*Caere Corp. .................................................. 35,000 276
*Casino Data Systems........................................... 12,000 186
*Challenger International, Ltd. ............................... 50,000 253
*Intersolv..................................................... 14,000 221
MacNeal-Schwendler Corp. ...................................... 24,000 366
*Micron Electronics, Inc. ..................................... 12,000 249
*Premenos Technology Corp. .................................... 17,000 667
*Stac, Inc. .................................................. 30,000 371
*Symmetricom, Inc. ............................................ 8,000 147
*Trident Microsystems, Inc. ................................... 12,000 357
-------
3,526
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (4.3%)
Metricom, Inc. ................................................ 15,000 244
*TESSCO Technologies, Inc. .................................... 10,000 255
Wireless Telecom Group, Inc. .................................. 17,000 310
-------
809
- -------------------------------------------------------------------------------
TRANSPORTATION (1.8%)
*Greyhound Lines, Inc. ........................................ 50,000 187
*Mark VII, Inc. ............................................... 9,000 161
-------
348
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $15,240).............................. 17,465
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.9%)
J.P. Morgan Securities, Inc. 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $743, collateralized by $656
United States Treasury Bonds 7.50%, due 11/15/16, valued at
$759 (COST $743)............................................. $743 $ 743
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (96.3%) (COST $15,983)....................... 18,208
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (3.7%)
- -------------------------------------------------------------------------------
Cash.......................................................... 4
Receivable for Investments Sold............................... 1,021
Dividends Receivable.......................................... 5
Other Assets.................................................. 8
Payable for Investments Purchased............................. (292)
Payable for Investment Advisory Fees.......................... (19)
Payable for Administrative Fees............................... (6)
Payable for Custodian Fees.................................... (2)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (16)
-------
702
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,191,841 outstanding shares $0.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $18,910
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 15.87
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
(In Thousands) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest..................................................... $ 66
Dividends.................................................... 36
- --------------------------------------------------------------------------------
Total Income................................................ 102
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.................................................. $100
Less: Fees Waived........................................... (15) 85
----
Administrative Fees--Note C.................................. 52
Printing Fees................................................ 13
Audit Fees................................................... 12
Custodian Fees............................................... 10
Registration and Filing Fees................................. 8
Directors' Fees--Note F...................................... 3
Legal Fees................................................... 2
Other........................................................ 2
- --------------------------------------------------------------------------------
Total Expenses.............................................. 187
Expense Offset--Note A....................................... (1)
- --------------------------------------------------------------------------------
Net Expenses................................................ 186
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS........................................... (84)
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.............................. 3,475
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS.......... 1,698
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS....................................... 5,173
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $5,089
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
JULY 1,
1994** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss).......................... $ 4 $ (84)
Net Realized Gain (Loss).............................. (79) 3,475
Net Change in Unrealized Appreciation................. 527 1,698
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 452 5,089
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. -- (4)
In Excess of Net Investment Income.................... -- (4)
- --------------------------------------------------------------------------------
Total Distributions.................................. -- (8)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 7,835 5,697
--In Lieu of Cash Distributions..................... -- 8
Redeemed.............................................. -- (163)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 7,835 5,542
- --------------------------------------------------------------------------------
Total Increase......................................... 8,287 10,623
Net Assets:
Beginning of Period................................... -- 8,287
- --------------------------------------------------------------------------------
End of Period (2)..................................... $8,287 $18,910
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issues and Redeemed:
Shares Issued........................................ 744 459
In Lieu of Cash Distributions........................ -- 1
Shares Redeemed...................................... -- (12)
- --------------------------------------------------------------------------------
744 448
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital...................................... $7,835 $13,377
Undistributed Net Investment Income.................. 4 --
Accumulated Net Realized Gain (Loss)................. (79) 3,308
Unrealized Appreciation.............................. 527 2,225
- --------------------------------------------------------------------------------
$8,287 $18,910
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JULY 1,
1994** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................. $10.00 $ 11.14
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)+........................ 0.01 (0.07)
Net Realized and Unrealized Gain..................... 1.13 4.81
- --------------------------------------------------------------------------------
Total From Investment Operations.................... 1.14 4.74
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................................ -- (0.01)
In Excess of Net Investment Income................... -- (0.00)##
- --------------------------------------------------------------------------------
Total Distributions................................. -- (0.01)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........................ $11.14 $ 15.87
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.......................................... 11.40%++ 42.59%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)................. $8,287 $18,910
Ratio of Expenses to Average Net Assets+.............. 1.40%* 1.40%#
Ratio of Net Investment Income (Loss) to Average Net
Assets+.............................................. 0.30%* (0.63)%
Portfolio Turnover Rate............................... 5% 180%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.05
and $.01 per share for the periods ended October 31, 1994 and 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, 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.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 the UAM Funds, Inc., began operations on
July 1, 1994. At October 31, 1995, the UAM Funds were comprised of thirty-four
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.
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. 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 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 permanent book-tax differences. Reclassifications between
undistributed net investment income and accumulated net realized gain arose
principally from differing book and tax treatments for the characterization
of net operating losses.
At October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $15,983,000. Net unrealized appreciation for Federal income tax
purposes aggregated $2,225,000, of which $2,971,000 related to appreciated
securities and $746,000 related to depreciated securities.
For the year ended October 31, 1995, the Portfolio utilized capital loss
carryforwards for Federal income tax purposes of approximately $79,000.
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 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.
11
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. DISTRIBUTIONS TO SHAREHOLDERS: Any distributions from net investment
income are declared and paid quarterly. Any realized net capital gains will
be distributed annually. All distributions are recorded on ex-dividend
date.
The amount and character of income and capital gain distributions 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 determined 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 adjusted to include expense
offsets for custodian balance credits.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income 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
the Portfolio's average daily net assets. 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 1.40% of average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors, (a division of Regis Retirement Plan
Services, Inc.), a wholly-owned subsidiary of UAM, distributes
12
<PAGE>
RICE, HALL, JAMES SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 year ended October 31, 1995, the Portfolio
made purchases of $26,890,000 and sales of $22,171,000 of investment
securities other than 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement of expenses
incurred in attending Board meetings.
G. LINE OF CREDIT. The Rice, Hall, James Small Cap Portfolio, 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 year ended October 31, 1995, there were no
borrowings under the agreement.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Rice, Hall, James Small Cap Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Rice, Hall, James Small Cap Portfolio (the "Portfolio"), a Portfolio of the
UAM Funds, Inc., at October 31, 1995, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
For the year ended October 31, 1995, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders is 20.8%.
14
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
MCKEE 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
C.S. McKee & Co., Inc.
One Gateway Center
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
UAM FUNDS MCKEE PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
U.S. Government........................................................... 11
Domestic Equity........................................................... 14
International Equity...................................................... 19
Statements of Operations.................................................... 25
Statement of Changes in Net Assets
U.S. Government........................................................... 26
Domestic Equity........................................................... 27
International Equity...................................................... 28
Financial Highlights
U.S. Government........................................................... 29
Domestic Equity........................................................... 30
International Equity...................................................... 31
Notes to Financial Statements............................................... 32
Report of Independent Accountants........................................... 36
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
This is our first annual shareholder report since the McKee U.S. Government
Portfolio was launched on March 2, 1995. We welcome you as shareholders and
are confident you will be pleased with our investment results in the years
ahead.
ECONOMIC SUMMARY
The first eight months of the McKee U.S. Government Portfolio will be
remembered as a remarkable period. Falling bond yields, propelled by declining
interest rates, low inflation, and a global slowdown set the stage for a bond
rally of historical proportions. This occurred as the domestic jobless rate
declined to 5.5%, a level generally associated with full employment and
inflationary wage pressures.
What caused this perfect world, a world where inflation is benign and almost
everyone is working? We believe the following three items: First, today's
economic environment is materially different from any that has existed over
the past 30 years. Both major political parties are discussing reducing the
federal deficit. Second, corporate America has adopted a strategy that states
productivity and profits are more important than market share. As a result, a
worker who once had visions of working for one firm his entire career, now is
experiencing tremendous job insecurity and minimum wage growth due to
continuous corporate restructuring. Third, investor's psychology concerning
higher inflation has changed for the better. As a result, bond market yields
are back to 30 year lows. How long can this continue? That answer lies with
the Federal Reserve and its ability to walk the fine line between keeping
inflation at bay and the economy experiencing moderate growth.
PERFORMANCE
From its inception date of March 2, 1995 through October 31, 1995, the
Portfolio achieved a return of 9.96% versus 10.86% for the Lehman Brothers
Government/Corporate Index (the "Index"). Several factors were responsible for
these results. First, we were consistently longer in duration than our
benchmark. This was based on our belief that we saw no evidence of commodity
or wage inflation present in our system. Second, we positioned ourselves on
the yield curve to take advantage of any steeping that we believed would occur
as the federal funds rate was reduced. Finally, we were underweighted in the
corporate sector. At first this penalized our performance but over the last
several months it helped as corporate spreads started to widen.
PORTFOLIO STRUCTURE
The McKee U.S. Government Portfolio continues to maintain a large presence in
U.S. Treasury securities as per our guidelines, over 73% versus 67% for the
Index. As discussed above, with our longer duration and maturity structure
decisions, we sought those issues that we felt would experience the greatest
positive appreciation in a period of falling interest rates. For incremental
yields greater than U.S. Treasuries, we examined and later acquired various
federal agency issues which were trading at attractive spreads. We now own
almost 4% of agency paper compared to 10% for the Index. Finally, the last 10%
is distributed as follows: 5% in mortgages and 5% in corporates. The Index
does not hold mortgage paper and corporates account for 23%.
1
<PAGE>
The following chart lists the top ten holdings and their percentage of the
Portfolio's net assets:
<TABLE>
<CAPTION>
% OF
SECURITY COUPON MATURITY PORTFOLIO
- -------- ------- -------- ---------
<S> <C> <C> <C>
U. S. Treasury Notes 7.500% 2/15/05 13.4%
U. S. Treasury Notes 7.125% 9/30/99 12.1%
U. S. Treasury Notes 7.250% 8/15/04 11.7%
U. S. Treasury Notes 6.250% 2/15/03 11.0%
U. S. Treasury Bonds 7.875% 2/15/21 8.7%
U. S. Treasury Notes 6.375% 8/15/02 8.5%
U. S. Treasury Bonds 14.000% 11/15/11 5.5%
FHLMC Gold Pool #C80328 7.500% 7/1/25 3.9%
Pacific Bell Telephone 6.250% 3/1/05 2.1%
U. S. Treasury Notes 6.125% 7/31/96 2.1%
</TABLE>
OUTLOOK
We believe the outlook for the domestic fixed income market over the next year
is positive. We anticipate interest rates resuming their downward trajectory
once a federal budget compromise is reached. This should be followed by cuts
in the federal funds rate, discount rate, and prime rate. Also, corporate
restructuring should continue, but at a slower pace, keeping wage increases
moderate. Another factor is the consumer with a high level of debt. This will
probably force the consumer to reduce spending in 1996 which will act as a
further drag on the economy. All of these items should allow the 30-year bond
to test its 1993 lows of 5.75% in 1996. However, this decline in rates
eventually should stimulate both the housing and automobile markets causing
some back up in yields that could be troublesome for the fixed income markets
during the second half of the year. Still, this does not dampen our belief
that, on balance, fiscal 1996 should be a rewarding year for the Portfolio and
its shareholders.
In conclusion, all of us at McKee are looking forward to working for you again
in 1996. We want to assure you that we will continue to strive to provide you,
our shareholders, with superior performance and look forward to a long and
profitable relationship.
2
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
This is the first annual shareholder report since the McKee Domestic Equity
Portfolio was launched on March 2, 1995. We welcome you as shareholders and
appreciate the trust you have shown in us. All of us at C.S. McKee look
forward to helping you accomplish your investment objectives in future years.
ECONOMIC PERSPECTIVE
The U.S. economy has grown at a modest rate over the past year. We expect
continued moderate growth through 1996 and regard the chance of a premature
recession as highly unlikely. On the inflation front, prospects remain
decidedly favorable. We remain firm in our conviction that ongoing
disinflation will extend the current trend toward lower interest rates into
next year. This improving interest rate setting, coupled with the ongoing
expansion anticipated in corporate profits, should produce a constructive
equity market environment in the coming year.
PERFORMANCE
From its inception date of March 2, 1995 through the fiscal year end of
October 31, 1995, the Portfolio return was 15.13% versus 21.28% for the S&P
500 Index. Results were positively influenced by large weightings in high
performing industries such as technology, health care, banks and airlines as
well as by a significant underweighting in the utilities sector which was a
weak part of the market. On the minus side, major positions in relatively weak
groups such as energy, retailing, metals and chemicals penalized performance.
Results were also hurt by the Portfolio's exposure to smaller and middle
capitalization stocks as well as by its emphasis on cyclically sensitive
issues.
On an individual stock basis, the Portfolio benefited substantially from the
strong performance exhibited by Adaptec, Cheyenne Software, Smithkline
Beecham, Loews Corporation and Bank of Boston. Results were negatively
affected by positions in Venture Stores, Telefonos de Mexico, IMO Industries,
Delta Woodside and Stone Energy which were poor performers during the year.
PORTFOLIO STRUCTURE
The Portfolio is invested across all economic sectors and capitalization
segments of the market. Within this diversified context, it has a meaningful
representation in stocks characterized by consumer and industrial cyclicality.
This strategy is based on the highly attractive value and earnings momentum
features of these securities in addition to their strong relative performance
prospects if interest rates decline over the next year.
The Portfolio also has a strong emphasis on stocks with low price-earnings and
low price-book value ratios as well as on securities with strong earnings
momentum. With regard to industry structure, the Portfolio has large positions
in airlines, paper, shipping, producer goods, retailing and business machines
and computer software. It has a low representation in utilities, food,
beverages, media, cosmetics, household products and international oils. The
following table lists the ten largest industry positions at the end of the
fiscal year.
3
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
TOP TEN INDUSTRY POSITIONS
OCTOBER 31, 1995
<TABLE>
<S> <C>
Technology........................................................... 17.3%
Multi-Industry....................................................... 8.3%
Retail............................................................... 8.1%
Energy............................................................... 7.2%
Paper & Packaging.................................................... 5.8%
Pharmaceuticals...................................................... 5.5%
Capital Equipment.................................................... 5.2%
Telecommunications................................................... 4.7%
Banks................................................................ 4.6%
Beverages, Food & Tobacco............................................ 4.3%
</TABLE>
As of October 31, 1995, the Portfolio held seventy-four stocks. The top ten
holdings as a percentage of net assets are shown below:
MCKEE DOMESTIC EQUITY PORTFOLIO
TOP TEN STOCK POSITIONS
OCTOBER 31, 1995
<TABLE>
<S> <C>
General Motors........................................................ 3.4%
Willamette Industries................................................. 3.3%
Akzo N.V. ............................................................ 2.7%
Ingersoll-Rand Co. ................................................... 2.5%
Dayton-Hudson Corp. .................................................. 2.4%
AMR Corp. ............................................................ 2.4%
Bowne & Co., Inc. .................................................... 2.2%
Whitman Corp. ........................................................ 2.1%
Philip Morris Cos., Inc. ............................................. 2.0%
Reynolds & Reynolds Co. .............................................. 2.0%
</TABLE>
OUTLOOK
We believe the outlook for the market remains positive but do not expect stock
prices to rise as fast and consistently as they have in the past year. Indeed,
within the context of rising stock prices, we would not be surprised if equity
investors experience at least one or two quarters of negative returns over the
next year. This relatively optimistic market assessment is based on our
expectations for strong corporate profit growth, low inflation and declining
interest rates. In addition, equity valuations are still reasonable at current
market levels.
4
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
The fiscal year ended October 31, 1995 was the first full year of operations
for the McKee International Equity Portfolio which was launched on May 26,
1994. We appreciate the trust you have shown in us and are confident you will
be pleased with your investment in the Portfolio during coming years.
ECONOMIC PERSPECTIVE
Even though economic growth has slowed in some regions of the world, moderate
global expansion is probable over the next year. In Europe, momentum has
weakened somewhat, but growth in countries such as Germany and the United
Kingdom should increase next year while nations such as France and Italy are
likely to show a modest decline. In Japan, growth should resume but at a rate
that will be unsatisfactory to most investors. With the exception of several
Latin American countries, developing nations should continue to experience
rapid expansion, particularly in the Far East where economic growth rates of
6% to 10% should be the rule in 1996.
In this environment of moderate growth, global competition should remain
intense, and inflation should stay low. Indeed, deflation is possible in
Japan, and worldwide inflation rates are expected to remain in the current 2%
to 2.5% range over the next year. Only in some developing economies in the Far
East and Latin America is inflation likely to be a near-term problem.
PERFORMANCE
For the fiscal year ended October 31, 1995, the Portfolio achieved a return of
- -2.69% compared with -0.37% for the Morgan Stanley Capital International
Europe, Australia and Far East Index (EAFE Index).
Results were helped by underweighting Japan, which continued to perform
poorly. In addition, the Portfolio benefited from large weightings in the
Netherlands, Ireland and Finland, all of which performed very well. On the
negative side, results were hurt by positions in Argentina, Mexico and Italy
which generated below-average performance.
On an industry basis, the Portfolio benefited from large positions in
electronics, health care, services and food as well as from low weightings in
poorly performing groups such as transportation, banks and utilities. In
contrast, performance was negatively affected by holdings in certain weaker
industries including metals, automotive and energy.
With regard to stock selection, the Portfolio was helped significantly by
excellent performance from Smithkline Beecham, Teva Pharmaceutical, Nokia,
HSBC Holdings and Westpac Banking. It was hurt by several positions in
underperforming issues including DSG International, Telefonos de Mexico,
Coflexip, Waste Management International and YPF.
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.
5
<PAGE>
This combination of attributes has historically produced strong investment
performance, and we firmly believe it will generate attractive results in
future years.
As of October 31, 1995, the Portfolio was invested in twenty countries with
comparatively large positions in Canada, Korea, Spain, Mexico, China and
Argentina. Relative to the EAFE Index, it is significantly underweighted in
Japan as well as in Switzerland, Malaysia and Sweden. The table below lists
the top ten holdings by country as a percentage of net assets:
MCKEE INTERNATIONAL EQUITY PORTFOLIO
TOP TEN HOLDINGS BY COUNTRY
OCTOBER 31, 1995
<TABLE>
<S> <C>
Japan................................................................ 21.7%
United Kingdom....................................................... 15.2%
Hong Kong............................................................ 7.2%
Canada............................................................... 6.7%
France............................................................... 6.6%
Germany.............................................................. 5.0%
Korea................................................................ 4.6%
Spain................................................................ 4.5%
Netherlands.......................................................... 4.3%
Switzerland.......................................................... 3.2%
</TABLE>
While structured to benefit from continued moderate growth in the global
economy, the Portfolio remains broadly diversified. It is invested in all
economic sectors and major industries with the largest positions in energy,
metals, chemicals, electronics, food, health care and services. Underweighted
industries include utilities, building materials, construction, banks and
insurance.
As of October 31, 1995, the Portfolio held the stocks of in fifty-three
companies. The ten largest holdings as a percentage of net assets are shown
below:
MCKEE INTERNATIONAL EQUITY PORTFOLIO
TOP TEN STOCK POSITIONS
OCTOBER 31, 1995
<TABLE>
<CAPTION>
COMPANY COUNTRY
------- -------
<C> <S> <C>
Nestle S.A. Switzerland.................................. 3.2%
Waste Management Int'l. United Kingdom............................... 3.1%
Smithkline Beecham United Kingdom............................... 3.0%
Bayer AG Germany...................................... 2.7%
Repsol S.A. Spain........................................ 2.6%
Seagram Co., Ltd. Canada....................................... 2.5%
Elan Corp. Ireland...................................... 2.5%
LG Electronics Korea........................................ 2.5%
Huaneng Power China........................................ 2.5%
YPF S.A. Argentina.................................... 2.4%
</TABLE>
6
<PAGE>
OUTLOOK
During the year ahead, most world economies should continue to experience
moderate growth and lower inflation than in past economic cycles. Corporate
profits, cash flows, and dividends are likely to remain strong. With global
markets generally undervalued relative to these attractive underlying
fundamentals, we believe the outlook for international equities is highly
positive.
Sincerely yours,
C.S. McKee & Co., Inc.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Total return 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE
McKEE U.S. GOVERNMENT PORTFOLIO
AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX.
-----------------------------------
CUMULATIVE TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995**
-----------------------------------
SINCE 3/2/95*
-----------------------------------
9.96%**
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Portfolio+ Index+
<S> <C> <C>
3/2/95* 100,000 100,000
10/31/95 109,956 110,860
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
Definition of the Comparative Index
-----------------------------------
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 can not invest in an unmanaged index.
8
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE
McKEE DOMESTIC EQUITY PORTFOLIO
AND THE STANDARD & POOR'S 500 INDEX (S&P 500).
-----------------------------------
CUMULATIVE TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
SINCE 3/2/95*
-----------------------------------
15.13%**
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Portfolio+ Index+
<S> <C> <C>
3/2/95* 100,000 100,000
10/31/95 115,130 121,280
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
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.
Please note that one can not invest in an unmanaged index.
9
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE
McKEE INTERNATIONAL EQUITY PORTFOLIO
AND THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX.
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 5/26/94*
-----------------------------------
(2.69)% 1.05%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Portfolio+ Index+
<S> <C> <C>
5/26/94* 100,000 100,000
10/31/94 104,310 104,890
10/31/95 101,502 104,502
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
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.
Please note that one can not invest in an unmanaged index.
10
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY SECURITIES (76.8%)
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
7.225%, 5/17/05.................................................. $ 15 $ 15
7.65%, 5/10/05................................................... 10 11
7.974%, 4/20/05.................................................. 60 62
------
88
- --------------------------------------------------------------------------------
Federal National Mortgage Association
7.92%, 3/30/05................................................... 30 32
8.00%, 4/13/05................................................... 70 73
8.01%, 4/1/05.................................................... 30 31
------
136
- --------------------------------------------------------------------------------
U.S. Treasury Bonds
7.875%, 2/15/21.................................................. 450 530
14.00%, 11/15/11................................................. 205 332
------
862
- --------------------------------------------------------------------------------
U.S. Treasury Notes
6.125%, 7/31/96.................................................. 125 125
6.25%, 2/15/03................................................... 655 667
6.375%, 8/15/02.................................................. 500 513
7.125%, 9/30/99.................................................. 700 732
7.25%, 8/15/04................................................... 655 709
7.50%, 1/31/96................................................... 10 10
7.50%, 2/15/05................................................... 740 816
------
3,572
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES (COST $4,566)........... 4,658
- --------------------------------------------------------------------------------
MORTGAGE OBLIGATIONS (4.4%)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES (4.4%)
Federal National Mortgage Association Series:
93-87 H, CMO, 6.50%, 10/25/21................................... 13 13
93-136 PD, CMO, PAC 6.25%, 11/25/21............................. 10 9
93-139 H, CMO, PAC 6.75%, 12/25/21.............................. 9 9
Federal Home Loan Mortgage Corp.
Gold Pool #C80328, 7.50%, 7/1/25................................ 233 236
- --------------------------------------------------------------------------------
TOTAL MORTGAGE OBLIGATIONS (COST $253)............................ 267
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES (0.8%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (0.8%)
Advanta Mortgage Loan Trust, Series 94-1 A1 6.30%, 7/25/25 (COST
$51)........................................................... $ 53 $ 51
- -------------------------------------------------------------------------------
CORPORATE BONDS (5.4%)
- -------------------------------------------------------------------------------
BANKS (0.1%)
NationsBank Corp. 5.125%, 9/15/98............................... 5 5
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (0.5%)
Dean Witter Discover & Co. 6.00%, 3/1/98........................ 15 15
Lehman Brothers Holdings 7.625%, 6/15/97........................ 15 15
------
30
- -------------------------------------------------------------------------------
INSURANCE (0.2%)
Travelers, Inc. 5.75%, 4/15/98.................................. 15 15
- -------------------------------------------------------------------------------
RETAIL (0.5%)
J.C. Penny & Co. 5.375%, 11/15/98............................... 15 14
Walmart Stores 5.50%, 9/15/97................................... 15 15
------
29
- -------------------------------------------------------------------------------
UTILITIES (4.1%)
Pacific Bell Telephone 6.25%, 3/1/05............................ 130 128
Pacific Gas & Electric 5.875%, 10/1/05.......................... 130 122
------
250
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $326)................................ 329
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (11.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (11.6%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $703, collateralized by $621 U.S.
Treasury Bonds, 7.50%, due 11/15/16, valued at $718 (COST
$703).......................................................... 703 703
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.0%) (COST $5,899).......................... 6,008
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (1.0%)
- -------------------------------------------------------------------------------
Cash............................................................. $ 2
Interest Receivable.............................................. 74
Receivable due from Investment Adviser........................... 3
Other Assets..................................................... 2
Payable for Audit Fees........................................... (12)
Payable for Administrative Fees.................................. (4)
Payable for Directors' Fees...................................... (1)
Other Liabilities................................................ (3)
------
61
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 564,078 outstanding $.001 par value Institutional
Class shares
(authorized 25,000,000 shares).................................. $6,069
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.......... $10.76
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
CMO--Collateralized Mortgage Obligation
PAC--Planned Amortization Class
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.1%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (3.4%)
General Motors Corp............................................. 5,000 $ 219
- --------------------------------------------------------------------------------
BANKS (4.6%)
Bank of Boston Corp............................................. 1,500 67
First Commerce Corp............................................. 1,700 52
First Union Corp................................................ 1,200 60
Mellon Bank Corp. .............................................. 2,300 115
------
294
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (4.3%)
Philip Morris Cos., Inc......................................... 1,550 131
Pioneer Hi-Bred International, Inc.............................. 1,800 89
*Ryan's Family Steak House, Inc.................................. 7,300 57
------
277
- --------------------------------------------------------------------------------
CAPITAL CONSTRUCTION (1.3%)
*Owens-Corning Fiberglass Corp................................... 2,000 85
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (5.2%)
Aviall, Inc..................................................... 4,800 40
*IMO Industries, Inc. ........................................... 6,400 38
*INDRESCO, Inc................................................... 5,500 95
Ingersoll-Rand Co. ............................................. 4,500 159
------
332
- --------------------------------------------------------------------------------
CHEMICALS (2.7%)
Akzo N.V., ADR.................................................. 3,100 176
- --------------------------------------------------------------------------------
ENERGY (7.2%)
Mitchell Energy & Development Corp., Class B.................... 5,500 90
Occidental Petroleum Corp....................................... 2,100 45
Repsol S.A. ADR................................................. 1,700 50
*Stone Energy Corp............................................... 4,600 52
Ultramar Corp................................................... 5,200 127
YPF S.A. ADR, Class D........................................... 5,600 96
------
460
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE (0.3%)
Walt Disney Co.................................................. 300 $ 17
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (1.7%)
AT&T Capital Corp............................................... 200 8
Lehman Brothers Holdings........................................ 4,800 104
------
112
- --------------------------------------------------------------------------------
HEALTH CARE (3.2%)
*Foundation Health Corp. ........................................ 2,100 89
*Humana, Inc. ................................................... 5,400 114
------
203
- --------------------------------------------------------------------------------
INSURANCE (1.4%)
CIGNA Corp...................................................... 900 89
- --------------------------------------------------------------------------------
MANUFACTURING (1.9%)
Ampco-Pittsburgh Corp........................................... 4,000 40
*Whittaker Corp.................................................. 4,300 85
------
125
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (8.3%)
GATX Corp....................................................... 2,400 114
ITT Corp........................................................ 700 86
Loews Corp...................................................... 800 117
Textron, Inc.................................................... 1,200 82
Whitman Corp. .................................................. 6,200 132
------
531
- --------------------------------------------------------------------------------
PAPER & PACKAGING (5.8%)
Rayonier, Inc................................................... 2,012 76
*Shorewood Packaging Corp. ...................................... 5,000 82
Willamette Industries........................................... 3,700 215
------
373
- --------------------------------------------------------------------------------
PHARMACEUTICALS (5.5%)
American Home Products Corp. ................................... 1,300 115
Becton, Dickinson & Co.......................................... 1,200 78
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
PHARMACEUTICALS--(CONTINUED)
Mylan Laboratories, Inc......................................... 3,700 $ 71
Smithkline Beecham plc ADR...................................... 1,700 88
------
352
- --------------------------------------------------------------------------------
RETAIL (8.1%)
American Stores Co.............................................. 4,200 125
Dayton-Hudson Corp.............................................. 2,250 155
Dillard Department Stores....................................... 2,900 79
Gap, Inc........................................................ 2,150 85
Venture Stores, Inc............................................. 3,700 14
*Waban, Inc. .................................................... 4,200 65
------
523
- --------------------------------------------------------------------------------
SERVICES (2.2%)
Bowne & Co., Inc. .............................................. 7,500 140
- --------------------------------------------------------------------------------
TECHNOLOGY (17.3%)
*Adaptec, Inc. .................................................. 2,700 120
Advanced Micro Devices, Inc..................................... 3,500 83
*Avid Technology, Inc. .......................................... 1,300 56
*Black Box Corp. ................................................ 1,400 23
*Cheyenne Software, Inc.......................................... 2,200 46
*Computer Network Technology Corp. .............................. 6,600 43
*Conner Peripherals, Inc......................................... 2,000 36
*FTP Software, Inc. ............................................. 2,100 57
Intelligent Electronics, Inc.................................... 9,300 71
*Planar Systems, Inc. ........................................... 4,700 80
*Policy Management Systems....................................... 1,100 52
*Quantum Corp. .................................................. 1,300 22
Reynolds & Reynolds Co., Class A................................ 3,600 128
*Sterling Software, Inc. ........................................ 1,700 78
*Systems & Computer Technology Corp. ............................ 7,100 127
Systems Software Associates, Inc. .............................. 1,900 59
*3D Systems Corp................................................. 2,000 34
------
1,115
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (4.7%)
Bell Atlantic Corp. ............................................ 1,100 70
NYNEX Corp...................................................... 2,200 103
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS--(CONTINUED)
Sprint Corp................................................... 2,800 $ 108
Telefonos de Mexico S.A. ADR, Class L......................... 800 22
------
303
- ------------------------------------------------------------------------------
TEXTILES & APPAREL (0.4%)
Delta Woodside Industries, Inc. .............................. 4,100 27
- ------------------------------------------------------------------------------
TRANSPORTATION (4.1%)
American President Cos. Ltd. ................................. 4,800 116
*AMR Corp. .................................................... 2,300 152
------
268
- ------------------------------------------------------------------------------
UTILITIES (3.5%)
General Public Utilities Corp................................. 2,700 84
Illinova Corp. ............................................... 2,600 74
Southern New England Telecommunications Corp. ................ 1,800 65
------
223
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $6,096).............................. 6,244
- ------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.4%)
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.4%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95 to be repurchased at $217, collateralized by $192
U.S. Treasury Bonds, 7.50%, due 11/15/16, valued at $222
(COST $217).................................................. $ 217 217
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%) (COST $6,313)....................... 6,461
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (-0.5%)
- -------------------------------------------------------------------------------
Cash.............................................................. $ 7
Dividends Receivable.............................................. 5
Receivable due from Investment Adviser............................ 3
Other Assets...................................................... 2
Payable for Investments Purchased................................. (30)
Payable for Administrative Fees................................... (4)
Payable for Directors' Fees....................................... (1)
Other Liabilities................................................. (16)
------
(34)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 561,769 outstanding $.001 par value Institutional
Class shares
(authorized 25,000,000 shares)................................... $6,427
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE........... $11.44
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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.
18
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.3%)
- -------------------------------------------------------------------------------
ARGENTINA (2.4%)
YPF S.A. ADR.................................................. 105,000 $ 1,798
- -------------------------------------------------------------------------------
AUSTRALIA (2.3%)
Westpac Banking Corp. ........................................ 312,000 1,281
Westpac Banking Corp. ADR..................................... 23,100 473
-------
1,754
- -------------------------------------------------------------------------------
CANADA (6.7%)
Alcan Aluminium Ltd. ......................................... 33,700 1,072
Canadian Imperial Bank of Commerce............................ 38,240 1,038
Seagram Co., Ltd. ............................................ 51,830 1,886
West Coast Energy, Inc. ...................................... 25,000 376
West Coast Energy, Inc. ADR................................... 43,400 640
-------
5,012
- -------------------------------------------------------------------------------
CHINA (2.5%)
Huaneng Power International, Inc. ADR......................... 111,000 1,845
- -------------------------------------------------------------------------------
FINLAND (1.6%)
Nokia AB...................................................... 10,000 584
Nokia AB, Series A............................................ 11,100 636
-------
1,220
- -------------------------------------------------------------------------------
FRANCE (6.6%)
Alcatel Alsthom............................................... 13,015 1,112
Alcatel Alsthom ADR........................................... 18,814 317
Coflexip...................................................... 23,000 652
Coflexip ADR.................................................. 44,334 604
PSA Peugeot S.A............................................... 11,665 1,520
Total S.A., Class B........................................... 11,850 732
-------
4,937
- -------------------------------------------------------------------------------
GERMANY (5.0%)
Bayer AG...................................................... 4,765 1,260
Bayer AG ADR.................................................. 29,000 771
Commerzbank AG................................................ 4,000 925
Commerzbank AG ADR............................................ 16,600 768
-------
3,724
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
HONG KONG (7.2%)
Cathay Pacific Airway Ltd................................... 835,000 $ 1,231
Cathay Pacific Airways Ltd. ADR............................. 57,300 422
*DSG International Ltd....................................... 64,116 681
Hong Kong Electric Holdings................................. 240,000 817
Hong Kong Electric Holdings ADR............................. 197,800 673
HSBC Holdings plc........................................... 108,000 1,572
-------
5,396
- --------------------------------------------------------------------------------
IRELAND (2.5%)
*Elan Corp. plc ADR.......................................... 46,410 1,862
- --------------------------------------------------------------------------------
ISRAEL (2.0%)
Teva Pharmaceutical Industries Ltd. ADR..................... 38,590 1,515
- --------------------------------------------------------------------------------
ITALY (1.9%)
*Montedison SPA.............................................. 1,717,000 1,183
*Montedison SPA ADR.......................................... 33,400 230
-------
1,413
- --------------------------------------------------------------------------------
JAPAN (21.7%)
Amada Co., Ltd. ............................................ 78,000 778
Amada Co., Ltd. ADR......................................... 16,150 644
Credit Saison Co. .......................................... 79,500 1,671
Hitachi Ltd. ............................................... 108,000 1,109
Hitachi Ltd. ADR............................................ 6,000 628
Ito-Yokado Co., Ltd. ....................................... 17,000 929
Ito-Yokado Co., Ltd. ADR.................................... 3,500 756
Kao Corp. .................................................. 34,000 412
Kao Corp. ADR............................................... 4,778 580
Marui Co., Ltd. ............................................ 45,000 779
Marui Co., Ltd. ADR......................................... 19,250 667
Mitsubishi Electric Corp. .................................. 55,000 411
Mitsubishi Electric Corp. ADR............................... 11,100 829
Mitsui & Co., Ltd. ADR...................................... 3,700 584
Mitsui Fire & Marine Insurance.............................. 82,000 493
Mitsui Fire & Marine Insurance ADR.......................... 7,930 477
Nissan Motor Co., Ltd. ..................................... 52,000 351
Nissan Motor Co., Ltd. ADR.................................. 27,400 366
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Nomura Securities Co., Ltd. ................................... 12,000 $ 219
Nomura Securities Co., Ltd. ADR................................ 3,100 567
Sanwa Bank Ltd. ............................................... 13,000 221
Sanwa Bank Ltd. ADR............................................ 3,000 511
Sony Corp. ADR................................................. 14,720 673
Toyota Motor Corp. ............................................ 51,000 947
Toyota Motor Corp. ADR......................................... 17,184 636
-------
16,238
- --------------------------------------------------------------------------------
KOREA (4.6%)
L.G. Electronics Co. .......................................... 40,936 1,848
Pohang Iron & Steel Co., Ltd. ................................. 13,700 1,431
Pohang Iron & Steel Co., Ltd. ADR.............................. 6,000 155
-------
3,434
- --------------------------------------------------------------------------------
MEXICO (3.0%)
Grupo Industrial Durango ADR................................... 155,000 1,240
Telefonos de Mexico S.A. ADR, Class L.......................... 36,000 990
-------
2,230
- --------------------------------------------------------------------------------
NETHERLANDS (4.3%)
Akzo Nobel N.V. ............................................... 15,775 1,797
Philips Electronics N.V. ...................................... 38,500 1,489
-------
3,286
- --------------------------------------------------------------------------------
NORWAY (0.9%)
Norsk Hydro A.S. ADR........................................... 17,100 684
- --------------------------------------------------------------------------------
PORTUGAL (1.2%)
Banco Comercial Portuguese S.A. ............................... 34,900 474
Banco Comercial Portuguese S.A. ADR............................ 33,460 452
-------
926
- --------------------------------------------------------------------------------
SPAIN (4.5%)
Banco Santander S.A. .......................................... 20,400 890
Banco Santander S.A. ADR....................................... 12,900 556
Repsol S.A. ................................................... 64,230 1,920
-------
3,366
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SWITZERLAND (3.2%)
Nestle S.A. (Registered)..................................... 1,555 $ 1,631
Nestle S.A. ADR.............................................. 14,100 738
-------
2,369
- -------------------------------------------------------------------------------
UNITED KINGDOM (15.2%)
British Steel plc............................................ 560,800 1,449
Carlton Communications plc................................... 68,315 1,041
Carlton Communications plc ADR............................... 22,500 686
Grand Metropolitan plc....................................... 156,270 1,082
Grand Metropolitan plc ADR................................... 16,400 451
HSBC Holdings plc............................................ 23,100 344
RTZ Corp. plc (Registered)................................... 79,780 1,103
RTZ Corp. plc ADR............................................ 11,000 619
Smithkline Beecham plc ADR................................... 43,790 2,272
*Waste Management International plc........................... 417,500 2,118
*Waste Management International plc ADR....................... 21,200 215
-------
11,380
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $74,381)............................ 74,389
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.6%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95 to be repurchased at $450, collateralized by $397
U.S. Treasury Bonds, 7.50%, due 11/15/16, valued at $459
(COST $450)................................................. $ 450 450
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%) (COST $74,831)...................... 74,839
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (0.1%)
- -------------------------------------------------------------------------------
Cash............................................................ $ 2
Dividends Receivable............................................ 73
Foreign Withholding Tax Reclaim Receivable...................... 45
Other Assets.................................................... 16
Payable for Investment Advisory Fees............................ (45)
Audit Fees Payable.............................................. (13)
Payable for Administrative Fees................................. (8)
Payable for Directors' Fees..................................... (1)
Other Liabilities............................................... (15)
-------
54
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 7,463,894 outstanding $.001 par value
Institutional Class shares (authorized 25,000,000 shares)...... $74,893
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE......... $ 10.03
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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.
23
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995 (Unaudited)
At October 31, 1995, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Automotive...................................................... 3.4% $ 2,522
Banks........................................................... 5.8 4,364
Basic Resources................................................. 8.9 6,638
Beverages, Food, & Tobacco...................................... 3.8 2,850
Broadcasting & Publishing....................................... 1.0 686
Capital Equipment............................................... 12.2 9,116
Chemicals....................................................... 3.4 2,569
Consumer Durables............................................... 11.4 8,564
Electronics..................................................... 2.7 1,998
Energy.......................................................... 10.9 8,172
Financial Services.............................................. 11.2 8,377
Health Care..................................................... 8.4 6,330
Home Furnishings & Appliances................................... 0.9 673
Insurance....................................................... 0.7 493
Metals.......................................................... 2.2 1,691
Multi-Industry.................................................. 1.9 1,413
Repurchase Agreement............................................ 0.6 450
Retail.......................................................... 1.9 1,422
Services........................................................ 2.0 1,513
Telecommunications.............................................. 2.7 2,031
Transportation.................................................. 2.2 1,654
Utilities....................................................... 1.7 1,313
- -------------------------------------------------------------------------------
Total Investments............................................. 99.9 74,839
Other Assets and Liabilities.................................... 0.1 54
---- -------
Net Assets.................................................... 100% $74,893
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
MCKEE PORTFOLIOS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
U.S. GOVERNMENT DOMESTIC EQUITY INTERNATIONAL
PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
MARCH 2, 1995** MARCH 2, 1995** YEAR ENDED
TO OCTOBER 31, TO OCTOBER 31, OCTOBER 31,
(In Thousands) 1995 1995 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................. $ -- $ 41 $1,336
Interest.................. 126 10 132
Less: Foreign Taxes With-
held..................... -- -- (98)
- ----------------------------------------------------------------------------------
Total Income............. 126 51 1,370
- ----------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--
Note B
Basic Fees............... $ 9 $ 15 453
Less: Fees Waived........ (9) -- (15) -- --
------- -------
Administrative Fees--Note
C........................ 20 21 82
Custodian Fees............ 3 6 52
Audit Fees................ 13 13 13
Legal Fees................ 1 -- 4
Directors' Fees--Note F... 2 2 4
Registration and Filing
Fees..................... 2 2 5
Printing Fees............. 6 6 7
Other Expenses............ 1 1 10
Expenses Assumed by the
Adviser--Note B.......... (30) (25) --
- ----------------------------------------------------------------------------------
Total Expenses........... 18 26 630
Expense Offset--Note A.... (1) (2) (8)
- ----------------------------------------------------------------------------------
Net Expenses............. 17 24 622
- ----------------------------------------------------------------------------------
NET INVESTMENT INCOME...... 109 27 748
- ----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
ON:
Investments............... 74 161 1,690
Foreign Exchange Transac-
tions.................... -- -- (115)
- ----------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON
INVESTMENTS AND FOREIGN
EXCHANGE TRANSACTIONS..... 74 161 1,575
- ----------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION
ON:
Investments............... 109 148 (1,165)
Foreign Exchange Transla-
tion..................... -- -- (1)
- ----------------------------------------------------------------------------------
TOTAL NET CHANGE IN
UNREALIZED
APPRECIATION/DEPRECIATION. 109 148 (1,166)
- ----------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND
FOREIGN EXCHANGE
TRANSACTIONS.............. 183 309 409
- ----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. $ 292 $ 336 $1,157
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
** Commenced Operations.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MARCH 2, 1995**
TO
(In Thousands) OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income........................................ $ 109
Net Realized Gain............................................ 74
Net Change in Unrealized Appreciation........................ 109
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations........ 292
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income........................................ (81)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.............................................. 6,209
--In Lieu of Cash Distributions............................ 79
Redeemed..................................................... (430)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions................ 5,858
- --------------------------------------------------------------------------------
Total Increase............................................... 6,069
Net Assets:
Beginning of Period.......................................... --
- --------------------------------------------------------------------------------
End of Period (2)............................................ $6,069
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued................................................ 597
In Lieu of Cash Distributions................................ 8
Shares Redeemed.............................................. (41)
- --------------------------------------------------------------------------------
564
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital.............................................. $5,858
Undistributed Net Investment Income.......................... 28
Accumulated Net Realized Gain................................ 74
Unrealized Appreciation...................................... 109
- --------------------------------------------------------------------------------
$6,069
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MARCH 2, 1995**
TO
(In Thousands) OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income........................................ $ 27
Net Realized Gain............................................ 161
Net Change in Unrealized Appreciation........................ 148
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations........ 336
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income........................................ (24)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.............................................. 6,181
--In Lieu of Cash Distributions............................ 24
Redeemed..................................................... (90)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions................ 6,115
- --------------------------------------------------------------------------------
Total Increase............................................... 6,427
Net Assets:
Beginning of Period.......................................... --
- --------------------------------------------------------------------------------
End of Period (2)............................................ $6,427
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued................................................ 568
In Lieu of Cash Distributions................................ 2
Shares Redeemed.............................................. (8)
------
562
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital.............................................. $6,115
Undistributed Net Investment Income.......................... 3
Accumulated Net Realized Gain................................ 161
Unrealized Appreciation...................................... 148
------
$6,427
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
** Commencement of Operations
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MAY 26,
1994** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- ----------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net Investment Income...... $ 128 $ 748
Net Realized Gain (Loss)... (71) 1,575
Net Change in Unrealized
Appreciation/Depreciation. 1,174 (1,166)
- ----------------------------------------------------
Net Increase in Net Assets
Resulting from Opera-
tions.................... 1,231 1,157
- ----------------------------------------------------
DISTRIBUTIONS:
Net Investment Income...... (83) (610)
- ----------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
(1)
Issued--Regular............ 36,026 36,598
--In Lieu of Cash Dis-
tributions.............. 83 523
Redeemed................... -- (32)
- ----------------------------------------------------
Net Increase from Capital
Share Transactions....... 36,109 37,089
- ----------------------------------------------------
Total Increase............. 37,257 37,636
Net Assets:
Beginning of Period........ -- 37,257
- ----------------------------------------------------
End of Period (2).......... $37,257 $74,893
- ----------------------------------------------------
- ----------------------------------------------------
(1)Shares Issued and Re-
deemed:
Shares Issued.............. 3,576 3,831
In Lieu of Cash Distribu-
tions..................... 8 52
Shares Redeemed............ -- (3)
------- -------
3,584 3,880
- ----------------------------------------------------
- ----------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital............ $36,109 $73,198
Undistributed Net Invest-
ment Income............... 17 40
Accumulated Net Realized
Gain (Loss)............... (43) 1,647
Unrealized Appreciation.... 1,174 8
------- -------
$37,257 $74,893
- ----------------------------------------------------
- ----------------------------------------------------
</TABLE>
** Commencement of Operations.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
MCKEE U.S. GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
MARCH 2, 1995**
TO
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................... $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................................... 0.28+
Net Realized and Unrealized Gain.............................. 0.71
- --------------------------------------------------------------------------------
Total From Investment Operations............................. 0.99
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income......................................... (0.23)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................................. $10.76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN................................................... 9.96%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).......................... $6,069
Ratio of Expenses to Average Net Assets+....................... 0.89%*#
Ratio of Net Investment Income to Average Net Assets+.......... 5.39%*
Portfolio Turnover Rate........................................ 104%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntary waived fees and expenses assumed by the Adviser of $0.10
per share for the period ended October 31, 1995.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the period indicated.
# For the period ended October 31, 1995, 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%*.
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
MCKEE DOMESTIC EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
MARCH 2, 1995**
TO
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................... $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income......................................... 0.08+
Net Realized and Unrealized Gain ............................. 1.43
- --------------------------------------------------------------------------------
Total From Investment Operations............................. 1.51
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income......................................... (0.07)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................................. $11.44
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN................................................... 15.13%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).......................... $6,427
Ratio of Expenses to Average Net Assets+....................... 1.08%*#
Ratio of Net Investment Income to Average Net Assets+.......... 1.12%*
Portfolio Turnover Rate........................................ 27%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntary waived fees and expenses assumed by the Adviser of $0.11
per share for the period ended October 31, 1995.
++ Total return would have been lower had certain fees not been waived and
expenses assumed by the Adviser during the period indicated.
# For the period ended October 31, 1995, 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.
30
<PAGE>
MCKEE INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
MAY 26,
1994** TO YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $ 10.00 $ 10.40
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.................................. 0.04 0.11
Net Realized and Unrealized Gain (Loss) ............... 0.39 (0.39)+
- --------------------------------------------------------------------------------
Total From Investment Operations...................... 0.43 (0.28)
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.................................. (0.03) (0.09)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......................... $ 10.40 $ 10.03
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN............................................ 4.31% (2.69)%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)................... $37,257 $74,893
Ratio of Expenses to Average Net Assets................. 1.12%* 0.97%#
Ratio of Net Investment Income to Average Net Asssets... 0.97%* 1.16%
Portfolio Turnover Rate................................. 11% 7%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
# For the year ended October 31, 1995, 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%.
+ 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.
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds
Trust, formerly known as The Regis Fund II, (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 October 31, 1995, the
UAM Funds were comprised of thirty-four 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.
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
mean of the bid and asked prices 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 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 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. In addition, withholding taxes on foreign securities
have been provided for in accordance with the McKee International Equity
Portfolio's understanding of the applicable country's tax rules and rates.
Undistributed net investment income and accumulated net realized gain
(loss) have been adjusted for the McKee International Equity Portfolio for
permanent book-tax differences. Reclassifications arose principally from
differing book and tax treatments for foreign currency transactions.
At October 31, 1995, cost and unrealized appreciation (depreciation) of
investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
COST APPRECIATION DEPRECIATION NET
MCKEE PORTFOLIOS (000) (000) (000) (000)
---------------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C>
U.S. Government..................... $ 5,899 $ 109 $ -- $109
Domestic Equity..................... 6,314 410 (263) 147
International Equity................ 74,847 5,899 (5,907) (8)
</TABLE>
32
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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 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 forward 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 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 gains or losses. The
McKee International Equity Portfolio recognizes 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. DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios will normally distribute
substantially all of their net investment income to shareholders in the
form of quarterly dividends. 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.
33
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 determined 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 adjusted
to include expense offsets for custodian balance credits.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income 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 the Portfolio's average daily net assets for the McKee U.S.
Government, Domestic Equity and International Equity Portfolios, respectively.
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 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. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition,
each Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor")
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.) 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.
34
<PAGE>
MCKEE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
E. PURCHASES AND SALES. During the year ended October 31, 1995, 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............................................. $ 394 $ 15
Domestic Equity............................................. 6,961 1,056
International Equity........................................ 42,033 4,605
</TABLE>
Purchases and sales of long-term U.S. Government and agency securities were
$7,454,000 and $2,713,000, respectively, for the McKee U.S. Government
Portfolio. There were no long-term U.S. Government and agency securities
purchases and sales 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 portfolios of the UAM Funds and AEW, plus a quarterly
retainer of $150 for each active portfolio of the UAM Funds and reimbursement
of expenses incurred in attending Board meetings.
G. LINE OF CREDIT. The McKee 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 October 31, 1995, there were no borrowings under the agreement.
H. OTHER. At October 31, 1995, 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....................................... 4 68.2%
Domestic Equity....................................... 4 69.5
International Equity.................................. 2 32.0
</TABLE>
At October 31, 1995, the net assets of the McKee International Equity
Portfolio were substantially comprised of foreign denominated equity
securities. 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.
35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of UAM Funds, Inc. and the Shareholders of
McKee U.S. Government Portfolio
McKee Domestic Equity Portfolio
McKee International Equity Portfolio
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
McKee U.S. Government Portfolio, McKee Domestic Equity Portfolio, and McKee
International Equity Portfolio (the "Portfolios"), Portfolios of the UAM
Funds, Inc., at October 31, 1995, and the results of each of their operations,
the changes in each of their net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Portfolios' management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
Price Waterhouse llp
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):
Foreign taxes accrued during the fiscal year ended October 31, 1995 for the
McKee International Equity Portfolio amounting to $98,400 are expected to be
passed through to the shareholders as foreign tax credits on Form 1099
Dividend for the year ending December 31, 1995, which shareholders of the
International Equity Portfolio will receive in late January 1996.
For the year ended October 31, 1995, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
3% for the McKee International Equity Portfolio.
36
<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 Executive Director
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
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholder:
The following report provides a detailed description of the securities held
and statement of operations for the Cooke & Bieler Equity Portfolio for the
fiscal year ended October 31, 1995.
For the most recent fiscal year ended October 31, 1995, the Cooke & Bieler
Equity Portfolio underperformed its Benchmark Index, the S&P 500 Index. Over
this period, the Portfolio appreciated 22.28%, which in absolute terms is
quite high given the low level of inflation, while the S&P 500 Index earned
26.41% for the same time period.
Over the past twelve months, returns on common stocks have been
exceptionally generous. During periods of rapidly rising financial markets, it
is not unusual for our "high quality/low risk" philosophy to underperform.
Although we are certainly disappointed with the relative results, they are not
altogether inconsistent with our philosophy.
At this juncture, a cautionary outlook is warranted. Yields on common stocks
are at multi-decade lows and investor enthusiasm is quite high. Any negative
revisions to the benign inflation outlook or earnings outlook could be met
with disappointment. This disappointment could potentially compromise some of
the generous returns achieved over this recent period. It is our goal to
protect the Portfolio's principal should the U.S. equity market correct. We
will do this by adhering to our discipline of only investing in the highest
quality companies and making sure that we pay reasonable prices for these
securities.
The Cooke & Bieler Equity Portfolio remains invested in a select number of
companies which in the aggregate have high return on equity, strong balance
sheets and consistency and predictability in the growth of earnings and
dividends. We remain confident that over the long term, this value approach to
investing may produce better than market returns with less than market risk.
Sincerely,
/s/ Peter A. Thompson
Peter A. Thompson
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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $250,000 PURCHASE IN THE
C & B EQUITY PORTFOLIO AND THE STANDARD & POOR'S 500 INDEX (S & P 500).
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
---------------------------------------
1 YEAR 5 YEAR SINCE 5/15/90*
---------------------------------------
22.28% 15.26% 12.12%**
---------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
5/15/90* 10/31/90 10/31/91 10/31/92 10/31/93 10/31/94 10/31/95
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
C & B EQUITY PORTFOLIO+ 250,000 243,455 317,708 351,753 364,963 382,000 467,110
S & P 500 INDEX+ 250,000 230,000 275,000 300,000 359,575 373,450 472,078
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return reflects expenses waived by the Adviser. Without such waiver,
total return would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities in
the index.
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.
Please note that one can not invest in an unmanaged index.
2
<PAGE>
C & B EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.5%)
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE (7.0%)
Boeing Co..................................................... 112,000 $ 7,350
Raytheon Co................................................... 226,000 9,859
--------
17,209
- --------------------------------------------------------------------------------
AUTOMOTIVE (5.4%)
Cooper Tire & Rubber Co....................................... 90,000 2,081
Eaton Corp. .................................................. 53,000 2,716
Genuine Parts Co. ............................................ 212,100 8,405
--------
13,202
- --------------------------------------------------------------------------------
BANKS (1.1%)
Wachovia Corp................................................. 63,300 2,793
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (5.2%)
McCormick & Co., Inc. ........................................ 166,300 4,116
Philip Morris Cos., Inc. ..................................... 102,300 8,645
--------
12,761
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (9.5%)
American Greetings Corp., Class A............................. 170,500 5,371
Dun & Bradstreet Corp. ....................................... 113,900 6,806
McGraw-Hill Cos., Inc. ....................................... 12,000 982
Readers Digest Association, Inc., Class A (Non-Voting)........ 202,000 10,150
--------
23,309
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (6.3%)
Cooper Industries, Inc. ...................................... 156,500 5,282
Dover Corp. .................................................. 255,300 10,084
--------
15,366
- --------------------------------------------------------------------------------
CHEMICALS (2.4%)
Lubrizol Corp. ............................................... 206,900 5,948
- --------------------------------------------------------------------------------
CONSTRUCTION (3.7%)
Sherwin-Williams Co........................................... 239,900 9,026
- --------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER DURABLES (7.5%)
Avery Dennison Corp. ......................................... 77,100 $ 3,450
Corning, Inc. ................................................ 278,900 7,286
Service Corp. International................................... 195,900 7,861
--------
18,597
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (4.2%)
Avon Products, Inc. .......................................... 91,700 6,522
Hasbro, Inc. ................................................. 125,700 3,834
--------
10,356
- --------------------------------------------------------------------------------
ELECTRONICS (0.7%)
Grainger (W.W.) Inc. ......................................... 29,200 1,825
- --------------------------------------------------------------------------------
ENERGY (10.7%)
Burlington Resources, Inc. ................................... 155,100 5,584
Exxon Corp. .................................................. 142,100 10,853
Royal Dutch Petroleum Co. .................................... 80,400 9,879
--------
26,316
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (13.0%)
EXEL Ltd. .................................................... 97,800 5,232
Hartford Steam Boiler Inspection & Insurance Co. ............. 20,800 970
Marsh & McLennan Cos., Inc. .................................. 140,500 11,504
MBIA, Inc. ................................................... 76,500 5,326
State Street Boston Corp. .................................... 226,600 8,809
--------
31,841
- --------------------------------------------------------------------------------
HEALTH CARE (1.5%)
Becton, Dickinson & Co. ...................................... 58,200 3,783
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (2.5%)
Whitman Corp. ................................................ 283,100 6,016
- --------------------------------------------------------------------------------
PAPER & PACKAGING (4.0%)
Union Camp Corp. ............................................. 194,500 9,895
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
C & B EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
PHARMACEUTICALS (9.8%)
Bristol-Myers Squibb Co..................................... 108,700 $ 8,289
Merck & Co., Inc. .......................................... 94,700 5,445
Pfizer, Inc. ............................................... 25,000 1,434
Schering-Plough Corp. ...................................... 165,500 8,875
--------
24,043
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $193,963).......................... 232,286
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (5.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.4%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $13,335 collateralized by
$10,333 U.S. Treasury Bonds 10.00%, due 5/15/10, valued at
$13,601 (COST $13,333)...................................... $13,333 13,333
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%) (COST $207,296).................... 245,619
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
- -------------------------------------------------------------------------------
Cash........................................................ 5
Receivable for Investments Sold............................. 1,939
Dividends Receivable........................................ 370
Interest Receivable......................................... 2
Other Assets................................................ 17
Payable for Investments Purchased........................... (1,933)
Payable for Investment Advisory Fees........................ (134)
Payable for Administrative Fees............................. (24)
Payable for Directors' Fees................................. (1)
Other Liabilities........................................... (47)
--------
194
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 15,676,837 outstanding $0.001 par value Insti-
tutional Class shares (authorized 25,000,000 shares)........ $245,813
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE..... $ 15.68
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
C & B EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
OCTOBER 31,
(In Thousands) 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends.......................................................... $ 6,362
Interest........................................................... 741
- --------------------------------------------------------------------------------
Total Income...................................................... 7,103
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B................................... 1,418
Administrative Fees--Note C........................................ 264
Custodian Fees..................................................... 24
Legal Fees......................................................... 16
Audit Fees......................................................... 15
Directors' Fees--Note F............................................ 7
Other Expenses..................................................... 40
- --------------------------------------------------------------------------------
Total Expenses.................................................... 1,784
Expense Offset--Note A............................................. (24)
- --------------------------------------------------------------------------------
Net Expenses...................................................... 1,760
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................... 5,343
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.................................... 14,986
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS................ 25,576
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS............................................. 40,562
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $45,905
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
C & B EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net Investment Income............................... $ 4,923 $ 5,343
Net Realized Gain (Loss)............................ (3,767) 14,986
Net Change in Unrealized Appreciation............... 8,121 25,576
- -----------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations........................................ 9,277 45,905
- -----------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income............................... (4,698) (5,401)
Net Realized Gain................................... (2,785) --
In Excess of Net Realized Gain...................... (729) --
- -----------------------------------------------------------------------------
Total Distributions................................ (8,212) (5,401)
- -----------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular..................................... 44,206 36,111
--In Lieu of Cash Distributions............... 7,631 4,791
Redeemed............................................ (53,118) (44,530)
- -----------------------------------------------------------------------------
Net Decrease from Capital Share Transactions....... (1,281) (3,628)
- -----------------------------------------------------------------------------
Total Increase (Decrease)........................... (216) 36,876
Net Assets:
Beginning of Period................................. 209,153 208,937
- -----------------------------------------------------------------------------
End of Period (2).................................. $208,937 $245,813
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued...................................... 3,396 2,478
In Lieu of Cash Distributions...................... 592 334
Shares Redeemed.................................... (4,096) (3,047)
- -----------------------------------------------------------------------------
(108) (235)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital.................................... $200,062 $196,434
Undistributed Net Investment Income................ 546 488
Accumulated Net Realized
Gain (Loss)....................................... (4,418) 10,568
Unrealized Appreciation............................ 12,747 38,323
- -----------------------------------------------------------------------------
$208,937 $245,813
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
C & B EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------------------------
1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.13 $ 12.33 $ 13.29 $ 13.06 $ 13.13
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.. 0.25+ 0.29 0.28 0.31 0.34
Net Realized and
Unrealized Gain
(Loss)................ 3.20 1.02 0.24 0.28 2.55
- ----------------------------------------------------------------------------
Total From Investment
Operations........... 3.45 1.31 0.52 0.59 2.89
- ----------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.25) (0.30) (0.26) (0.30) (0.34)
Net Realized Gain...... -- (0.05) (0.49) (0.18) --
In Excess of Net Real-
ized Gain............. -- -- -- (0.04) --
- ----------------------------------------------------------------------------
Total Distributions... (0.25) (0.35) (0.75) (0.52) (0.34)
- ----------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 12.33 $ 13.29 $ 13.06 $ 13.13 $ 15.68
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
TOTAL RETURN............ 38.04%++ 10.68% 4.05% 4.67% 22.28%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Pe-
riod (Thousands)....... $50,321 $112,763 $209,153 $208,937 $245,813
Ratio of Expenses to Av-
erage Net Assets....... 1.00%+ 0.83% 0.82% 0.82% 0.79%#
Ratio of Net Investment
Income to
Average Net Assets..... 2.65%+ 2.27% 2.28% 2.39% 2.35%
Portfolio Turnover Rate. 7% 45% 21% 46% 42%
- ----------------------------------------------------------------------------
</TABLE>
+ Net of voluntarily waived fees of $.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, 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%.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 the UAM Funds, Inc., began operations on May 15, 1990. At
October 31, 1995, the UAM Funds were comprised of thirty-four 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.
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. 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 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 October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $208,089,000. Net unrealized appreciation for Federal income tax
purposes aggregated $37,530,000 of which $41,248,000 related to appreciated
securities and $3,718,000 related to depreciated securities.
During the year ended October 31, 1995, the Portfolio utilized capital loss
carryforwards for Federal income tax purposes of approximately $3,422,000.
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 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: Any distributions from net investment
income are declared and paid quarterly. Any realized net capital gains will
be distributed annually. All distributions are recorded on ex-dividend
date.
9
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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 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 adjusted to include expense offsets for custodian
balance credits.
B. ADVISORY SERVICES. Under the terms of an Investment Advisory Agreement,
Cooke & Bieler, Inc. ("C&B"), 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 the Portfolio's
average daily net assets. C&B 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 offsets arrangements, from exceeding 1.00% of average daily
net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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.
10
<PAGE>
C & B EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
E. PURCHASES AND SALES. During the year ended October 31, 1995, the Portfolio
made purchases of $95,023,000 and sales of $89,769,000 of investment
securities other than U.S. Government and short-term securities. There were no
purchases and sales of 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement for expenses
incurred in attending Board meetings.
G. LINE OF CREDIT. The C & B Equity Portfolio, 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 year ended October 31, 1995, there were no
borrowings under the agreement.
H. OTHER. At October 31, 1995, 11.1% of total shares outstanding were held by
one record shareholder owning 10% or greater of the aggregate total shares
outstanding.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
C&B Equity Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the C&B Equity Portfolio (the "Portfolio"), a Portfolio of the UAM Funds,
Inc., at October 31, 1995, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
For the year ended October 31, 1995, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
100.0%.
12
<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
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholder:
During the fiscal year ended October 31, 1995, the net asset value (NAV) of
the ICM Equity Portfolio increased from $10.41 to $12.14. Including dividends
and capital gains totaling $.28 per share paid in December 1994, and April,
July and October 1995, the total return of the Portfolio for the 12 months was
19.62%, compared to an increase of 26.41% for the S&P 500 Index over the same
period.
We look on our results for the year with decidedly mixed emotions. On one
hand, our return of nearly 20% was far better than one could have earned in
money market funds, CD's, bonds and most foreign equity markets over the same
timeframe. It is also a far better return than we expected going into the
year, and nearly twice as good as the long-term annual returns produced by
stocks over the last seventy years as reported by Ibbotson Associates. On the
other hand, we trailed our benchmark S&P 500 Index by nearly 700 basis points
for the year on a relative basis. Viewed in this light, our results were
disappointing. The balance of this letter will be devoted to a discussion of
the reasons for our shortfall this past year, as well as the reasons for our
optimism about improved results in the future.
The S&P 500 Index has been a tough bogey to beat this year. According to
Lipper Analytical Services, the S&P 500 Index is ahead of 80% of diversified
equity mutual funds in 1995. Actively managed mutual funds such as the
Portfolio perform differently than the market (sometimes better, sometimes
worse) because of differences in investment style, investment strategy and
stock selection. In addition, all equity mutual funds face the real world
issues of cash holdings, transaction costs and fees; and costs which are not
born by artificial benchmarks such as the S&P 500 Index. Turnover has tended
to be relatively low in the Portfolio, so transactions costs have not been a
big issue for us. Our fees (currently capped at 90 basis points) are also
lower than the average mutual fund./1/ In our case, the factors most
significantly affecting performance were our cash holdings, our investment
style, and to a certain extent, our investment strategy and stock selection.
In a year in which the market is up 26%, any cash is too much cash. Our cash
position averaged about 10% through the course of the year, costing us about
2.5% (or 250 basis points) in relative performance. With the yield on stocks
at a 100 year low, we maintained this cash position as an anchor to windward
in what history says could have been a tough environment for stocks. Our
caution was not rewarded.
Our investment style has also been out of favor for much of this year. We are
value buyers, focusing on solidly financed companies trading at substantial
discounts to the market in terms of price-to-earnings ratio, price-to-book
value and/or price-to-cash flow. The average stock in our portfolio typically
trades at a 30% discount to the market price/earnings ratio. Numerous academic
studies and the real world experience of investors who adhere to value
principles have shown that value investing has outperformed other investment
styles in the long-run. However, value investing does not prevail at all
times. In 1995, growth stocks have held the upper hand by a substantial
margin. In fact, a recent Barron's article (November 20, 1995 issue) notes
that "Lipper Analytical Services' index of funds with the highest earnings
growth rates and valuations is up 40% this year, while the index of portfolios
with the lowest prices relative to book and earnings has gained just 22.4%".
For comparison purposes, the Portfolio's total return is up 23.4% in calendar
1995 through October 31st.
One reason why growth stocks have outperformed value stocks this year is that
investors have worried about the durability of the economic recovery. In this
environment, stocks--such as Coca-Cola, Gillette and Procter & Gamble--whose
prospects are thought to be relatively insensitive to the economic cycle, have
substantially outperformed cyclical stocks. Ironically, twelve months ago,
investors were worried about the economy in 1995.
- --------
/1/Bogle on Mutual Funds, 1994.
1
<PAGE>
Now that 1995 has turned out fine, people seem to want to worry about 1996. As
far as we're concerned, worry creates opportunity--and we have been adding to
our positions in such cyclicals as Dow Chemical, USX-U.S. Steel Group,
International Paper and Louisiana-Pacific--while at the same time increasing
our exposure in energy and real estate investment trusts (REITs).
One might logically ask, "If growth stocks are the place to be, why not own
growth stocks?" The answer is that while it may seem logical, it almost never
works. People are most strongly influenced by recent events. Those who try to
jump from one investment style to another usually abandon one approach that
hasn't been working (just before it starts working), in favor of an approach
that has been working (just before it stops).
We have no intention of adopting this approach. We will continue to focus our
attention on the stocks of well-financed companies with below average price-
to-earnings and price-to-book ratios and above average or sharply improving
profitability. The practice of buying as much earning power and asset value as
possible per dollar of investment has provided satisfactory results in the
past, and we have confidence in its prospects for the future.
As of October 31, 1995, the Portfolio held forty-seven 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 (Est.) 10.9x 15.6x
Average Price-to-Book Value 2.16x 2.69x
Average Return on Equity 19.6% 26.4%
Average Debt/Total Capitalization 40.1% 45.0%
Median Market Capitalization (millions) $7,967 $3,971
</TABLE>
Respectfully submitted,
/s/ David E. Nelson, CFA
David E. Nelson, CFA
Principal
Investment Counselors of Maryland, Inc.
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Without the Adviser's temporary fee waiver (also expenses assumed by the
Adviser), 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>
Performance Comparison
- ------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE
ICM EQUITY PORTFOLIO AND THE STANDARD & POOR'S 500 INDEX (S&P 500).
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1 YEAR SINCE 10/1/93*
- --------------------------------------------------------------------------------
19.62% 11.75%
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C>
ICM S&P
EQUITY 500
PORTFOLIO+ INDEX+
10/1/93 100,000 100,000
10/31/93 99,400 102,070
10/31/94 105,990 106,005
10/31/95 126,785 134,001
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations.
**Total return of the Portfolio reflects fees waived and expenses assumed by the
Adviser. Without such waiver of fees and expenses assumed, total return would
be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees,
if reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities in
the index.
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.
Please note that one can not invest in an unmanaged index.
3
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (89.8%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.4%)
Lockheed Martin Corp. .......................................... 2,400 $ 164
- -------------------------------------------------------------------------------
AUTOMOTIVE (3.5%)
Chrysler Corp. ................................................. 1,500 77
Ford Motor Corp. ............................................... 5,600 161
------
238
- -------------------------------------------------------------------------------
BASIC RESOURCES (1.5%)
*FMC Corp. ..................................................... 1,400 100
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (3.5%)
American Brands, Inc. .......................................... 2,000 86
Philip Morris Cos., Inc. ....................................... 1,800 152
------
238
- -------------------------------------------------------------------------------
CHEMICALS (3.3%)
Dow Chemical Co. ............................................... 2,000 137
Praxair, Inc. .................................................. 3,400 92
------
229
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (5.3%)
Guilford Mills, Inc. ........................................... 4,500 100
Melville Corp. ................................................. 3,700 118
TJX Cos., Inc. ................................................. 10,700 144
------
362
- -------------------------------------------------------------------------------
CONSUMER STAPLES (6.7%)
American Home Products Corp. ................................... 2,200 195
General Electric Co. ........................................... 1,900 120
Warner-Lambert Co. ............................................. 1,700 145
------
460
- -------------------------------------------------------------------------------
ELECTRONICS (1.3%)
Philips Electronics N.V. ....................................... 2,300 89
- -------------------------------------------------------------------------------
ENERGY (3.9%)
Atlantic Richfield Co. ......................................... 700 75
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY--(CONTINUED)
Equitable Resources, Inc......................................... 4,200 $ 123
Royal Dutch Petroleum Co......................................... 600 74
------
272
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (17.0%)
BankAmerica Corp................................................. 2,600 150
Chemical Banking Corp............................................ 3,000 171
Comerica, Inc.................................................... 4,500 151
First Union Corp................................................. 2,800 139
Meridian Bancorp, Inc............................................ 3,000 128
NationsBank Corp. ............................................... 2,700 178
Republic New York Corp. ......................................... 2,800 164
Washington Mutual, Inc........................................... 3,500 89
------
1,170
- --------------------------------------------------------------------------------
INSURANCE (6.7%)
Chubb Corp....................................................... 1,900 170
First Colony Corp................................................ 4,400 120
Providian Corp................................................... 4,300 169
------
459
- --------------------------------------------------------------------------------
MANUFACTURING (3.8%)
ITT Corp......................................................... 1,400 172
Whitman Corp. ................................................... 4,200 89
------
261
- --------------------------------------------------------------------------------
METALS (4.2%)
Phelps Dodge Corp................................................ 2,500 158
USX-U.S. Steel Group, Inc........................................ 4,400 131
------
289
- --------------------------------------------------------------------------------
PAPER & PACKAGING (4.0%)
International Paper Co........................................... 4,000 148
Louisiana-Pacific Corp........................................... 5,200 124
------
272
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (5.8%)
Omega Healthcare Investors, Inc................................. 5,300 $ 134
Pacific Gulf Properties, Inc.................................... 8,500 129
United Dominion Realty Trust.................................... 10,000 138
------
401
- -------------------------------------------------------------------------------
TECHNOLOGY (2.6%)
Hewlett-Packard Co.............................................. 1,200 111
Seagate Technology.............................................. 1,500 67
------
178
- -------------------------------------------------------------------------------
TRANSPORTATION (8.2%)
Burlington Northern, Inc........................................ 2,200 185
Norfolk Southern Corp. ......................................... 1,200 93
Ryder System, Inc............................................... 5,200 125
Union Pacific Corp.............................................. 2,400 157
------
560
- -------------------------------------------------------------------------------
UTILITIES (6.1%)
AT&T Corp. ..................................................... 2,500 160
MCI Corp........................................................ 6,200 154
Telefonos de Mexico S.A. ADR, Class L........................... 3,900 107
------
421
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $5,321)................................ 6,163
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (10.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (10.2%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $699, collateralized by $617 U.S.
Treasury Bond
7.50%, due 5/15/16, valued at $713 (COST $699).................. $699 699
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%) (COST $6,020)......................... 6,862
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (0.0%)
- -------------------------------------------------------------------------------
Dividends Receivable.............................................. $ 15
Receivable from Investment Adviser................................ 11
Other Assets...................................................... 1
Payable for Administrative Fees................................... (6)
Payable for Directors' Fees....................................... (1)
Other Liabilities................................................. (17)
------
3
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 565,651 outstanding $0.001 par value Institutional Class
shares
(authorized 25,000,000 shares)....................................... $6,865
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE............... $12.14
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements
*Non-Income Producing Security
ADRAmerican Depositary Receipt
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ICM EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
ENDED
OCTOBER 31,
(In Thousands) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends.................................................... $ 158
Interest..................................................... 30
- --------------------------------------------------------------------------------
Total Income................................................ 188
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.................................................. $ 35
Less: Fees Waived........................................... (35) --
----
Administrative Fees--Note C.................................. 60
Printing Fees................................................ 13
Audit Fees................................................... 13
Custodian Fees............................................... 6
Registration and Filing Fees................................. 5
Directors' Fees--Note F...................................... 3
Other Expenses............................................... 1
Expenses Assumed by the Adviser--Note B...................... (49)
- --------------------------------------------------------------------------------
Total Expenses.............................................. 52
Expense Offset--Note A....................................... (1)
- --------------------------------------------------------------------------------
Net Expenses................................................ 51
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME......................................... 137
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.............................. 247
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS.......... 747
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS....................................... 994
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $1,131
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
ICM EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 55 $ 137
Net Realized Gain..................................... 13 247
Net Change in Unrealized Appreciation................. 101 747
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 169 1,131
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (47) (129)
Net Realized Gain..................................... -- (7)
- --------------------------------------------------------------------------------
Total Distributions.................................. (47) (136)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 1,515 2,502
--In Lieu of Cash Distribution...................... 45 131
Redeemed.............................................. -- (422)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 1,560 2,211
- --------------------------------------------------------------------------------
Total Increase........................................ 1,682 3,206
Net Assets:
Beginning of Year..................................... 1,977 3,659
- --------------------------------------------------------------------------------
End of Year (2)....................................... $3,659 $6,865
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 148 240
In Lieu of Cash Distributions......................... 5 12
Shares Redeemed....................................... -- (38)
- --------------------------------------------------------------------------------
153 214
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $3,547 $5,758
Undistributed Net Investment Income................... 10 18
Accumulated Net Realized Gain......................... 7 247
Unrealized Appreciation............................... 95 842
- --------------------------------------------------------------------------------
$3,659 $6,865
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ICM EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 31,
----------------
OCTOBER 1,
1993** TO
OCTOBER 31,
1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $10.00 $9.94 $10.41
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+....................... 0.01 0.20 0.26
Net Realized and Unrealized Gain (Loss)...... (0.07) 0.45 1.75
- --------------------------------------------------------------------------------
Total from Investment Operations............ (0.06) 0.65 2.01
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........................ -- (0.18) (0.26)
Net Realized Gain............................ -- -- (0.02)
- --------------------------------------------------------------------------------
Total Distributions......................... -- (0.18) (0.28)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD................ $9.94 $10.41 $12.14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.................................. (0.60)%++ 6.63%++ 19.62%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)......... $1,977 $3,659 $6,865
Ratio of Expenses to Average Net Assets+...... 0.90%* 0.90% 0.92%#
Ratio of Net Investment Income to Average Net
Assets+...................................... 1.06%* 2.15% 2.44%
Portfolio Turnover Rate....................... 11% 17% 37%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $0.04,
$0.21, and $0.16 per share for the period ended October 31, 1993, and the
years ended October 31, 1994 and 1995, 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 0.90%.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (collectively the "UAM Funds") were
organized on October 11, 1988 and May 18, 1994, respectively, and are
registered under the Investment Company Act to 1940, as amended, as open-end
management investment companies. The ICM Equity Portfolio (the "Portfolio"), a
portfolio of the UAM Funds, began operations on October 1, 1993. At October
31, 1995, the UAM Funds were comprised of thirty-four 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.
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. 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 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 October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $6,020,000. Net unrealized appreciation for Federal income tax purposes
aggregated $842,000, of which $1,013,000 related to appreciated securities
and $171,000 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: Any distributions from net investment
income are declared and paid quarterly. Any realized net capital gains will
be distributed annually. All distributions are recorded on ex-dividend
date.
The amount and character of income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles.
11
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 adjusted to include expense offsets for custodian
balance credits.
B. ADVISORY SERVICES. Investment Counselors of Maryland, Inc. (the "Adviser"),
a wholly-owned subsidiary of United Asset Management Corporation (UAM),
provides investment advisory services to the Portfolio under an Investment
Advisory Agreement. Under the terms of the agreement, the Adviser is paid a
fee at an annual rate of 0.625% of the Portfolio's average daily net assets.
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
offsets arrangements, from exceeding 0.90% of average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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. During the year ended October 31, 1995, the Portfolio
made purchases of $3,427,000 and sales of $1,854,000 of investment securities
other than U.S. Government and short-term securities. There were no purchases
and sales of U.S. Government securities.
12
<PAGE>
ICM EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(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 reimbursement of expenses
incurred in attending board meetings.
G. LINE OF CREDIT. The ICM Equity Portfolio, 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 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.
H. OTHER. At October 31, 1995, 77.0% of total shares outstanding were held by
three record shareholders owning 10% or greater of the aggregate total shares
outstanding.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
ICM Equity Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
ICM Equity Portfolio (the "Portfolio"), a Portfolio of UAM Funds, Inc., at
October 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
For the year ended October 31, 1995, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
47.7%.
14
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
ICM SMALL COMPANY PORTFOLIO
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Mary Rudie Barneby Peter M. Whitman, Jr.
Director and Executive Director
Vice President
William H. Park
John T. Bennett, Jr. Vice President and
Director 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
Investment Counselors of Maryland, Inc.
803 Cathedral Street, Baltimore, MD 21201
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
ICM SMALL COMPANY PORTFOLIO
"A SURPRISINGLY GOOD YEAR FOR STOCKS"
The U.S. equity market experienced a surprisingly benign economic and
financial environment during the twelve months ended October 31, 1995. The
Federal Reserve essentially moved to the sidelines for much of the year. The
tightening of monetary policy which occurred in 1994 had its desired effect as
the economy slowed dramatically and inflation remained under firm control. The
bond market responded to these events by staging a vigorous recovery as long-
term interest rates fell from close to 8% to just over 6.25%. Corporate
earnings growth remained very strong as profit margins continued to widen. The
combination of rising earnings and expanding price-to-earnings ratios produced
a market advance that exceeded general expectations.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------
1 YEAR 4-19-
ENDED 5 YEARS 89*
9-30- ENDED THROUGH
95 9-30-95 9-30-95
------ ------- -------
<S> <C> <C> <C>
22.19% 27.31% 17.25%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR FIVE FISCAL YEARS ENDED OCTOBER 31
(UNAUDITED)
<TABLE>
<CAPTION>
FIVE YEARS
------------------
AVERAGE
1991 1992 1993 1994 1995 CUMULATIVE ANNUAL
------- ------- ------- ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
ICM Small Co. Portfolio. +62.79% +23.96% +35.20% +4.59% +17.73% +235.98% +27.43%
Russell 2000............ +58.61% +9.48% +32.40% -0.30% +18.35% +171.22% +22.09%
S&P 500................. +33.51% +9.95% +14.91% +3.86% +26.41% +121.58% +17.25%
</TABLE>
The performance numbers set forth above deserve a detailed comment. First, the
most recent fiscal year marks the first fiscal year during which the Portfolio
underperformed the Russell 2000 Index. At the mid-way point of the year, the
Portfolio had outperformed the Russell 2000 by 270 basis points (+8.06% vs.
+5.36%). Obviously, the last six months have been tough. There are four
primary reasons for this recent lackluster record:
1. The Portfolio has significant exposure to consumer spending with heavy
weightings in auto-related, textile and apparel, and retail companies.
These groups did very poorly in the second half of the year.
2. We reduced our exposure to technology too early. These sales were driven
by our valuation disciplines which sometimes cause us to miss some of a
stock's appreciation.
3. We did not own enough banks. Nearly all bank stocks did extremely well
this year as earnings have been good and takeover and merger fever has
swept the industry.
4. Cash reserves as a percent of total assets increased throughout the
second half due in part to cash flows and in part to a cautious approach
to reinvesting proceeds from sales. In a bull market, cash does not help
performance.
More broadly, the five-year period ended October 31, 1995 was an
extraordinarily good one for stocks with compound annual returns exceeding by
a wide margin the long-term historic average for the S&P 500 Index of about
11% as reported by Ibbotson Associates. If these returns were on a calendar
basis, the annualized five-year return for the S&P 500 Index of 17.25% would
rank 12th, out of 65 five-year holding periods going back to 1926. The Russell
2000, a proxy for small capitalization stocks, underperformed the S&P 500
Index for the second consecutive year. In our Semi-Annual Report dated April
30, 1995 we suggested that small cap stocks could make up some ground lost to
big cap stocks earlier this year. For a portion of the summer, this in fact
occurred. However, this catch-up phase was short-lived as renewed concerns
about the U.S. economy put pressure on many consumer-related and industrial
stocks.
- --------
* date of commencement
1
<PAGE>
The big story for much of the last fiscal year was the explosive performance
by technology stocks. The magnitude of the price advances in numerous
technology stocks has been breathtaking, and valuation multiples of earnings,
revenues, and book value in certain sectors of the technology group are
reminiscent of those reached in the 1983 blow off. While the Portfolio had a
meaningful position in technology a year ago (19.5% of the Portfolio), we took
profits in some issues well before they peaked, and we exited the year with
less than 10% in this sector.
A reading of the Investment Approach section of this report will leave no
doubt that the Portfolio is a "value" oriented investment vehicle. While we
believe "value" will outperform "growth" over the long term, we recognize that
there will be periods when growth does better. The last year was such a
period. A recent Barron's article (November 20, 1995 issue) states that
"Lipper Analytical Services' index of funds with the highest earnings growth-
rates and valuations is up some 40% this year, while the index of portfolios
with the lowest prices relative to book and earnings has gained just 22.4%".
While the period covered by this Lipper analysis does not coincide with the
Portfolio's fiscal year, the study does confirm that most "value" investors
have underperformed "growth" investors in 1995. Again, our investment approach
stresses low price-to-earnings and price-to-book value, and the Portfolio's
average measures of these two ratios are consistently below those of the
average equity mutual fund. The one-hundred twenty-four stocks held in the
Portfolio had the following statistical profile as of October 31, 1995:
<TABLE>
<S> <C>
Largest Market Capitalization................................ $1,783 million
Smallest Market Capitalization............................... $16 million
Average Market Capitalization................................ $321 million
Median Market Capitalization................................. $221 million
Average Price-to-Earnings Ratio (Est.)....................... 13.3x
Average Price-to-Book Value.................................. 1.6x
Average Return on Equity..................................... 17.73%
</TABLE>
Looking ahead, we cannot envision a scenario that would propel stocks broadly
higher that would not, at the same time, be very bullish for the consumer-
related and industrial types of stocks which have hurt our performance in the
last six months. We will certainly be putting the cash to work as
opportunities present themselves, but we will do so in a very measured way.
Finally, we would like to comment on the recent increase in the minimum
initial investment for new investors from $100,000 to $5,000,000. This
increase was designed to slow inflows into the Portfolio which has grown from
just under $116 million last year to over $250 million this year. We believe
it is necessary to limit assets under management in order to maintain the
integrity of the process outlined in our Investment Approach set forth on page
3.
Respectfully,
Robert D. McDorman, Jr.
/s/ Robert D. McDorman, Jr.
Principal
Investment Counselors of Maryland, Inc.
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>
UAM FUNDS
ICM SMALL COMPANY PORTFOLIO
INVESTMENT APPROACH
The purpose of the ICM Small Company Portfolio is to provide its
shareholders with exposure to a diversified portfolio of small capitalization
companies with attractive valuation characteristics. The investment rationale
behind the Portfolio and the stock selection process is the historic long-term
superior relative performance of small companies and the belief on the part of
Investment Counselors of Maryland ("ICM") that "value" stocks within the small
cap sector will provide incremental positive returns. Since the Portfolio's
objective is to provide maximum, long-term total return consistent with
reasonable risk to principal by investing in the small cap sector of the
equity market, ICM maintains a nearly fully invested position in the Portfolio
at all times.
The evaluation of the performance of the Portfolio should take into
consideration the fact that the Portfolio manager is maintaining a nearly
fully invested position at all times, and the universe of stocks is the small
capitalization stock universe. Therefore, the index most appropriate for
comparison purposes is the Russell 2000.
In selecting stocks for inclusion in the Portfolio, the manger looks for the
following attributes:
1) Capitalization--Nearly all of the companies included in the Portfolio
will have a market capitalization of between $50 million and $700
million.
2) Low Price to Earnings Ratio--The stocks selected for inclusion in the
Portfolio are, at the time of purchase, selling at a discount to the S&P
500 on a Price to Earnings Ratio basis or will be in the immediate future
due to very strong earnings momentum.
3) Relative Return on Equity Greater Than Relative Price to Earnings
Ratio--Nearly all the companies held in the Portfolio have a Relative
Return on Equity (ROE relative to ROE of the S&P 500) that is higher than
their respective relative Price to Earnings Ratio.
4) Balance Sheet Strength--There is a strong bias in the selection process
toward companies with strong balance sheets. As a group, the companies in
the Portfolio have a lower debt to total capitalization ratio than the
average company and a higher current ratio.
5) Low Price to Book Value--There is a strong bias in the selection process
toward companies with a low absolute and relative Price to Book Value.
6) Positive Earnings Momentum--In choosing among a group of similarly
valued companies, those with positive earnings momentum and/or positive
earnings surprise are ranked more highly.
3
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $5,000,000 PURCHASE IN THE
ICM SMALL COMPANY PORTFOLIO AND THE RUSSELL 2000 INDEX
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS SINCE 4/19/89*
17.73% 27.43% 16.36%
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C>
ICM SMALL RUSSELL
COMPANY 2000
PORTFOLIO+ INDEX+
4/19/89 5,000,000 5,000,000
10/31/89 4,993,500 5,118,000
10/31/90 4,006,285 3,721,298
10/31/91 6,521,831 5,902,350
10/31/92 8,084,462 6,461,893
10/31/93 10,930,193 8,555,547
10/31/94 11,431,889 8,529,880
10/31/95 13,458,763 10,095,113
</TABLE>
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities in
the index.
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.
Please note that one can not invest in an unmanaged index.
4
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (82.7%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (4.0%)
Donnelly Corp................................................. 40,000 $ 570
Dorsey Trailers, Inc. ........................................ 60,000 397
Excel Industries, Inc. ....................................... 100,000 1,200
Smith (A.O.) Corp. ........................................... 100,000 2,075
Standard Products Co. ........................................ 40,000 620
Starcraft Corp. .............................................. 90,000 562
Strattec Security Corp. ...................................... 102,700 1,669
Treadco, Inc. ................................................ 80,000 580
Wynn's International, Inc. ................................... 84,300 2,318
--------
9,991
- --------------------------------------------------------------------------------
BANKS (4.3%)
First Commerce Corp. ......................................... 50,000 1,538
First Financial Corp. ........................................ 140,000 2,940
*Sterling Financial Corp. .................................... 33,341 433
TCF Financial Corp. .......................................... 40,000 2,350
Trans Financial Bancorp, Inc. ................................ 50,000 850
Vermont Financial Services Corp. ............................. 83,500 2,630
--------
10,741
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT (4.9%)
*Astec Industries, Inc........................................ 130,000 $ 1,544
*Avondale Industries, Inc..................................... 300,000 4,500
BE Aerospace, Inc............................................. 75,000 591
CMI Corp., Class A............................................ 300,000 1,462
Scotsman Industries, Inc...................................... 115,000 1,869
Varlen Corp................................................... 88,000 2,354
--------
12,320
- --------------------------------------------------------------------------------
CHEMICALS (3.3%)
Aceto Corp.................................................... 80,000 1,250
Applied Extrusion Technologies, Inc........................... 100,000 1,537
Cambrex Corp.................................................. 40,800 1,556
Dexter Corp................................................... 100,000 2,387
Furon Co...................................................... 100,000 1,550
--------
8,280
- --------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSTRUCTION (9.1%)
*BMC West Corp. ................................................ 100,000 1,363
Centex Construction Products, Inc. ............................. 250,000 3,156
Centex Corp. ................................................... 50,000 1,638
Continental Homes Holding Corp. ................................ 110,000 2,255
Granite Construction, Inc. ..................................... 120,000 3,405
Griffon Corp. .................................................. 250,000 2,094
Juno Lighting, Inc. ............................................ 135,000 1,958
Martin Marietta Materials, Inc. ................................ 100,000 1,900
Payless Cashways, Inc. ......................................... 115,000 661
Republic Gypsum Co. ............................................ 35,000 411
*Southdown, Inc................................................. 230,000 3,737
Wolohan Lumber Co. ............................................. 30,000 285
------
22,863
- --------------------------------------------------------------------------------
CONSUMER DURABLES (4.6%)
Aaron Rents, Inc., Class B...................................... 120,000 2,070
Baldwin Piano & Organ Co........................................ 85,000 1,062
Bush Industries, Inc., Class A.................................. 125,000 2,328
Coachmen Industries, Inc........................................ 75,000 1,266
General Housewares Corp......................................... 100,000 1,037
*Material Science Corp.......................................... 100,000 1,662
*Rex Stores Corp................................................ 100,000 1,700
Winsloew Furniture, Inc......................................... 60,000 360
------
11,485
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.7%)
Cone Mills Corp................................................. 150,000 1,631
EKCO Group, Inc................................................. 150,000 844
ERO, Inc........................................................ 100,000 575
*Fieldcrest Cannon, Inc......................................... 70,000 1,348
Galey & Lord, Inc............................................... 200,000 2,500
Guilford Mills, Inc............................................. 110,000 2,434
------
9,332
- --------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (3.5%)
Apache Corp.................................................... 31,500 $ 803
Nabors Industries, Inc......................................... 350,000 3,019
*Oceaneering International, Inc................................ 90,000 855
Offshore Logistics, Inc........................................ 63,000 780
Penn Virginia Corp............................................. 38,200 1,203
Phoenix Resource Co., Inc...................................... 120,000 2,130
-------
8,790
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (0.7%)
Edwards (A.G.), Inc............................................ 22,500 574
Legg Mason, Inc................................................ 40,000 1,150
-------
1,724
- --------------------------------------------------------------------------------
HEALTH CARE (2.3%)
Beckman Instruments, Inc....................................... 60,000 1,987
PSICOR, Inc.................................................... 110,000 1,375
Spacelabs Medical, Inc......................................... 95,000 2,399
-------
5,761
- --------------------------------------------------------------------------------
INSURANCE (7.6%)
Acmat Corp..................................................... 100,000 1,150
Allied Group, Inc.............................................. 65,000 2,064
Capital Guaranty Corp.......................................... 80,000 1,770
Capital RE Corp................................................ 60,000 1,695
CMAC Investment Corp........................................... 40,000 1,900
Lawyers Title Corp............................................. 70,000 1,146
Life Re Corp................................................... 125,000 2,594
*MAIC Holdings, Inc............................................ 31,500 945
*Penn Treaty American Corp..................................... 80,000 1,220
PXRE Corp...................................................... 100,000 2,475
Trenwick Group, Inc............................................ 40,000 1,980
-------
18,939
- --------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MANUFACTURING (3.6%)
Clarcor, Inc................................................. 55,000 $ 1,251
Donaldson Co., Inc........................................... 40,500 987
Essef Corp................................................... 60,000 1,050
Harsco Corp.................................................. 18,000 949
Hunt Manufacturing Co........................................ 150,000 2,625
Synalloy Corp................................................ 100,000 2,050
--------
8,912
- -------------------------------------------------------------------------------
METALS (4.9%)
AK Steel Holding Corp........................................ 125,000 3,875
Carpenter Technology Corp.................................... 80,000 3,030
Easco, Inc................................................... 150,000 1,087
J & L Specialty Steel, Inc................................... 200,000 3,275
*Steel of West Virginia, Inc................................. 125,000 1,063
--------
12,330
- -------------------------------------------------------------------------------
PAPER & PACKAGING (1.9%)
American Business Products, Inc.............................. 30,000 656
Rayonier, Inc................................................ 70,000 2,625
Specialty Paperboard, Inc.................................... 120,000 1,395
--------
4,676
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (2.1%)
Cali Realty Corp............................................. 100,000 1,950
Healthcare Realty Trust, Inc................................. 35,000 704
Liberty Property Trust....................................... 40,000 810
Omega Healthcare Investors, Inc.............................. 22,500 571
Shurgard Storage Centers, Inc................................ 30,000 765
Town & Country Trust......................................... 45,000 574
--------
5,374
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
RETAIL (4.2%)
Big B, Inc................................................... 150,000 $ 2,175
Carson Pirie Scott & Co...................................... 122,000 2,059
Fred's, Inc.................................................. 52,500 407
Ruddick Corp................................................. 140,000 1,785
Smith's Food & Drug Centers, Inc., Class B................... 125,000 2,859
Strawbridge & Clothier....................................... 69,000 1,277
--------
10,562
- -------------------------------------------------------------------------------
SERVICES (6.2%)
ABM Industries, Inc.......................................... 110,000 2,915
Devon Group, Inc............................................. 125,000 4,813
*EA Engineering Science & Technology, Inc.................... 36,500 146
PHH Corp..................................................... 70,000 3,063
Rexel, Inc................................................... 300,000 3,450
Unitel Video, Inc............................................ 70,000 416
*Vicorp Restaurants, Inc..................................... 70,000 735
--------
15,538
- -------------------------------------------------------------------------------
TECHNOLOGY (9.4%)
AMETEK, Inc.................................................. 65,000 1,146
Analysts International Corp.................................. 50,000 1,463
Andros, Inc.................................................. 85,500 1,454
*Banctec, Inc................................................ 55,000 1,031
Charter Power System, Inc.................................... 70,000 1,750
Cohu, Inc.................................................... 60,000 1,845
*Exar Corp................................................... 82,500 1,959
*ILC Technology, Inc......................................... 65,000 609
*Marshall Industries......................................... 70,000 2,468
Methode Electronics, Inc., Class A........................... 125,000 2,875
National Computer Systems, Inc............................... 150,000 2,775
*Norstan, Inc................................................ 55,000 1,375
Quixote Corp................................................. 150,000 1,425
Western Digital Corp......................................... 100,000 1,550
--------
23,725
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TRANSPORTATION (1.2%)
Rollins Truck Leasing Corp.................................. 200,000 $ 1,925
TNT Freightways Corp........................................ 60,000 1,080
--------
3,005
- -------------------------------------------------------------------------------
UTILITIES (1.2%)
Comsat Corp................................................. 150,000 2,981
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $176,014).......................... 207,329
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (17.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.3%)
J.P. Morgan Securities Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $18,315, collateralized by
$11,321 U.S. Treasury Bond 13.875%, due 5/15/11, valued at
$18,680..................................................... $18,312 18,312
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION (9.9%)
Federal Home Loan Bank Discount Note 5.60%, 11/15/95........ 25,000 24,946
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $43,258).................. 43,258
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.9%) (COST $219,272).................... 250,587
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.1%)
- -------------------------------------------------------------------------------
Cash........................................................ 471
Dividends Receivable........................................ 209
Interest Receivable......................................... 3
Other Assets................................................ 9
Payable for Investments Purchased........................... (270)
Payable for Investment Advisory Fees........................ (147)
Payable for Administrative Fees............................. (23)
Payable for Directors' Fees................................. (1)
Other Liabilities........................................... (40)
--------
211
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 13,169,952 outstanding $0.001 par value Insti-
tutional Class shares (authorized 50,000,000 shares)........ $250,798
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE..... $ 19.04
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
Interest rate disclosed for the U.S. Government Agency Obligation represents
effective yield.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ICM SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
ENDED
OCTOBER 31,
(In Thousands) 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends.......................................................... $ 2,098
Interest........................................................... 1,246
- --------------------------------------------------------------------------------
Total Income...................................................... 3,344
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B................................... 1,242
Administrative Fees--Note C........................................ 207
Custodian Fees..................................................... 19
Printing Fees...................................................... 18
Audit Fees......................................................... 14
Legal Fees......................................................... 13
Registration and Filing Fees....................................... 11
Directors' Fees--Note F............................................ 6
Other Expenses..................................................... 16
- --------------------------------------------------------------------------------
Total Expenses.................................................... 1,546
Expense Offset--Note A............................................. (19)
- --------------------------------------------------------------------------------
Net Expenses...................................................... 1,527
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME............................................... 1,817
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.................................... 12,752
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS................ 13,796
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS............................................. 26,548
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $28,365
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ICM SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 582 $ 1,817
Net Realized Gain..................................... 5,152 12,752
Net Change in Unrealized Appreciation (Depreciation).. (1,046) 13,796
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 4,688 28,365
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (552) (1,470)
Net Realized Gain..................................... (10,917) (5,149)
- --------------------------------------------------------------------------------
Total Distributions.................................. (11,469) (6,619)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 35,248 128,619
--In Lieu of Cash Distributions..................... 11,172 6,136
Redeemed.............................................. (5,748) (21,464)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 40,672 113,291
- --------------------------------------------------------------------------------
Total Increase........................................ 33,891 135,037
Net Assets:
Beginning of Year..................................... 81,870 115,761
- --------------------------------------------------------------------------------
End of Year (2)....................................... $115,761 $250,798
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 2,081 7,178
In Lieu of Cash Distributions......................... 689 377
Shares Redeemed....................................... (346) (1,176)
- --------------------------------------------------------------------------------
2,424 6,379
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $ 93,009 $206,300
Undistributed Net Investment Income................... 90 437
Accumulated Net Realized Gain......................... 5,143 12,746
Unrealized Appreciation............................... 17,519 31,315
- --------------------------------------------------------------------------------
$115,761 $250,798
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ICM SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------------------
1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR.......................... $ 7.78 $ 12.50 $ 14.96 $ 18.75 $ 17.05
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERA-
TIONS
Net Investment Income......... 0.14 0.11 0.08 0.09 0.16
Net Realized and Unrealized
Gain......................... 4.73 2.81 4.94 0.64 2.70
- -------------------------------------------------------------------------------
Total from Investment Opera-
tions....................... 4.87 2.92 5.02 0.73 2.86
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income......... (0.15) (0.10) (0.07) (0.09) (0.14)
Net Realized Gain............. -- (0.36) (1.16) (2.34) (0.73)
- -------------------------------------------------------------------------------
Total Distributions.......... (0.15) (0.46) (1.23) (2.43) (0.87)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR... $ 12.50 $ 14.96 $ 18.75 $ 17.05 $ 19.04
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN................... 62.79% 23.96% 35.20% 4.59% 17.73%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Year (Thou-
sands)........................ $43,559 $58,483 $81,870 $115,761 $250,798
Ratio of Expenses to Average
Net Assets.................... 1.02% 0.95% 0.95% 0.93% 0.87%#
Ratio of Net Investment Income
to Average Net Assets......... 1.32% 0.77% 0.46% 0.58% 1.02%
Portfolio Turnover Rate........ 49% 34% 47% 21% 20%
- -------------------------------------------------------------------------------
</TABLE>
# 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%.
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 the UAM Funds, began operations on April 19,
1989. At October 31, 1995, the UAM Funds were comprised of thirty-four 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.
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. 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 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 permanent book-tax differences.
At October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $219,273,000. Net unrealized appreciation for Federal income tax
purposes aggregated $31,314,000, of which $43,310,000 related to
appreciated securities and $11,996,000 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: Any distributions from net investment
income are declared and paid quarterly. Any realized net capital gains will
be distributed annually. All distributions are recorded on ex-dividend
date.
14
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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
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 have been adjusted to include expense offsets for custodian
balance credits.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income per share in the financial highlights.
B. ADVISORY SERVICES. Investment Counselors of Maryland, Inc. (the "Adviser"),
a wholly-owned subsidiary of United Asset Management Corporation (UAM),
provides investment advisory services to the Portfolio under an Investment
Advisory Agreement. Under the terms of the agreement, the Adviser is paid a
monthly fee calculated at an annual rate of 0.70% of the Portfolio's average
daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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.
15
<PAGE>
ICM SMALL COMPANY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
E. PURCHASES AND SALES. During the year ended October 31, 1995, the Portfolio
made purchases of $102,899,000 and sales of $30,885,000 of investment
securities other than 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds, Inc. and reimbursement of
expenses incurred in attending board meetings.
G. LINE OF CREDIT. The ICM Small Company Portfolio, 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 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.
H. OTHER. At October 31, 1995, 12.0% of total shares outstanding were held by
one record shareholder owning 10% or greater of the aggregate total of shares
outstanding.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Fund, Inc. and Shareholders of
ICM Small Company Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
ICM Small Company Portfolio (the "Portfolio"), a Portfolio of UAM Funds, Inc.,
at October 31, 1995, the results of its operations for the year then ended,
and the changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The ICM Small Company Portfolio hereby designates $2,667,000 as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
Federal income tax return. For the year ended October 31, 1995, the percentage
of dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 38.6%.
17
<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
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor
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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholder:
The following report provides a detailed description of the securities held
and statement of operations for the Cooke & Bieler Balanced Portfolio for the
fiscal year ended October 31, 1995.
For the most recent fiscal year ended October 31, 1995, the Cooke & Bieler
Balanced Portfolio underperformed its Benchmark Index, which consists of a
blended return of 60% of the S&P 500 Index and 40% of the Lehman Brothers
Government/Corporate Index. Over this period, the Portfolio appreciated
17.83%, which in absolute terms is quite high given the low level of inflation
versus 22.31% for the Benchmark Index. Individually, the S&P 500 Index had a
total return during this period of 26.41% and the Lehman Brothers
Government/Corporate Index had a total return of 16.16%.
Over this past twelve month period, returns on both common stocks and bonds
have been exceptionally generous. During rapidly rising financial markets, it
is not unusual for our "high quality/low risk" philosophy to underperform.
Although we are certainly disappointed with the relative results, they are not
altogether inconsistent with our philosophy.
At this juncture a cautionary outlook is warranted. Yields on stocks and
bonds are at multi-decade lows and investor enthusiasm is quite high. Any
negative revisions to the benign inflation outlook or the earnings outlook
could be met with disappointment that could potentially compromise some of the
generous returns achieved over this recent period. It is our goal to position
the Portfolio so as to fully participate in any further market advances, but
to protect the Portfolio's principal should the markets correct. We will do
this by adhering to our discipline of only investing in the highest quality
companies and debt instruments, and making sure that we pay reasonable prices
for these securities.
The equity portion of the Cooke & Bieler Balanced Portfolio is invested in a
select number of high quality companies which in aggregate have high return on
equity, strong balance sheets, and consistency and predictability in the
growth of earnings and dividends. The fixed income portion is concentrated in
U.S. Treasury issues of intermediate-term maturity. The bond component is in a
very defensive position given its high quality holdings and short maturity
schedule.
We remain confident that over the long term, this value approach to
investing may produce better than market returns with less than market risk.
Sincerely,
/s/ Peter A. Thompson
Peter A. Thompson
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Without the Adviser's temporary fee waiver, 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $250,000 PURCHASE IN C & B BALANCED
PORTFOLIO, THE STANDARD & POOR'S 500 INDEX (S&P 500) AND
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1 YEAR 5 YEAR SINCE 12/29/89*
- --------------------------------------------------------------------------------
<S> <C> <C>
17.83% 12.91% 10.45%
- --------------------------------------------------------------------------------
</TABLE>
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
LEHMAN BROTHERS
C & B BALANCED S&P 500 GOVERNMENT/CORPORATE
PORTFOLIO+ INDEX+ INDEX+ COMPOSITE+
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/29/89 250,000 250,000 250,000 250,000
10/31/90 243,455 221,375 261,000 237,225
10/31/91 317,708 295,375 301,100 297,675
10/31/92 351,753 324,750 332,775 327,950
10/31/93 376,423 373,175 378,150 375,150
10/31/94 379,225 387,562 360,600 376,857
10/31/95 446,841 489,917 418,873 460,934
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
**Total return reflects expenses waived by the Adviser. Without such waiver
total return would be lower.
+ The comparative indices are not adjusted to reflect expenses or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
fees, if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. Each
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
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 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 Composite Index, a hypothetical combination of unmanaged indices, reflects
the funds neutral mix of 60% stocks and 40% bonds. This index combines returns
from the S & P 500 Index and the Lehman Brothers Government/Corporate Index.
Please note that one can not invest in an unmanaged index.
2
<PAGE>
C & B BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (56.0%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (4.1%)
Boeing Co...................................................... 6,300 $ 413
Raytheon Co.................................................... 13,400 585
-------
998
- -------------------------------------------------------------------------------
AUTOMOTIVE (3.1%)
Cooper Tire & Rubber Co........................................ 5,900 137
Eaton Corp..................................................... 2,400 123
Genuine Parts Co............................................... 12,700 503
-------
763
- -------------------------------------------------------------------------------
BANKS (0.8%)
Wachovia Corp.................................................. 4,200 185
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (3.1%)
McCormick & Co., Inc........................................... 10,400 258
Philip Morris Cos., Inc........................................ 5,900 499
-------
757
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (5.7%)
American Greetings Corp., Class A.............................. 9,300 293
Dun & Bradstreet Corp. ........................................ 6,900 412
McGraw-Hill Cos., Inc.......................................... 900 74
Readers Digest Association, Inc., Class A (Non-Voting)......... 11,800 593
-------
1,372
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (3.7%)
Cooper Industries, Inc. ....................................... 8,900 300
Dover Corp..................................................... 15,000 593
-------
893
- -------------------------------------------------------------------------------
CHEMICALS (1.4%)
Lubrizol Corp.................................................. 11,500 330
- -------------------------------------------------------------------------------
CONSTRUCTION (2.1%)
Sherwin-Williams Co............................................ 13,400 504
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER DURABLES (4.6%)
Avery Dennison Corp. .......................................... 4,600 $ 206
Corning, Inc. ................................................. 16,200 423
Service Corp. International.................................... 11,700 469
-------
1,098
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (2.4%)
Avon Products, Inc............................................. 5,300 377
Hasbro, Inc. .................................................. 6,400 195
-------
572
- -------------------------------------------------------------------------------
ELECTRONICS (0.4%)
Grainger (W.W.) Inc. .......................................... 1,600 100
- -------------------------------------------------------------------------------
ENERGY (6.3%)
Burlington Resources, Inc...................................... 9,000 324
Exxon Corp..................................................... 8,400 642
Royal Dutch Petroleum Co....................................... 4,600 565
-------
1,531
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (7.7%)
EXEL Ltd. ..................................................... 6,100 326
Hartford Steam Boiler Inspection & Insurance Co................ 1,300 61
Marsh & McLennan Cos., Inc..................................... 8,000 655
MBIA, Inc...................................................... 4,400 306
State Street Boston Corp....................................... 13,400 521
-------
1,869
- -------------------------------------------------------------------------------
HEALTH CARE (1.0%)
Becton, Dickinson & Co......................................... 3,600 234
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (1.5%)
Whitman Corp. ................................................. 16,800 357
- -------------------------------------------------------------------------------
PAPER & PACKAGING (2.4%)
Union Camp Corp. .............................................. 11,400 580
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
PHARMACEUTICALS (5.7%)
Bristol-Myers Squibb Co........................................ 6,100 $ 465
Merck & Co., Inc............................................... 5,300 305
Pfizer, Inc.................................................... 1,500 86
Schering-Plough Corp........................................... 9,700 520
-------
1,376
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $11,185).............................. 13,519
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- -------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (16.8%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (2.1%)
Boeing Co.
6.35%, 6/15/03................................................ $ 500 496
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (6.5%)
Coca Cola Co.
7.875%, 9/15/98............................................... 1,000 1,048
Philip Morris Cos., Inc.
8.75%, 6/15/97................................................ 500 519
-------
1,567
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (4.6%)
Clorox Co.
8.80%, 7/15/01................................................ 1,000 1,119
- -------------------------------------------------------------------------------
ENERGY (1.1%)
Amoco, Canada
7.25%, 12/1/02................................................ 250 264
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (2.5%)
Chevron Profit Sharing Savings Plan Trust Fund
7.28%, 1/1/97................................................. 600 609
- -------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS (COST $3,847)....................... 4,055
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
<S> <C> <C>
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES (19.8%)
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (6.6%)
7.50%, 2/11/02............................................... $1,500 $ 1,605
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (13.2%)
7.00%, 4/15/99............................................... 1,000 1,039
8.25%, 5/15/05............................................... 400 434
8.125%, 2/15/98.............................................. 600 631
7.50%, 11/15/01.............................................. 1,000 1,081
-------
3,185
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $4,523)...... 4,790
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (5.8%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (5.8%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $1,392, collateralized by $1,261
U.S. Treasury Bonds, 7.25%, due 5/15/16, valued at $1,420
(COST $1,392)................................................. 1,392 1,392
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.4%) (COST $20,947)....................... 23,756
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.6%)
- -------------------------------------------------------------------------------
Receivable for Investments Sold............................... 342
Interest Receivable........................................... 175
Dividends Receivable.......................................... 23
Other Assets.................................................. 3
Payable for Investments Purchased............................. (101)
Payable for Investment Advisory Fees.......................... (20)
Payable for Administrative Fees............................... (7)
Payable to Custodian Bank..................................... (3)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (21)
-------
390
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,838,819 outstanding $0.001 par value Institu-
tional Class shares (authorized 25,000,000 shares)........... $24,146
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 13.13
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
(In Thousands) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest..................................................... $ 953
Dividends.................................................... 515
- --------------------------------------------------------------------------------
Total Income................................................ 1,468
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.................................................. $191
Less: Fees Waived........................................... (9) 182
----
Administrative Fees--Note C.................................. 79
Audit Fees................................................... 14
Custodian Fees............................................... 8
Directors' Fees--Note F...................................... 3
Legal Fees................................................... 2
Other Expenses............................................... 19
- --------------------------------------------------------------------------------
Total Expenses.............................................. 307
Expense Offset--Note A....................................... (1)
- --------------------------------------------------------------------------------
Net Expenses................................................ 306
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME......................................... 1,162
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.............................. 2,589
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS.......... 1,387
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS....................................... 3,976
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $5,138
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
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>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,352 $ 1,162
Net Realized Gain..................................... 666 2,589
Net Change in Unrealized Appreciation (Depreciation).. (1,719) 1,387
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 299 5,138
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,346) (1,204)
Net Realized Gain..................................... (1,465) (643)
- --------------------------------------------------------------------------------
Total Distributions.................................. (2,811) (1,847)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 1,127 1,075
--In Lieu of Cash Distributions..................... 2,681 1,548
Redeemed.............................................. (12,193) (13,845)
- --------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions......... (8,385) (11,222)
- --------------------------------------------------------------------------------
Total Decrease........................................ (10,897) (7,931)
Net Assets:
Beginning of Period................................... 42,974 32,077
- --------------------------------------------------------------------------------
End of Period (2)..................................... $ 32,077 $ 24,146
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued........................................ 93 88
In Lieu of Cash Distributions........................ 222 131
Shares Redeemed...................................... (1,001) (1,084)
- --------------------------------------------------------------------------------
(686) (865)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital...................................... $ 29,923 $ 18,701
Undistributed Net Investment Income.................. 135 93
Accumulated Net Realized Gain........................ 597 2,543
Unrealized Appreciation.............................. 1,422 2,809
- --------------------------------------------------------------------------------
$ 32,077 $ 24,146
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</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>
YEARS ENDED OCTOBER 31,
--------------------------------------------------
1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 9.44 $ 11.88 $ 12.57 $ 12.68 $ 11.86
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPER-
ATIONS
Net Investment Income...... 0.40+ 0.46 0.45 0.48+ 0.52+
Net Realized and Unrealized
Gain (Loss) .............. 2.45 0.79 0.40 (0.39) 1.51
- --------------------------------------------------------------------------------
Total From Investment Op-
erations................. 2.85 1.25 0.85 0.09 2.03
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income...... (0.40) (0.46) (0.44) (0.47) (0.52)
Net Realized Gain.......... (0.01) (0.10) (0.30) (0.44) (0.24)
- --------------------------------------------------------------------------------
Total Distributions....... (0.41) (0.56) (0.74) (0.91) (0.76)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PE-
RIOD....................... $ 11.88 $ 12.57 $ 12.68 $ 11.86 $ 13.13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN................ 30.50%++ 10.72% 7.01% 0.74%++ 17.83%++
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................ $26,346 $35,326 $42,974 $32,077 $24,146
Ratio of Expenses to Average
Net Assets................. 1.00%+ 0.91% 0.90% 1.00%+ 1.00%#+
Ratio of Net Investment
Income to Average Net
Assets..................... 4.07%+ 3.78% 3.65% 3.84%+ 3.80%+
Portfolio Turnover Rate..... 11% 12% 22% 24% 22%
- --------------------------------------------------------------------------------
</TABLE>
+ Net of voluntarily waived fees of $.01, $.001 and $.004 per share for the
years ended October 31, 1991, 1994 and 1995, respectively.
++ Total return would have been lower had certain fees not been waived during
the periods indicated.
# For the year ended October 31, 1995, 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.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 the UAM Funds, Inc., began operations on December
29, 1989. At October 31, 1995, the UAM Funds were comprised of thirty-four
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.
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 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 a broker and/or 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 permanent book-tax differences.
At October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $20,987,000. Net realized appreciation for Federal income tax purposes
aggregated $2,769,000 of which $3,004,000 related to appreciated securities
and $235,000 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>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. DISTRIBUTIONS TO SHAREHOLDERS: Any distributions from net investment
income are declared and paid quarterly. Any realized net capital gains will
be distributed annually. All distributions are recorded on ex-dividend
date.
The amount and character of income and capital gain distributions 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 determined 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
adjusted to include expense offsets for custodian balance credits.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income per share in the financial highlights.
B. ADVISORY SERVICES. Under the terms of an Investment Advisory Agreement,
Cooke & Bieler, Inc. ("C&B"), 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 the Portfolio's
average daily net assets. C&B 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 offsets arrangements, from exceeding 1.00% of average daily
net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
11
<PAGE>
C & B BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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. During the year ended October 31, 1995, the Portfolio
made purchases of $6,087,000 and sales of $11,511,000 of investment securities
other than U.S. Government and short-term securities. There were no purchases
of U.S. Government securities. Sales and maturities of long-term U.S.
Government securities totaled $4,093,000.
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 reimbursement for expenses
incurred in attending Board meetings.
G. LINE OF CREDIT. The C&B Balanced Portfolio, 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 year ended October 31, 1995, there were no
borrowings under the agreement.
H. OTHER. At October 31, 1995, 42.4% of total shares outstanding were held by
three record shareholders owning 10% or greater of the aggregate total shares
outstanding.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
C&B Balanced Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
C&B Balanced Portfolio (the "Portfolio"), a Portfolio of the UAM Funds, Inc.,
at October 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
The C&B Balanced Portfolio hereby designates $504,000 as a long-term capital
gain dividend for the purpose of the dividend paid deduction on its Federal
income tax return. For the year ended October 31, 1995, the percentage of
dividends paid that qualify for the 70% dividend received deduction for
corporate shareholders is 34.1%.
13
<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
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square, Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor, 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
UAM FUNDS STERLING PARTNERS' PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Balanced.................................................................. 8
Equity.................................................................... 13
Short-Term Fixed Income................................................... 17
Statements of Operations.................................................... 21
Statement of Changes in Net Assets
Balanced.................................................................. 22
Equity.................................................................... 23
Short-Term Fixed Income................................................... 24
Financial Highlights
Balanced.................................................................. 25
Equity.................................................................... 26
Short-Term Fixed Income................................................... 27
Notes to the Financial Statements........................................... 28
Report of Independent Accountants........................................... 32
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
To Our Fellow Shareholders:
OVERVIEW OF ECONOMIC AND MARKET CONDITIONS
A year ago, the Federal Reserve (the "Fed") was in the midst of an intense
battle with inflation. Their objective was to pre-empt the rise of inflation
without sending the economy into a recession. This so-called "soft landing"
objective is certainly an admirable goal, but it is not easily achieved. Thus,
at that time the outcome of the battle was unclear, and we must admit that we
were in the camp of the skeptics. History was on our side because the Fed had
not succeeded very often in the past.
Now, however, it is increasingly evident that the Fed has indeed beat the
odds and engineered a "soft landing." Inflation remains subdued. And while
economic growth is beginning to slow, the rate of deceleration suggests that a
full-blown recession may be avoided.
This is, of course, the best of all possible worlds for the financial
markets. As a result, the past year has been a very good one for both stock
and bond investors. Interest rates on the 30-year government bond have fallen
by an amazing 1.84 percentage points from their peak of 8.17%. Thus, bond
investments, as measured by the Lehman Brothers Intermediate
Government/Corporate Index, produced a return of 12.54% during the 12 months
ended October 31, 1995. Stocks, as measured by the S&P 500 Index, produced a
total return of 26.41% during the same time period.
Looking forward, a gradually slowing economy suggests that aggregate
corporate earnings are likely to slow and perhaps decline modestly, but the
prospect for large painful declines is increasingly remote. However, while the
aggregate statistics are expected to be rather benign, certain segments of the
economy will experience significant difficulty. For example, the recent rash
of bankruptcies among retailers suggests that the retail segment may be
suffering something more than just a mild slowdown. We believe that
selectivity will become increasingly important for equity investors during
this "soft landing." This, combined with fairly high valuation levels by
historical standards suggests that some caution is warranted. Nevertheless, as
long as inflation remains under control, reasonably attractive returns can be
expected for both stock and bond investors.
FIXED INCOME OVERVIEW
After experiencing one of the worst bond markets on record in 1994, patient
investors have been rewarded with excellent fixed income returns this year.
Moderate economic activity coupled with benign inflation has resulted in an
excellent bond market environment. After raising rates early in February, the
Fed reversed course in July and lowered the Federal Funds Rate by 25 basis
points.
The ongoing deficit reduction debate has been a major positive for the bond
market this year. Expectations of fiscal responsibility have lead to a
substantial decline in long-term interest rates. The Federal Reserve Chairman
has suggested the likelihood of a more accommodative Fed should a credible
deficit reduction package be adopted.
Due to moderate economic activity and surprisingly strong productivity
gains, inflation year-to-date as measured by the Consumer Price Index (CPI)
has averaged approximately 2.6% on a trailing twelve month basis.
1
<PAGE>
Appreciation in the value of the U.S. dollar has also encouraged foreign
investors to increase their holdings of U.S. Treasuries. Despite the decline
in fixed income yields thus far this year, current yield levels remain
relatively high should inflation remain near current levels.
Looking forward, we remain optimistic. Clearly, much good news has been
built into the current level of interest rates. Nevertheless, we believe that
the country is now clearly focused on what steps must be taken to insure
continued economic prosperity. While we would not be surprised to see some
setbacks in the bond market near term, we continue to look for a favorable
fixed income environment in 1996.
BALANCED PORTFOLIO REVIEW
For the year ended October 31, 1995, the Sterling Partners' Balanced
Portfolio had a very attractive total return of 14.23%. This return was
achieved with a very minimal amount of risk due to our defensive asset mix and
our defensively biased security selection. However, in retrospect, we were too
defensive as evidenced by the fact that we lagged the 19.14% 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 26.41%, the Lehman Brothers Intermediate Government/Corporate
Index had a total return of 12.54% and the Salomon Brothers 3-month Treasury
Bills had a total return of 5.74%.
As noted above, at the beginning of the year we were overly cautious about
the prospects for the economic environment. A year ago, on October 31, 1994,
equities represented only about 37% of the assets in the Portfolio. However,
as the year progressed we reduced the magnitude of our cautious stance by
gradually raising equity exposure. By the October 31, 1995 year-end, equities
had risen to about 45% of assets.
Our expectations of moderate economic growth with low inflation leads us to
a constructive view towards the bond market. Over the last three months we
have gradually lengthened the duration of the fixed income portion of the
Portfolio to a current duration of 5.3 years.
As we reported earlier, we hired two new equity investment professionals
during 1995. Brian Walton joined us in April, and Ed Brea joined us in June.
Together with Sterling veteran Jim Norris, this new equity team is already
making a difference in performance through superior equity security selection.
Our confidence in this new equity team, combined with the benign outlook for
inflation and the prospects for avoiding a recession discussed above, suggest
that we should continue to raise equity exposure going forward. Although we
are certainly not "throwing caution to the wind," we expect to add to our
equity exposure as opportunities present themselves.
1995 was an unusual year with respect to portfolio turnover. The number of
transactions was higher than normal primarily because of the introduction of
the new equity team which brought with them some attractive new stock ideas.
The purchases of these new ideas and the sales of the less-attractive stocks
they replaced resulted in a larger-than-usual number of transactions during
the year. This situation was further impacted by the conscious decision to
raise equity exposure throughout the year. Importantly, with the transition of
the equity team largely complete, we expect portfolio turnover to trend toward
more normal levels in 1996.
2
<PAGE>
EQUITY PORTFOLIO REVIEW
For the year ended October 31, 1995, the Sterling Partners' Equity Portfolio
posted a 16.61% return. This is certainly a very attractive return, and it was
achieved during a time period when the average common stock listed on the New
York Stock Exchange returned only 15.2%. Nevertheless, our above-average
return failed to keep up with the widely followed S&P 500 Index which posted a
26.41% return.
The performance of the S&P 500 Index was led by the incredible 51% return of
the volatile and risky technology sector. Our defensive bias early in the year
kept us from fully participating in this sector. Furthermore, our conservative
value-oriented stock selection style kept us out of some of the most risky
"high-fliers" which turned out to harbor some of the most attractive returns
this year.
As the year progressed, we became more sanguine about the economic
environment. For this reason, and because of the number of attractive
investment ideas our research was uncovering, we gradually removed the
defensive bias of the Portfolio. As we end the year, the Portfolio is very
evenly diversified and structured to benefit from selected opportunities
across a wide variety of industries.
As we reported earlier, Brian Walton and Ed Brea joined Sterling during the
year. Together with Jim Norris, they constitute a new team of investment
professionals responsible for selecting the stocks which comprise the equity
portfolio. All three team members have significant experience in the industry
and each has a very impressive investment performance track record. Their
fresh new insight and expertise are already making a difference, as we are
excited about what the future holds.
You should note that the new team members brought with them a number of new
stock ideas. Naturally, we purchased these stocks and sold the less-attractive
stocks they replaced. Primarily because of this activity, the portfolio
turnover was very high this year. We believe this was highly unusual and is
not likely to be repeated. With the transition of the new equity team nearly
complete, we would expect turnover to trend back toward more normal levels in
1996.
SHORT-TERM FIXED INCOME PORTFOLIO REVIEW
The total return on the Sterling Partners' Short-Term Fixed Income Portfolio
for the twelve months ended October 31, 1995 was 8.16%. This compares to a
twelve month return on the Lehman Brothers 1-3 Year Government Bond Index of
8.83% and the Salomon Brothers 3 Month T-Bill Average of 5.74%.
The average duration of this Portfolio has ranged between 14 and 19 months
over the last year. Currently, the average duration of this Portfolio is equal
to the duration of the Lehman Brothers 1-3 Year Government Bond Index.
Incremental spreads related to non-U.S. Treasury securities are very small.
As a result, 66.0% of this Portfolio is invested in U.S. Treasury and Agency
securities and an additional 34.0% is invested in high quality corporate
bonds. Currently, the average credit quality of the Portfolio is AA.
While we have seen a significant decline in interest rates year-to-date, we
remain optimistic towards the fixed income market. We believe that economic
activity will remain moderate and that any uptick in inflation
3
<PAGE>
will be manageable. Should a credible deficit reduction plan be enacted, we
would expect short-term rates to continue to decline. We continue to manage
this Portfolio with a strong emphasis towards capital preservation.
In closing, we would once again like to thank you for your continued
confidence in Sterling Capital Management Company. As always, we remain
committed to serving your investment needs.
Sincerely,
STERLING CAPITAL MANAGEMENT COMPANY
November 15, 1995
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Without the Adviser's temporary fee waivers (also expenses assumed by the
Adviser), total returns for the Sterling Partners' Equity and 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE STERLING
PARTNERS' BALANCED PORTFOLIO, THE STANDARD & POOR'S 500 INDEX (S&P 500),
THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE INDEX,
THE SALOMON BROTHERS 3-MONTH TREASURY BILL AND THE BALANCED INDEX
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 3/15/91*
-----------------------------------
14.23% 8.60%
-----------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Lehman
Brothers+ Salomon
Sterling Intermediate Brothers
Partners+ Government/ 3-Month
Balanced S&P 500+ Corporate Treasury Balanced
Portfolio Index Index Bill Index+
<S> <C> <C> <C> <C> <C>
3/15/91* 100,000 100,000 100,000 100,000 100,000
10/31/91 104,536 107,710 108,310 103,600 107,780
10/31/92 113,581 117,760 119,140 107,520 117,870
10/31/93 127,476 135,350 130,980 110,890 132,170
10/31/94 128,319 140,575 128,452 115,170 133,822
10/31/95 146,577 177,700 144,518 121,781 159,436
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative indices are not adjusted to reflect expenses or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
fees, if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions.
Each comparative index (excluding the Lehman Brothers Intermediate
Government/Corporate Index) has been adjusted to reflect reinvestment of
dividends on securities in the index.
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 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 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.
Please note that one can not invest in an unmanaged index.
5
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN
THE STERLING PARTNERS' EQUITY PORTFOLIO
AND THE STANDARD & POOR'S 500 INDEX (S & P 500).
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 5/15/91*
-----------------------------------
16.61% 10.67%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sterling
Partners'
Equity
Portfolio+ S & P 500 Index+
<S> <C> <C>
5/15/91* 100,000 100,000
10/31/91 103,512 108,010
10/31/92 112,839 118,760
10/31/93 130,280 136,500
10/31/94 134,840 141,769
10/31/95 157,237 179,210
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return for the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
fees, if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions. The
comparative index has been adjusted to reflect reinvestment of dividends on
securities in the index.
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.
Please note that one can not invest in an unmanaged index.
6
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE STERLING
PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO, THE LEHMAN 1-3 YEAR
GOVERNMENT BOND INDEX AND THE SALOMON BROTHERS 3 MONTH TREASURY BILL.
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------
1 YEAR SINCE 2/10/92*
-----------------------------------
8.16% 5.09%
-----------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Sterling
Partners' The Lehman Salomon
Short--Term 1-3 Year Brothers
Fixed Income Government 3-Month
Portfolio+ Bond Index+ Treasury Bill
<S> <C> <C> <C>
2/10/92* 100,000 100,000 100,000
10/31/92 103,745 105,000 103,000
10/31/93 109,951 111,550 105,790
10/31/94 111,226 112,833 109,863
10/31/95 120,302 122,796 116,169
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return for the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative indices are not adjusted to reflect expenses or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
fees, if reflected, would reduce the performance quoted. The Portfolio's
performance assumes the reinvestment of all dividends and distributions.
Each comparative index has been adjusted to reflect reinvestment of
dividends on securities in the index.
Definition of the Comparative Index
-----------------------------------
The Lehman Brothers 1-3 Year Government Bond Index is composed of agency and
Treasury securities with maturities of one to three years.
Please note that one can not invest in an unmanaged index.
7
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (45.1%)
- -------------------------------------------------------------------------------
BANKS (0.3%)
PNC Bank Corp. ............................................... 8,225 $ 216
- -------------------------------------------------------------------------------
BASIC RESOURCES (1.4%)
Destec Energy, Inc. .......................................... 24,800 350
Rayonier, Inc. ............................................... 15,600 585
-------
935
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (0.5%)
Interstate Bakeries Corp. .................................... 16,000 342
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (1.1%)
Knight-Ridder, Inc. .......................................... 12,650 702
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (1.2%)
BW/IP Holding, Inc. .......................................... 14,875 249
Keystone International, Inc. ................................. 25,100 559
-------
808
- -------------------------------------------------------------------------------
CHEMICALS (1.0%)
Dow Chemical Co. ............................................. 9,400 645
- -------------------------------------------------------------------------------
CONSTRUCTION (0.7%)
*USG Corp. .................................................... 15,600 454
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (5.4%)
Anheuser-Busch Cos., Inc. .................................... 5,065 334
Dial Corp. ................................................... 27,500 670
First Brands Corp. ........................................... 17,300 792
Hasbro, Inc. ................................................. 23,000 701
Philip Morris Cos., Inc. ..................................... 11,733 992
-------
3,489
- -------------------------------------------------------------------------------
ELECTRONICS (1.8%)
Amphenol Corp., Class A....................................... 21,000 454
Motorola, Inc. ............................................... 11,000 722
-------
1,176
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (3.9%)
Chevron Corp. ................................................. 15,625 $ 730
Exxon Corp. ................................................... 4,225 323
Mobil Corp. ................................................... 8,625 869
Schlumberger Ltd. ............................................. 10,100 629
-------
2,551
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (2.2%)
Great Western Financial Corp. ................................. 27,225 616
Paine Webber Group............................................. 37,950 835
-------
1,451
- --------------------------------------------------------------------------------
HEALTH CARE (3.5%)
*Acuson Corp. .................................................. 33,300 387
Amsco International, Inc. ..................................... 43,000 688
Charter Medical Corp. ......................................... 22,175 399
Guidant Corp. ................................................. 24,400 781
-------
2,255
- --------------------------------------------------------------------------------
INSURANCE (2.6%)
Chubb Corp. ................................................... 7,800 701
*Prudential Reinsurance Holdings, Inc. ......................... 26,000 530
UNUM Corp. .................................................... 8,325 438
-------
1,669
- --------------------------------------------------------------------------------
MANUFACTURING (4.0%)
Bandag, Inc. .................................................. 7,800 400
Snap-On Tools Corp. ........................................... 19,450 824
Thomas & Betts Corp. .......................................... 7,000 452
Tyco International Ltd. ....................................... 15,075 916
-------
2,592
- --------------------------------------------------------------------------------
MINING (1.5%)
Potash Corp. of Saskatchewan, Inc. ............................ 13,700 954
- --------------------------------------------------------------------------------
PHARMACEUTICALS (1.2%)
Rhone-Poulenc Rorer, Inc. ..................................... 17,150 808
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
RETAIL (2.6%)
Federated Department Stores, Inc. ............................. 18,175 $ 461
*Price/Costco, Inc. ............................................ 47,250 803
The Limited, Inc. ............................................. 22,100 406
-------
1,670
- --------------------------------------------------------------------------------
SERVICES (2.0%)
FlightSafety International, Inc. .............................. 10,700 511
Rexel, Inc. ................................................... 14,400 166
Rollins, Inc. ................................................. 27,600 580
-------
1,257
- --------------------------------------------------------------------------------
TECHNOLOGY (2.3%)
*Novell, Inc. .................................................. 25,650 423
*Sequent Computer Systems, Inc. ................................ 37,400 650
*Storage Technology Corp. ...................................... 17,875 440
-------
1,513
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (1.2%)
Ameritech Corp. ............................................... 14,250 770
- --------------------------------------------------------------------------------
UTILITIES (4.7%)
AT&T Corp. .................................................... 10,500 672
CMS Energy Corp. .............................................. 34,625 956
Illinova Corp. ................................................ 31,900 905
Portland General Corp. ........................................ 18,500 502
-------
3,035
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $26,762).............................. 29,292
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS (12.1%)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (12.1%)
Associates Corp.
6.00%, 12/1/95................................................ $1,900 1,899
General Motors Acceptance Corp.
7.75%, 1/17/97................................................ 2,000 2,041
Norwest Corp.
7.70%, 11/15/97............................................... 2,400 2,479
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS--(CONTINUED)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES--(CONTINUED)
Paccar Financial Corp.
6.31%, 7/15/98................................................ $1,425 $ 1,434
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $7,721)............................. 7,853
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (38.5%)
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (22.4%)
6.50%, 4/30/99................................................ 2,625 2,686
6.25%, 5/31/00................................................ 950 966
7.50%, 11/15/01............................................... 2,260 2,444
7.25%, 8/15/04................................................ 2,200 2,382
6.50%, 8/15/05................................................ 5,885 6,095
-------
14,573
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (8.2%)
6.25%, 8/15/23................................................ 1,350 1,319
7.625%, 2/15/25............................................... 2,700 3,135
6.875%, 8/15/25............................................... 800 859
-------
5,313
- -------------------------------------------------------------------------------
GOVERNMENT AGENCY SECURITIES (7.9%)
Federal Home Loan Bank
7.87%, 4/19/00, callable 4/19/96.............................. 1,000 1,009
Federal Home Loan Mortgage Corp.
REMIC Series 1311G
7.50%, 5/15/19
Estimated Average Life 11/98++................................. 2,050 2,087
REMIC Series 1332E
6.50%, 1/15/16
Estimated Average Life 11/96++................................. 2,000 2,000
-------
5,096
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $24,105)................. 24,982
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.0%)
- -------------------------------------------------------------------------------
COMMERCIAL PAPER (1.4%)
AT & T Corp.
**5.72%, 11/14/95............................................. $ 900 $ 898
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.6%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $2,377, collateralized by $2,153
U.S. Treasury Notes 7.25%, due 5/15/16, valued at $2,425...... 2,377 2,377
- -------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,275)..................... 3,275
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.7%) (COST $61,863)...................... 65,402
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.7%)
- -------------------------------------------------------------------------------
Cash.......................................................... 26
Interest Receivable........................................... 476
Dividends Receivable.......................................... 34
Other Assets.................................................. 10
Payable for Investments Purchased............................. (943)
Payable for Investment Advisory Fees.......................... (42)
Payable for Administrative Fees............................... (7)
Payable for Custodian Fees.................................... (3)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (19)
-------
(469)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 5,477,151 outstanding $0.001 par value Institu-
tional Class shares (authorized 25,000,000 shares)........... $64,933
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 11.86
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
++ Estimated average life is unaudited
* Non-Income Producing Security
** Interest rate disclosed represents effective yield at October 31, 1995
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (94.6%)
- -------------------------------------------------------------------------------
BANKS (0.7%)
PNC Bank Corp. ............................................... 8,875 $ 233
- -------------------------------------------------------------------------------
BASIC RESOURCES (3.1%)
Destec Energy, Inc. .......................................... 25,500 360
Rayonier, Inc. ............................................... 17,200 645
-------
1,005
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (1.1%)
Interstate Bakeries Corp. .................................... 16,600 355
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (2.2%)
Knight-Ridder, Inc. .......................................... 12,835 712
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (2.5%)
BW/IP Holding, Inc. .......................................... 15,400 258
Keystone International, Inc. ................................. 25,000 556
-------
814
- -------------------------------------------------------------------------------
CHEMICALS (2.1%)
Dow Chemical Co. ............................................. 9,850 676
- -------------------------------------------------------------------------------
CONSTRUCTION (1.5%)
*USG Corp. .................................................... 16,000 466
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (11.3%)
Anheuser-Busch Cos., Inc. .................................... 5,150 340
Dial Corp. ................................................... 27,425 668
First Brands Corp. ........................................... 17,850 817
Hasbro, Inc. ................................................. 23,500 717
Philip Morris Cos., Inc. ..................................... 12,600 1,065
-------
3,607
- -------------------------------------------------------------------------------
ELECTRONICS (3.8%)
Amphenol Corp., Class A....................................... 21,500 465
Motorola, Inc. ............................................... 11,500 755
-------
1,220
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ENERGY (8.0%)
Chevron Corp. ................................................. 15,900 $ 743
Exxon Corp. ................................................... 4,300 329
Mobil Corp. ................................................... 8,225 829
Schlumberger Ltd. ............................................. 10,430 649
-------
2,550
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (4.6%)
Great Western Financial Corp. ................................. 27,900 631
Paine Webber Group............................................. 38,775 853
-------
1,484
- --------------------------------------------------------------------------------
HEALTH CARE (7.2%)
*Acuson Corp. .................................................. 34,000 395
Amsco International, Inc. ..................................... 45,600 730
Charter Medical Corp. ......................................... 23,250 418
Guidant Corp. ................................................. 23,900 765
-------
2,308
- --------------------------------------------------------------------------------
INSURANCE (5.5%)
Chubb Corp. ................................................... 8,600 773
*Prudential Reinsurance Holdings, Inc. ......................... 26,000 530
UNUM Corp. .................................................... 8,600 452
-------
1,755
- --------------------------------------------------------------------------------
MANUFACTURING (8.7%)
Bandag, Inc. .................................................. 8,575 439
Snap-On, Inc. ................................................. 21,425 908
Thomas & Betts Corp. .......................................... 7,150 462
Tyco International Ltd. ....................................... 15,750 957
-------
2,766
- --------------------------------------------------------------------------------
MINING (3.1%)
Potash Corp. of Saskatchewan, Inc. ............................ 14,000 975
- --------------------------------------------------------------------------------
PHARMACEUTICALS (2.6%)
Rhone-Poulenc Rorer, Inc. ..................................... 17,500 825
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
RETAIL (5.4%)
Federated Department Stores, Inc. ............................ 18,625 $ 473
*Price/Costco, Inc. ........................................... 48,200 819
The Limited, Inc. ............................................ 23,600 434
-------
1,726
- --------------------------------------------------------------------------------
SERVICES (4.2%)
FlightSafety International, Inc. ............................. 11,650 556
Rexel, Inc. .................................................. 15,400 177
Rollins, Inc. ................................................ 29,000 609
-------
1,342
- --------------------------------------------------------------------------------
TECHNOLOGY (4.8%)
*Novell, Inc. ................................................. 27,035 446
*Sequent Computer Systems, Inc. ............................... 36,950 642
*Storage Technology Corp. ..................................... 18,670 460
-------
1,548
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.5%)
Ameritech Corp. .............................................. 14,700 794
- --------------------------------------------------------------------------------
UTILITIES (9.7%)
AT&T Corp. ................................................... 11,000 704
CMS Energy Corp. ............................................. 34,400 950
Illinova Corp. ............................................... 32,550 924
Portland General Corp. ....................................... 19,000 515
-------
3,093
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $27,881)............................. 30,254
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (8.4%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (8.4%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $2,693, collateralized by $2,439
U.S. Treasury Notes 7.25%, due 5/15/16, valued at $2,747 (COST
$2,693)....................................................... $2,693 2,693
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.0%) (COST $30,574)...................... 32,947
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (-3.0%)
- -------------------------------------------------------------------------------
Cash............................................................ $ 10
Dividends Receivable............................................ 34
Interest Receivable............................................. 1
Other Assets.................................................... 9
Payable for Investments Purchased............................... (985)
Payable for Investment Advisory Fees............................ (20)
Payable for Administrative Fees................................. (7)
Payable for Custodian Fees...................................... (2)
Payable for Directors' Fees..................................... (1)
Other Liabilities............................................... (17)
-------
(978)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 2,335,458 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)...... $31,969
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE......... $ 13.69
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
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
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES (32.0%)
- -------------------------------------------------------------------------------
AUTO-LOAN PASS THROUGH (2.0%)
Chase Manhattan Grantor Trust, Series 1995A A
6.00%, 9/17/01............................................... $ 484 $ 484
- -------------------------------------------------------------------------------
BANKS (3.7%)
Irving Bank Corp.
8.50%, 6/1/02, callable 12/18/95............................. 405 409
NationsBank Corp.
6.625%, 1/15/98.............................................. 500 506
-------
915
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (6.1%)
Commercial Credit Corp.
6.375%, 1/1/96............................................... 100 100
*Ford Motor Credit Corp. Medium Term Note
6.035%, 11/10/97.............................................. 1,000 998
Xerox Credit Co.
10.125%, 4/15/99, callable 4/15/96........................... 400 407
-------
1,505
- -------------------------------------------------------------------------------
INDUSTRIAL (11.9%)
B.P. America Inc.
9.50%, 1/1/98................................................ 1,000 1,071
Cooper Industries, Inc.
7.76%, 11/5/97............................................... 1,000 1,032
Johnson & Johnson
8.00%, 9/1/98, callable 9/1/96............................... 200 203
PHH Group, Inc.
8.00%, 1/1/97................................................ 500 511
Philip Morris Cos., Inc.
9.80%, 12/15/98, callable 12/15/95........................... 125 126
-------
2,943
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.0%)
Cincinnatti Bell Telephone
7.30%, 4/30/96............................................... 500 501
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- --------------------------------------------------------------------------------
TRANSPORTATION (2.1%)
Seaboard System, Series 6
10.00%, 5/15/97................................................ $ 500 $ 529
- --------------------------------------------------------------------------------
UTILITIES (4.2%)
Louisville Gas & Electric Co.
5.625%, 6/1/96................................................. 1,050 1,048
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (COST $7,845).................... 7,925
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (65.0%)
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (53.2%)
4.625%, 2/15/96................................................ 1,000 997
4.375%, 8/15/96................................................ 2,175 2,155
6.75%, 5/31/97................................................. 300 305
5.50%, 7/31/97................................................. 500 499
5.875%, 7/31/97................................................ 2,000 2,008
6.50%, 8/15/97................................................. 500 507
5.50%, 9/30/97................................................. 400 399
6.125%, 5/15/98................................................ 1,000 1,010
5.875%, 8/15/98................................................ 1,900 1,909
6.875%, 8/31/99................................................ 1,000 1,037
7.125%, 9/30/99................................................ 1,000 1,046
6.25%, 5/31/00................................................. 1,250 1,271
-------
13,143
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY SECURITIES (4.9%)
Federal Farm Credit Bank
*5.91%, 6/24/96................................................. 500 500
*6.60%, 8/26/96................................................. 500 501
Federal Home Loan Bank
6.34%, 4/6/98.................................................. 150 151
Guaranteed Trade Trust, Series 93-A
4.86%, 4/1/98 Estimated Average Life 9/96++ ................... 50 49
-------
1,201
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(CONTINUED)
- --------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (6.9%)
Federal Home Loan Mortgage Corporation
*REMIC Series 1225S
6.663%, 3/15/97
Estimated Average Life 2/97++............................... $ 212 $ 212
REMIC Series 1165G
7.00%, 9/15/18
Estimated Average Life 1/96++................................. 47 47
REMIC Series 1484Q
5.00%, 1/15/23
Estimated Average Life 8/17++................................. 79 60
Federal National Mortgage Association
REMIC Series G-93 2D
6.00%, 10/25/12
Estimated Average Life 7/97++................................. 225 224
REMIC Series 90-4E
8.95%, 7/25/15
Estimated Average Life 3/96++................................. 563 564
REMIC Series 92-49 E
7.00%, 7/25/17
Estimated Average Life 7/96++................................. 174 174
REMIC Series 92-150G
6.75%, 9/25/18
Estimated Average Life 3/97++................................. 370 371
REMIC Series G-32E
8.00%, 12/25/18
Estimated Average Life 11/95++................................ 63 62
-------
1,714
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $15,948)................. 16,058
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.4%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.4%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $354, collateralized by $313 U.S.
Treasury Bonds 7.5%, due 11/15/16, valued at $362 (COST $354).. 354 354
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.4%) (COST $24,147)........................ 24,337
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (1.6%)
- -------------------------------------------------------------------------------
Cash............................................................ $ 24
Interest Receivable............................................. 384
Other Assets.................................................... 10
Dividends Payable............................................... (7)
Payable for Administrative Fees................................. (7)
Payable for Custodian Fees...................................... (1)
Payable for Directors' Fees..................................... (1)
Other Liabilities............................................... (17)
-------
385
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 2,481,036 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)...... $24,722
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE......... $ 9.96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements.
++ Estimated Average Life is unaudited.
* Variable/Floating rate security--rate disclosed is as of October 31, 1995.
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
STERLING PARTNERS' PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended October 31, 1995
<TABLE>
<CAPTION>
STERLING
STERLING STERLING PARTNERS'
PARTNERS' PARTNERS' SHORT-TERM
BALANCED EQUITY FIXED INCOME
(In Thousands) PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................... $ 642 $ 617 $ --
Interest............................ 2,567 73 1,467
- --------------------------------------------------------------------------------
Total Income....................... 3,209 690 1,467
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B....
Basic Fee.......................... $490 $197 $ 120
Less: Fees Waived.................. -- 490 (60) 137 (105) 15
---- ---- -----
Administrative Fees--Note C......... 82 76 80
Custodian Fees...................... 8 11 2
Audit Fees.......................... 14 13 13
Printing Fees....................... 9 9 7
Legal Fees.......................... 7 3 2
Registration and Filing Fees........ 6 7 8
Directors' Fees--Note F............. 4 3 3
Other Expenses...................... 7 3 3
- --------------------------------------------------------------------------------
Total Expenses..................... 627 262 133
Expense Offset--Note A.............. (2) (2) (1)
- --------------------------------------------------------------------------------
Net Expenses....................... 625 260 132
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME................ 2,584 430 1,335
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON
INVESTMENTS......................... 3,427 2,238 (146)
NET CHANGE IN UNREALIZED APPRECIATION
ON INVESTMENTS...................... 2,718 1,464 695
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS.............. 6,145 3,702 549
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................... $8,729 $4,132 $1,884
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
STERLING PARTNERS' BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,719 $ 2,584
Net Realized Gain..................................... 1,823 3,427
Net Change in Unrealized Appreciation (Depreciation).. (3,156) 2,718
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 386 8,729
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,621) (2,533)
Net Realized Gain..................................... (622) (1,844)
- --------------------------------------------------------------------------------
Total Distributions.................................. (2,243) (4,377)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 24,923 20,678
--In Lieu of Cash Distributions..................... 2,141 4,260
Redeemed.............................................. (7,550) (29,030)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... 19,514 (4,092)
- --------------------------------------------------------------------------------
Total Increase........................................ 17,657 260
Net Assets:
Beginning of Year..................................... 47,016 64,673
- --------------------------------------------------------------------------------
End of Year (2)....................................... $64,673 $64,933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 2,190 1,856
In Lieu of Cash Distributions......................... 191 391
Shares Redeemed....................................... (654) (2,580)
------- -------
1,727 (333)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $61,810 $57,718
Undistributed Net Investment Income................... 223 274
Accumulated Realized Net Gain......................... 1,819 3,402
Unrealized Appreciation............................... 821 3,539
------- -------
$64,673 $64,933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 279 $ 430
Net Realized Gain..................................... 1,079 2,238
Net Change in Unrealized Appreciation (Depreciation).. (837) 1,464
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 521 4,132
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (257) (412)
Net Realized Gain..................................... (177) (1,076)
- --------------------------------------------------------------------------------
Total Distributions.................................. (434) (1,488)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 9,113 8,462
--In Lieu of Cash Distributions..................... 430 1,472
Redeemed.............................................. (2,260) (3,961)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 7,283 5,973
- --------------------------------------------------------------------------------
Total Increase........................................ 7,370 8,617
Net Assets:
Beginning of Year..................................... 15,982 23,352
- --------------------------------------------------------------------------------
End of Year (2)....................................... $23,352 $31,969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 720 665
In Lieu of Cash Distributions......................... 35 125
Shares Redeemed....................................... (182) (318)
------- -------
573 472
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $21,342 $27,315
Undistributed Net Investment Income................... 26 44
Accumulated Realized Net Gain......................... 1,075 2,237
Unrealized Appreciation............................... 909 2,373
------- -------
$23,352 $31,969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
STERLING PARTNERS' SHORT-TERM FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,156 $ 1,335
Net Realized Loss..................................... (274) (146)
Net Change in Unrealized Appreciation (Depreciation).. (623) 695
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 259 1,884
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,121) (1,347)
In Excess of Net Investment Income.................... -- (7)
Return of Capital..................................... (35) --
- --------------------------------------------------------------------------------
Total Distributions.................................. (1,156) (1,354)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 15,053 6,891
--In Lieu of Cash Distributions..................... 1,021 1,252
Redeemed.............................................. (11,051) (8,333)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... 5,023 (190)
- --------------------------------------------------------------------------------
Total Increase........................................ 4,126 340
Net Assets:
Beginning of Year..................................... 20,256 24,382
- --------------------------------------------------------------------------------
End of Year (2)....................................... $24,382 $24,722
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 1,512 701
In Lieu of Cash Distributions......................... 103 127
Shares Redeemed....................................... (1,114) (850)
------- -------
501 (22)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $25,137 $24,924
Distributions in Excess of Net Investment Income...... (9) (7)
Accumulated Realized Net Loss......................... (241) (385)
Unrealized Appreciation (Depreciation)................ (505) 190
------- -------
$24,382 $24,722
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<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
1991** TO OCTOBER 31,
OCTOBER 31, ----------------------------------
1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 10.00 $ 10.26 $ 10.71 $ 11.51 $ 11.13
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income....... 0.22+ 0.37 0.34 0.32 0.46
Net Realized and Unrealized
Gain (Loss)................ 0.23 0.50 0.94 (0.25) 1.04
- --------------------------------------------------------------------------------
Total From Investment
Operations................ 0.45 0.87 1.28 0.07 1.50
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....... (0.19) (0.37) (0.32) (0.32) (0.45)
Net Realized Gain........... (0.00) (0.05) (0.16) (0.13) (0.32)
- --------------------------------------------------------------------------------
Total Distributions........ (0.19) (0.42) (0.48) (0.45) (0.77)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD...................... $ 10.26 $ 10.71 $ 11.51 $ 11.13 $ 11.86
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN................. 4.54%++ 8.65% 12.23% 0.66% 14.23%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................. $19,501 $39,129 $47,016 $64,673 $64,933
Ratio of Expenses to Average
Net Assets.................. 1.11%*+ 1.09% 0.99% 1.01% 0.96%#
Ratio of Net Investment
Income to Average Net
Assets...................... 3.85%*+ 3.52% 3.08% 3.05% 3.96%
Portfolio Turnover Rate...... 40% 80% 49% 70% 130%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.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.
# For the year ended October 31, 1995, 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.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
STERLING PARTNERS' EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
MAY 15, YEARS ENDED
1991** TO OCTOBER 31,
OCTOBER 31, ----------------------------------------
1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.00 $ 10.29 $ 11.01 $ 12.39 $ 12.54
- ----------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income+. 0.06 0.17 0.15 0.16 0.21
Net Realized and
Unrealized Gain....... 0.29 0.75 1.53 0.27 1.73
- ----------------------------------------------------------------------------------
Total From Investment
Operations........... 0.35 0.92 1.68 0.43 1.94
- ----------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.. (0.06) (0.16) (0.16) (0.15) (0.20)
Net Realized Gain...... -- (0.04) (0.14) (0.13) (0.59)
- ----------------------------------------------------------------------------------
Total Distributions... (0.06) (0.20) (0.30) (0.28) (0.79)
- ----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ 10.29 $ 11.01 $ 12.39 $ 12.54 $ 13.69
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
TOTAL RETURN............ 3.51%++ 9.01%++ 15.46%++ 3.50%++ 16.61%++
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $ 2,515 $ 9,725 $15,982 $23,352 $31,969
Ratio of Expenses to
Average Net Assets+.... 1.11%* 1.04% 0.93% 0.99% 1.00%#
Ratio of Net Investment
Income to Average Net
Assets+................ 1.43%* 1.73% 1.30% 1.34% 1.64%
Portfolio Turnover Rate. 24% 84% 55% 73% 135%
- ----------------------------------------------------------------------------------
</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 and 1995 of $.18, $.09, $.06, $.04 and $.03 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.
# For the year ended October 31, 1995, 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%
The accompanying notes are an integral part of the financial statements.
26
<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
1992** TO OCTOBER 31,
OCTOBER 31, -------------------------------
1992 1993 1994 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 10.00 $ 10.07 $ 10.12 $ 9.74
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income+...... 0.30 0.53 0.49 0.54
Net Realized and Unrealized
Gain....................... 0.07 0.06 (0.38) 0.23
- ---------------------------------------------------------------------------------
Total From Investment
Operations................ 0.37 0.59 0.11 0.77
- ---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....... (0.30) (0.53)++ (0.48) (0.55)
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)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD...................... $ 10.07 $ 10.12 $ 9.74 $ 9.96
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN................. 3.75%+++ 5.98%+++ 1.16%+++ 8.16%+++
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)................. $12,101 $20,256 $24,382 $24,722
Ratio of Expenses to Average
Net Asset+.................. 0.50%* 0.50% 0.53% 0.55%#
Ratio of Net Investment
Income to Average Net
Assets+..................... 5.00%* 5.24% 5.00% 5.55%
Portfolio Turnover Rate...... 122% 78% 100% 58%
- ---------------------------------------------------------------------------------
</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
and 1995 of $.03, $.05, $.05 and $.04 per share, respectively.
++ Because of the differences between book and tax basis accounting,
approximately $.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.
# For the year ended October 31, 1995, 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.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO THE FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds
Trust, formerly known as The Regis Fund II, (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"), which are portfolios of the 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 October 31, 1995, the UAM Funds were comprised of
thirty-four 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.
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 securities are valued at the mean of the current bid and the
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 and undistributed net investment income have been
adjusted for permanent book-tax differences. Reclassifications arose
principally from differing book and tax treatments for paydown losses on
mortgage backed securities.
At October 31, 1995, cost and unrealized appreciation (depreciation) of
investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
COST APPRECIATION DEPRECIATION NET
STERLING PARTNERS' PORTFOLIOS (000) (000) (000) (000)
- ----------------------------- ------- ------------ ------------ ------
<S> <C> <C> <C> <C>
Balanced........................... $61,879 $4,125 $(602) $3,523
Equity............................. 30,575 3,047 (675) 2,372
Short-Term Fixed Income............ 24,150 254 (67) 187
</TABLE>
28
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
For the year ended October 31, 1995, the following Portfolio had a
capital loss carryover for Federal income tax purposes to offset future net
capital gains through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE OCTOBER 31,
-----------------------------
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 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: Any distributions from net investment
income will normally be declared and distributed quarterly for the Sterling
Partners' Equity and Sterling Partners' Balanced Portfolios, and declared
daily and distributed monthly for the Sterling Partners' Short-Term Fixed
Income Portfolio. Any realized net capital gains will be distributed
annually for the Portfolios. 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 determined based on the specific
identification method. Dividend income is recorded on the ex-dividend date.
Interest income is recognized using 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 Portfolios have been adjusted
to include expense offsets for custodian balance credits.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income per share in the Financial Highlights.
B. ADVISORY SERVICES. Sterling Capital Management Company ("Sterling"), a
wholly-owned subsidiary of United Asset Management Corporation ("UAM"),
provides investment advisory services to the Portfolios under Investment
Advisory Agreements. Under the terms of the Investment Advisory Agreements,
Sterling is
29
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
paid a fee calculated at an annual rate of 0.75% of average 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. Sterling has voluntarily agreed to waive a portion of
its advisory fees and to assume expenses on behalf of the Portfolios, if
necessary, in order to keep the Portfolios' total annual operating expenses,
after the effect of expense offsets arrangements, from exceeding 1.11%, 0.99%
and 0.55% of average daily net assets, respectively.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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 Portfolios.
E. PURCHASES AND SALES. During the year ended October 31, 1995, purchases
and sales of investment securities other than long-term U.S. Government and
agency securities and short-term securities were:
<TABLE>
<CAPTION>
STERLING PARTNERS' PURCHASES SALES
PORTFOLIOS (000) (000)
------------------ --------- -------
<S> <C> <C>
Balanced.................................................. $30,961 $40,167
Equity.................................................... 38,169 33,763
Short-Term Fixed Income................................... 2,581 3,326
</TABLE>
Purchases and sales of long-term U.S. Government and agency securities were
$46,986,000 and $39,614,000, respectively, for the Sterling Partners' Balanced
Portfolio, and $10,528,000 and $9,984,000, respectively, for the Sterling
Partners' Short-Term Fixed Income Portfolio. There were no purchases or sales
of 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 the UAM Funds and AEW, plus a
30
<PAGE>
STERLING PARTNERS' PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
quarterly retainer of $150 for each active portfolio of the UAM Funds 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 year
ended October 31, 1995, there were no borrowings under the agreement.
H. OTHER. At October 31, 1995, the percentage of total shares outstanding
and the number of record shareholders owning 10% or greater of the Portfolio's
was as follows:
<TABLE>
<CAPTION>
STERLING PARTNERS' NO. OF %
PORTFOLIOS SHAREHOLDERS OWNERSHIP
------------------ ------------ ---------
<S> <C> <C>
Equity................................................ 1 16.2%
Short-Term Fixed Income............................... 1 10.7
</TABLE>
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of UAM Funds, Inc. and Shareholders of
Sterling Partners' Balanced Portfolio
Sterling Partners' Equity Portfolio
Sterling Partners' Short-Term Fixed Income Portfolio
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Sterling Partners' Balanced Portfolio, Sterling Partners' Equity
Portfolio, and Sterling Partners' Short-Term Fixed Income Portfolio (the
"Portfolios"), Portfolios of the UAM Funds, Inc., at October 31, 1995, and the
results of each of their operations, the changes in each of their net assets
and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):
The Sterling Partners' Balanced and Sterling Partners' Equity Portfolios
hereby designates $1,844,000 and $1,076,000, respectively, as a long-term
capital gain dividend for the purpose of the dividend paid deduction on its
federal income tax return.
For the year ended October 31, 1995, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders for the
Sterling Partners' Balanced and Sterling Partners' Equity Portfolios is 15.5%
and 41.0%, respectively.
32
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS SAMI
PREFERRED STOCK INCOME
PORTFOLIO
- -------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Norton H. Reamer William A. Humenuk
Director, President Director
and Chairman
Peter M. Whitman, Jr.
Director
Mary Rudie Barneby
Director and Executive William H. Park
Vice President Vice President and
Assistant Treasurer
John T. Bennett, Jr.
Director Karl O. Hartmann
Secretary
J. Edward Day
Director Robert R. Flaherty
Treasurer
Philip D. English
Director Harvey M. Rosen
Assistant Secretary
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Spectrum Asset Management, Inc.
Four High Ridge Park
Stamford, CT 06905
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor, 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 PREFERRED STOCK INCOME
PORTFOLIO
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholder:
In the time period beginning November 1, 1994, and ended October 31, 1995, the
Dow Jones Industrial Average and the 30-year U.S. Government bond surged 22%
and 21%, respectively. During this same period, the net assets of the SAMI
Preferred Stock Income Portfolio (the "Portfolio") declined to $33.8 million
from $91.2 million. The shareholder redemptions during this fiscal period were
primarily the result of shifts in asset allocations which more favorably
weighted higher risk profiles than that of the Portfolio.
The total return (not annualized) for the Portfolio for the quarter ended
October 31, 1995 was 2.66% compared to 1.39%, for three-month treasury bills
based on the Salomon Brothers 1-3 Year Treasury Index. The total return for
the fiscal year ended October 31, 1995 was 6.67% compared to 5.97% for the
one-year treasury-bill based on the Salomon Brothers 1-3 Year Treasury Index.
Although the Portfolio outperformed these "risk-free" alternative investments
during both periods, there were two factors that narrowed the yield advantage
for the fiscal year. First, the fiscal year includes the last two months of
1994 when dealers were nervous about the direction of interest rates. During
this time period, there was about a 5% volatility range for the U.S. Treasury
bond without a real conviction on direction. This uncertainty manifested
itself in some spread widening in the preferred stock market which made the
cross-hedge underperform the risk-free alternative. Second, once the market
found its direction toward lower rates this year, the higher yielding stocks
were called from the Portfolio. Although the Portfolio gets a small capital
boost when these stocks are called at a premium, it is difficult to replace
the high current yield that is called away. To provide some offset to
continued call risk, we have favorably adjusted the Portfolio's call terms.
This had led to an improvement in performance as evidenced by the significant
yield advantage of the Portfolio over the quarter ended October 31, 1995. It
should be noted that corporate tax-paying investors qualifying for the 70%
Dividend Received Deduction would have needed to earn 3.33% (quarterly) and
9.64% (for the year) on a taxable-equivalent basis in order to achieve the
same after-tax return earned on the Portfolio.
Looking ahead, the utility industry which includes electric and gas (84% of
the Portfolio) is on the other side of the construction cycle and
repositioning itself for increased competition. To offset the increased
business risk of the industry, our portfolio strategy has been to avoid the
high cost utilities and diversify across those names with mostly an above-
average business position. In addition to diversification benefits, the
Portfolio should also benefit from the improved technicals of the traditional
preferred stock market as new issuance has all but evaporated. This decline in
new supply is being exacerbated by continued calls of and exchange offers for
the traditional preferred stock product. At the end of the day, the lack of
new supply and strong investor demand for existing issues should continue to
improve the technical outlook for the traditional preferred stock market. As
discussed, the Portfolio is well positioned to benefit from this strength and
should continue to be an attractive fund to invest your money.
Respectfully yours,
/s/ Mark A. Lieb /s/ Scott T. Fleming
Mark A. Lieb Scott T. Fleming
President Chairman
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>
Performance Comparison
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $500,000 PURCHASE IN THE SAMI PREFERRED
STOCK INCOME PORTFOLIO, THE SALOMON 1-3 YEAR TREASURY INDEX AND THE
1 YEAR U.S. TREASURY BILL.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
1 YEAR SINCE 6/23/92*
- --------------------------------------------------------------------------------
6.67% 3.74%**
- --------------------------------------------------------------------------------
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
SAMI Preferred
Stock Income 1 yr. U.S. Salomon 1-3 Year
Portfolio+ Treasury Bill Treasury Index+
<S> <C> <C> <C>
6/23/92 500,000 500,000 500,000
10/31/92 508,320 505,400 517,250
10/31/93 536,300 522,400 547,050
10/31/94 530,133 546,430 553,451
10/31/95 565,493 579,052 601,878
</TABLE>
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate. When shares are redeemed, they may
be worth more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, the total
return would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions.
Definition of the Comparative Index
-----------------------------------
The Salomon 1-3 Year Treasury Index includes only U.S. Treasury Notes and Bonds
with maturities one year or greater and less than three years.
Please note that one can not invest in an unmanaged index.
2
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (86.9%)
- -------------------------------------------------------------------------------
INDUSTRIAL (3.1%)
Ford Holdings, Series C, 7.12%................................ 42,000 $ 1,061
- -------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (83.8%)
Atlantic City Electric Co., 4.75%............................. 8,800 611
Baltimore Gas & Electric Co., 6.99%........................... 15,000 1,583
Central Illinois Light Co., 5.85%............................. 10,000 1,015
Columbus Southern Power Co., 9.50%............................ 1,988 210
Consolidated Edison Co., Series C, 4.65%...................... 6,090 435
Consolidated Edison Co., Series D, 4.65%...................... 10,329 737
Empire District Electric Co., 8.125%.......................... 115,365 1,223
Florida Power & Light Co., Series U, 6.75%.................... 15,000 1,558
Georgia Power Co., $4.92...................................... 5,400 408
Gulf Power Co., 5.16%......................................... 1,238 97
Hawaiian Electric Co., Series R, 8.75%........................ 5,890 616
Indianapolis Power & Light Co., 8.20%......................... 6,310 639
Jersey Central Power & Light Co., 8.65%....................... 2,500 266
Kentucky Utility Co., 6.53%................................... 12,330 1,264
Montana Power Co., $6.875..................................... 14,500 1,466
NICOR, Inc. 4.48%............................................. 36,000 1,476
Pacific Enterprises, Inc., $4.36.............................. 1,880 122
Pacific Gas & Electric Co., 7.04%............................. 58,000 1,552
Phillips Gas Co., Series A, 9.32%............................. 37,340 982
PSI Energy Co., 6.875%........................................ 13,900 1,425
Public Service Electric & Gas Co., 4.08%...................... 14,615 895
Puget Sound Power & Light Co., 4.84%.......................... 2,700 225
San Diego Electric & Gas Co., $7.20........................... 4,250 429
Union Electric Co., $4.56..................................... 12,800 898
Utilicorp United, Inc., $2.05................................. 55,495 1,422
Virginia Electric & Power Co., $6.98.......................... 15,000 1,584
Washington Natural Gas Co., Series II, 7.45%.................. 60,900 1,538
Western Mass Electric Co., 7.60%.............................. 10,884 273
Western Resources, Inc., 8.50%................................ 14,500 1,552
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS (CONTINUED)
Wisconsin Power & Light Co., 4.76%......................... 6,300 $ 476
Wisconsin Public Service Corp., 6.88%...................... 12,500 1,325
-------
28,302
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $27,320)....................... 29,363
- -------------------------------------------------------------------------------
<CAPTION>
NO. OF
CONTRACTS
- -------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED PUT OPTION (0.1%)
- -------------------------------------------------------------------------------
U.S. Treasury Bond expiring 3/96, strike price $112 (COST
$105)..................................................... 24 21
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.9%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $1,316, collateralized by
$1,192 United States Treasury Bonds 7.25%, due 5/15/16,
valued at $1,342 (COST $1,316)............................ $ 1,316 1,316
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (90.9%) (COST $28,741).................... 30,700
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (9.1%)
- -------------------------------------------------------------------------------
Margin Deposits on Futures Contracts....................... 400
Receivable for Investments Sold............................ 2,657
Dividends Receivable....................................... 265
Other Assets............................................... 2
Payable for Investments Purchased.......................... (144)
Payable for Daily Variation Margin on Futures.............. (42)
Payable for Investment Advisory Fees....................... (23)
Payable for Administrative Fees............................ (6)
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Payable for Directors' Fees...................................... $ (1)
Other Liabilities................................................ (19)
-------
3,089
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 3,668,755 outstanding $0.001 par value
Institutional Class shares (authorized 25,000,000 shares)....... $33,789
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.......... $ 9.21
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
(In Thousands) OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends..................................................... $ 4,265
Interest...................................................... 140
- --------------------------------------------------------------------------------
Total Income................................................. 4,405
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B.............................. 385
Administrative Fees--Note C................................... 78
Custodian Fees................................................ 15
Audit Fees.................................................... 13
Legal Fees.................................................... 9
Directors' Fees--Note F....................................... 4
Other Expenses................................................ 35
- --------------------------------------------------------------------------------
Total Expenses............................................... 539
Expense Offset--Note A........................................ (1)
- --------------------------------------------------------------------------------
Net Expenses................................................. 538
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME.......................................... 3,867
- --------------------------------------------------------------------------------
NET REALIZED LOSS ON:
Investments................................................... (1,009)
Futures....................................................... (5,092)
- --------------------------------------------------------------------------------
TOTAL NET REALIZED LOSS........................................ (6,101)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments................................................... 8,271
Futures....................................................... (2,757)
- --------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)..... 5,514
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS AND FUTURES CONTRACTS.................. (587)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... $ 3,280
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 4,929 $ 3,867
Net Realized Loss..................................... (245) (6,101)
Net Change in Unrealized Appreciation (Depreciation).. (5,857) 5,514
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (1,173) 3,280
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (4,511) (4,279)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 65,798 4,052
--In Lieu of Cash Distributions..................... 4,210 4,249
Redeemed.............................................. (22,774) (64,734)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... 47,234 (56,433)
- --------------------------------------------------------------------------------
Total Increase (Decrease)............................. 41,550 (57,432)
Net Assets:
Beginning of Period................................... 49,671 91,221
- --------------------------------------------------------------------------------
End of Period (2)..................................... $ 91,221 $ 33,789
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 6,776 443
In Lieu of Cash Distributions......................... 440 466
Shares Redeemed....................................... (2,368) (7,063)
- --------------------------------------------------------------------------------
4,848 (6,154)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $ 97,189 $ 40,756
Undistributed Net Investment Income................... 638 226
Accumulated Net Realized Loss......................... (1,948) (8,049)
Unrealized Appreciation (Depreciation)................ (4,658) 856
- --------------------------------------------------------------------------------
$ 91,221 $ 33,789
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JUNE 23,
1992** YEARS ENDED OCTOBER 31,
TO OCTOBER 31, -------------------------------
1992 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 10.00 $ 10.09 $ 9.98 $ 9.29
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERA-
TIONS
Net Investment Income........ 0.14+ 0.60+ 0.60 0.67
Net Realized and Unrealized
Gain (Loss)................. 0.03 (0.07) (0.71) (0.08)
- --------------------------------------------------------------------------------
Total from Investment Opera-
tions...................... 0.17 0.53 (0.11) 0.59
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........ (0.08) (0.61) (0.58) (0.67)
In Excess of Net Realized
Gain........................ -- (0.03) -- --
- --------------------------------------------------------------------------------
Total Distributions......... (0.08) (0.64) (0.58) (0.67)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERI-
OD........................... $ 10.09 $ 9.98 $ 9.29 $ 9.21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.................. 1.70%++ 5.47%++ (1.15)% 6.67%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................. $23,904 $ 49,671 $ 91,221 $ 33,789
Ratio of Expenses to Average
Net Assets................... 0.97%*+ 0.82%+ 0.89% 0.98%#
Ratio of Net Investment Income
to Average Net Assets........ 6.36%*+ 6.10%+ 6.45% 7.03%
Portfolio Turnover Rate....... 16% 144% 65% 44%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser for the
periods ended October 31, 1992 and October 31, 1993 of $0.02 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 not significantly differ.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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
(the "Portfolio"), a portfolio of the UAM Funds, Inc., began operations on
June 23, 1992. At October 31, 1995, the UAM Funds were comprised of thirty-
four 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.
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 business 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. 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 permanent book-tax differences.
At October 31, 1995, the Portfolio's cost of investments for Federal income
tax purposes was $28,742,000. Net unrealized appreciation for Federal
income tax purposes aggregated $1,958,000 of which $2,067,000 related to
appreciated securities and $109,000 related to depreciated securities.
At October 31, 1995, the 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.
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.
9
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 ("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 short futures contracts open at October 31,
1995:
<TABLE>
<CAPTION>
NET
AGGREGATE UNREALIZED
NUMBER OF FACE VALUE EXPIRATION DEPRECIATION
CONTRACTS CONTRACTS (000) DATE (000)
--------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Sales:
U.S. Treasury 10 year Notes..... 21 $ 2,342 Dec 1995 $ (84)
U.S. Treasury Long Bonds........ 138 16,155 Dec 1995 (1,019)
-------
$(1,103)
=======
</TABLE>
5. DISTRIBUTIONS TO SHAREHOLDERS: Any distributions from net investment
income will normally be distributed monthly. 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 futures.
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 determined 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 adjusted to include expense
offsets for custodian balance credits.
10
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income per share in the financial highlights.
B. ADVISORY SERVICES. Under the terms of an investment advisory agreement,
Spectrum Asset Management, Inc. (the "Adviser"), a wholly-owned subsidiary of
United Asset Management Corporation ("UAM"), provides investment advisory
services to the Portfolio for a fee calculated at an annual rate of 0.70% of
average daily net assets. 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 offsets arrangements, from
exceeding 0.99% of its average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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 of $70,000 annually after two years. In addition the
Portfolio is charged certain out-of-pocket expenses by the administrator.
Prior to September 1, 1995, MFSC was an affiliate of United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors, (a division of Regis Retirement Plan
Services, Inc.), 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 year ended October 31, 1995, the Portfolio
made purchases of $21,835,000 and sales of $68,382,000 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 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds, Inc. and reimbursement of
expenses incurred in attending Board meetings.
G. LINE OF CREDIT. The SAMI Preferred Stock Income Portfolio, 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
11
<PAGE>
SAMI PREFERRED STOCK INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
H. OTHER. At October 31, 1995, 95.1% of the total shares outstanding were held
by five record shareholders owning 10% or greater of the aggregate total
shares outstanding.
The Portfolio placed a portion of its portfolio transactions with SAMI, which
is a registered dealer. The commissions paid to SAMI for the year ended
October 31, 1995 were $58,000, representing 70% of commissions paid.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
SAMI Preferred Stock Income Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
SAMI Preferred Stock Income Portfolio (the "Portfolio"), a Portfolio of the
UAM Funds, Inc., at October 31, 1995, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
For the year ended October 31, 1995, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
100%.
13
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
NWQ 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
NWQ Investment Management Company
655 South Hope Street, 11th Floor
Los Angeles, CA 90017
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
UAM FUNDS NWQ PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Balanced.................................................................. 6
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
Report of Independent Accountants........................................... 22
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholders:
The period ended October 31, 1995 marked the end of our first full year of
management of the NWQ Value Equity and NWQ Balanced Portfolios. This was a
very favorable period for the financial markets, and we are pleased to report
that both Portfolios produced strong positive results. We appreciate the
confidence that all of our shareholders have placed in us and will continue to
work to justify that confidence.
ABOUT NWQ AND THE NWQ PORTFOLIOS
NWQ is one of the country's leading investment advisory firms, serving both
individual and institutional clients. Our success has been built on a
foundation of trust and service, and assets under management exceed $5.6
billion.
The objective of the NWQ Balanced Portfolio is to achieve consistent, above-
average returns with minimum risk to principal by investing primarily in a
combination of investment grade fixed income securities and common stocks of
companies with above-average statistical value which are in fundamentally
attractive industries and which, in our opinion, are undervalued at the time
of purchase.
The objective of the NWQ Value Equity Portfolio is to achieve consistent,
superior total return with minimum risk to principal by investing primarily in
common stocks with above-average statistical value which are in fundamentally-
attractive industries and which, in our opinion, are undervalued at the time
of purchase.
The cornerstone of our investment process is a disciplined approach to value
recognition within industries representing long-term market leadership. We
believe that investment opportunity is created by changes in the economic,
monetary, political, and social environment. We seek to recognize change early
in asset categories, market sectors, industries, and companies--before those
changes are reflected in securities prices. Stock selection emphasizes medium
to large capitalization companies representing above-average statistical
value. Investments are concentrated in those fundamentally attractive
industries identified as the beneficiaries of long-term investment trends.
BALANCED PORTFOLIO PERFORMANCE
During the fiscal year ended October 31, 1995, the NWQ Balanced Portfolio
appreciated $1.40 to $11.24 per share from $9.84 and paid 32 cents of dividend
income for a total gain of $1.72, or 17.80%. The performance was comparable to
the Lipper Balanced Funds Index which was up 17.37%, but trailed the composite
balanced index comprised of 60% S&P 500 Index, 30% Lehman Brothers
Government/Corporate Index, and 10% Salomon Brothers 3-month Treasury Bill
Index, which was up 21.27%. Individually, the S&P 500 Index had a total return
of 26.41%, the Lehman Brothers Government/Corporate Index returned 16.16%, and
the Salomon Brothers 3-month Treasury Bill Index returned 5.74%.
Performance results for the NWQ Balanced Portfolio benefited from the
favorable financial market environment, with declining interest rates
increasing the value of the Portfolio's holdings of longer maturity U.S.
Treasury Bonds and benefiting the equities as the stock market reached a
number of record highs during the year. While the stock market has been rising
throughout 1995, starting in September investors began worrying about the
slowing of the economy and the diminished outlook for earnings growth. Many
investors began selling "cyclical" stocks and buying "stable demand" issues,
anticipating potential earnings problems for "cyclical" stocks in a slow
growth environment. This market shift away from many of the industrial,
technology, and export-related companies in which the Portfolio has an
emphasis negatively impacted performance during the
1
<PAGE>
last couple of months of the fiscal year. We believe the important point for
equity investors is to focus on the major secular trends that are driving
world economic growth and look beyond short-term blips that may arise given
the changing short-term sentiments of traders and speculators. In the period
ahead, we expect that industrial stocks will once again resume market
leadership.
VALUE EQUITY PORTFOLIO PERFORMANCE
During the fiscal year ended October 31, 1995, the NWQ Value Equity Portfolio
appreciated $1.67 to $11.65 per share from $9.98 and paid 10 cents of dividend
income for a total gain of $1.77 or 17.84%. Performance was comparable
relative to the one year return of the Lipper Equity Income Funds Index, which
gained 17.92%, but underperformed the S&P 500 Index which gained 26.41% for
the year ended October 31, 1995.
Performance results for the NWQ Value Equity Portfolio benefited from the
favorable financial market environment, with declining interest rates helping
the stock market reach a number of record highs during the year. While the
stock market has been arising throughout 1995, starting in September investors
began worrying about the slowing of the economy and the diminished outlook for
earnings growth. Many investors began selling "cyclical" stocks and buying
"stable demand" issues, anticipating potential earnings problems for
"cyclical" stocks in a slow growth environment. This market shift away from
many of the industrial, technology, and export related companies in which the
Portfolio has an emphasis negatively impacted performance during the last
couple of months of the fiscal year. We believe the important point for equity
investors is to focus on the major secular trends that are driving world
economic growth and look beyond short-term blips that may arise given the
changing short-term sentiments of traders and speculators. In the period
ahead, industrial stocks should once again resume market leadership.
ECONOMIC OUTLOOK
Domestically, the rate of economic growth improved significantly in the third
quarter of 1995, and at the same time the prospects for any near-term
recession have diminished. Two sectors that contributed to the first-half
slowdown--housing and inventories--appear to be on firmer footing going into
the fourth quarter. The inventory correction may have further to run, but it
still appears to be of modest proportions relative to earlier cycles. At the
same time, the absence of any severe imbalances, coupled with the continuing
favorable inflation outlook, suggests that fears of recession have been
greatly overstated.
The best news concerns the inflation picture, where the pessimists predicting
a return to 3.5-4% or higher inflation overlook important secular forces that
should continue to hold inflation in check. The September data from the U.S.
Bureau of Labor Statistics show that U.S. unit labor costs have posted a 0%
year-over-year increase. This is unprecedented for the fifth year of an
economic recovery. It is in fact more typical of the first year of a recovery.
Given the declining costs of technology, the combination of increasing
technological content of most goods and intensified worldwide competition
argues for a prolonged period of low inflation. Prospects for significant
reductions in government spending are also helpful, as there is a very strong
correlation between growth of government spending and inflation rates. The
recent recovery of the U.S. dollar from its very undervalued level against the
Japanese yen and German mark will further ease U.S. inflationary pressure. (At
the same time, one should recall that despite the U.S. dollar's recent 25%
appreciation versus the Japanese yen, it has still merely returned to where it
stood at the beginning of 1995; hence the competitive position of U.S.
exporters has not been significantly impacted). The benign inflation outlook
has been a significant factor behind the strength of the U.S. bond market in
the first ten months of this year. Going forward, long-term rates may be
influenced more by domestic and foreign economic growth rates and central bank
monetary policy, since the strength of the case for low inflation has become
increasingly apparent to most investors.
2
<PAGE>
The major force in both the domestic and worldwide economy continues to be the
vigorous growth in capital spending. While a temporary worldwide slowdown will
obviously have some impact on capital spending, this boom has several more
years to run. The current capital cycle started earlier in the economic cycle
than ever before. Its strength, duration, and global composition suggest that
something is indeed very different this time. Throughout the world, companies
are substituting capital for labor. Even in a slower growth world this trend
will continue. Effective competition now requires the installation of new
capital goods technology everywhere in the world that a company has production
facilities. The continued penetration of computer technology in the office is
finally raising productivity in the service sector as well.
FINANCIAL MARKETS
Over the past few months many investors have been selling "cyclical" stocks
and buying "defensive" consumer-oriented and "stable demand" issues,
anticipating earnings problems for "cyclical" stocks in a slow growth
environment. NWQ views the stock market's rotation as a temporary,
countertrend rally in yesterday's "growth" companies. The issue is not so much
"cyclical vs. stable demand," but rather industrial/technological vs.
consumer-oriented. Recent experience has taught investors to shun industrial
stocks when economic growth rates slow down. But the experience of the 1980s
is unlikely to be repeated in the 1990s. A slowdown in the U.S. economy is
likely to pinch the U.S. consumer, but unlikely to impact demand for U.S.
produced capital and technological goods from emerging or recovering foreign
economies. The development of modern infrastructure and communications
networks in Asia and Latin America will proceed whether or not U.S. consumers
are willing, or able, to pay ever higher prices for a variety of domestic
products. While markets are supposed to discount the future, investor
perceptions change very slowly at times. We expect that industrial stocks will
once again resume market leadership. However, for the industrial leadership to
reemerge in force, investors will have to witness both a general economic
slowdown (perhaps in the 1.5-2.5% range over the next twelve months) and
continuing strong earnings power in the "cyclical" companies throughout such a
slowdown. In short, investors are responding to the economy of the 1980s
instead of the 1990s with respect to industrial companies and saying "Show
Me!" We expect the companies will do just that.
Going forward, one must be cognizant of the fact that the U.S. stock market
has moved up very sharply in the first three quarters of the year, and has
gone without a 10% correction for the longest period in history. The autumn
months have frequently proved difficult for investors in the past. We would
not attempt to predict a similar fate in 1995, as the inflation outlook and
the corporate earnings picture both remain favorable. At the same time, one
should not be surprised if some volatility appears. The important point for
equity investors is to focus on the major secular trends that are driving
world economic growth and look beyond short-term blips that may arise given
the changing short-term sentiments of traders and speculators. In the short
run, shifting emotions can impact markets, but over the longer course the
fundamental factors of the technology revolution and the restoration of U.S.
competitiveness will determine the market's course.
Sincerely,
NWQ Investment Management Company
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 didn't have fee waivers and didn't 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.
3
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $100,000 PURCHASE IN THE NWQ BALANCED
PORTFOLIO, THE STANDARD & POOR'S 500 INDEX (S&P 500),
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX
AND THE BALANCED INDEX
---------------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
---------------------------------------------
1 YEAR SINCE 8/2/94*
---------------------------------------------
17.80% 12.86%
---------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
08/02/94* 10/31/94 10/31/95
-------- -------- --------
<S> <C> <C> <C>
NWQ BALANCED PORTFOLIO+ 100,000 98,705 116,273
BALANCED INDEX+ 100,000 101,580 123,300
S&P 500 INDEX+ 100,000 103,190 130,460
LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX+ 100,000 98,520 114,420
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative indices are not adjusted to reflect expenses or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
Portfolio's performance assumes the reinvestment of all dividends and
distributions. Each comparative index has been adjusted to reflect reinvestment
of dividends on securities in the index.
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 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 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 form the S&P 500, Lehman Brothers
Government/Corporate Index and the Salomon Brothers 3-month Treasury Bill Index.
Please note that one can not invest in an unmanaged index.
4
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $100,000 PURCHASE IN THE
NWQ VALUE EQUITY PORTFOLIO AND THE STANDARD & POOR'S 500 INDEX (S&P 500)
-----------------------------------------
AVERAGE ANNUAL TOTAL RETURN**
FOR PERIOD ENDED OCTOBER 31, 1995
-----------------------------------------
1 YEAR SINCE 9/21/94*
-----------------------------------------
17.84% 15.73%
-----------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
09/21/94 10/31/94 10/31/95
-------- -------- --------
<S> <C> <C> <C>
NWQ VALUE EQUITY PORTFOLIO+ 100,000 99,800 117,600
S&P 500 INDEX+ 100,000 102,190 129,120
</TABLE>
Past performance is not predictive of future performance. your investment return
and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The
Portfolio's performance assumes the reinvestment of all dividends and
distributions. The comparative index has been adjusted to reflect
reinvestment of dividends on securities in the index.
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.
Please note that one can not invest in an unmanaged index.
5
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (55.1%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (1.4%)
Sundstrand Corp................................................. 350 $ 22
United Technologies Corp........................................ 600 53
------
75
- -------------------------------------------------------------------------------
BASIC RESOURCES (4.0%)
Cyprus Amax Minerals Co......................................... 1,550 40
IMC Global, Inc................................................. 1,550 108
Weyerhaeuser Co................................................. 1,450 64
------
212
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (8.9%)
BW/IP Inc....................................................... 925 15
Case Corp....................................................... 600 23
Caterpillar, Inc................................................ 2,150 121
CBI Industries, Inc............................................. 400 12
Cooper Industries, Inc.......................................... 300 10
Deere & Co...................................................... 1,100 98
Foster Wheeler Corp............................................. 700 26
Ingersoll-Rand Co............................................... 2,000 71
Kennametal, Inc................................................. 1,200 37
Trinity Industries, Inc......................................... 1,000 30
York International Corp......................................... 750 33
------
476
- -------------------------------------------------------------------------------
CHEMICALS (4.7%)
Air Products & Chemical, Inc.................................... 1,450 75
Dow Chemical Co................................................. 800 55
Du Pont (E.I.) de Nemours & Co.................................. 900 56
Grace (W.R.) & Co............................................... 800 45
Morton International, Inc....................................... 575 18
------
249
- -------------------------------------------------------------------------------
CONSUMER DURABLES (5.5%)
Black & Decker Corp............................................. 800 27
Chrysler Corp................................................... 1,000 52
Echlin, Inc..................................................... 1,800 64
Exide Corp...................................................... 850 37
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER DURABLES--(CONTINUED)
General Motors Corp............................................ 1,550 $ 68
Maytag Corp.................................................... 2,500 48
------
296
- -------------------------------------------------------------------------------
ELECTRONICS (3.9%)
Emerson Electric Co. .......................................... 900 64
General Electric Co. .......................................... 600 38
General Signal Corp. .......................................... 1,700 54
Grainger (W.W.), Inc. ......................................... 800 50
------
206
- -------------------------------------------------------------------------------
ENERGY (5.4%)
Coastal Corp................................................... 1,750 57
Diamond Shamrock, Inc. ........................................ 2,300 59
Dresser Industries, Inc. ...................................... 1,800 37
*Ensco International, Inc. ..................................... 2,100 35
Halliburton Co................................................. 1,450 60
McDermott (J. Ray) S.A. ....................................... 1,900 29
Tidewater, Inc................................................. 400 11
------
288
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (6.7%)
Allstate Corp.................................................. 1,500 55
American International Group, Inc.............................. 750 63
Comerica, Inc.................................................. 1,300 44
General RE Corp. .............................................. 450 65
National City Corp............................................. 1,925 59
Norwest Corp. ................................................. 2,500 74
------
360
- -------------------------------------------------------------------------------
METALS (4.7%)
*Alumax, Inc. .................................................. 1,400 41
*Bethlehem Steel Corp. ......................................... 3,200 42
Inco Ltd....................................................... 1,500 52
Newmont Mining Corp. .......................................... 550 21
Reynolds Metals Co............................................. 1,100 55
USX-U.S. Steel Group........................................... 1,250 37
------
248
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (1.8%)
Minnesota Mining & Manufacturing Co............................. 1,350 $ 77
Service Corp. International..................................... 450 18
------
95
- -------------------------------------------------------------------------------
TECHNOLOGY (4.8%)
AMP, Inc........................................................ 1,850 73
Intel Corp...................................................... 1,200 84
Texas Instruments, Inc.......................................... 1,150 78
Thomas & Betts Corp............................................. 350 23
------
258
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.2%)
AT&T Corp....................................................... 1,700 109
GTE Corp........................................................ 250 10
------
119
- -------------------------------------------------------------------------------
TRANSPORTATION (1.1%)
Burlington Northern, Inc........................................ 200 17
CSX Corp........................................................ 500 42
------
59
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $2,784)................................ 2,941
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (37.4%)
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS (17.0%)
7.50%, 11/15/16................................................. $445 501
10.375%, 11/15/12............................................... 300 403
------
904
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES (20.4%)
6.125%, 7/31/96................................................. 100 100
6.125%, 5/31/97................................................. 600 604
6.25%, 2/15/03.................................................. 100 102
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NWQ BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES--(CONTINUED)
- ---------------------------------------------------------------------------------
U.S. TREASURY NOTES--(CONTINUED)
6.375%, 8/15/02.................................................. $200 $ 205
6.50%, 9/30/96................................................... 50 51
8.00%, 8/15/99................................................... 25 27
------
1,089
- ---------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $1,900).................... 1,993
- ---------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.7%)
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENT (3.7%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $198, collateralized by $175 U.S.
Treasury Bonds, 7.50%, due 11/15/16, valued at $202 (COST $198). 198 198
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS (96.2%) (COST $4,882)........................... 5,132
- ---------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (3.8%)
- ---------------------------------------------------------------------------------
Cash............................................................. 162
Interest Receivable.............................................. 52
Receivable for Investments Sold.................................. 13
Receivable due from Investment Adviser........................... 6
Dividends Receivable............................................. 4
Other Assets..................................................... 1
Payable for Investments Purchased................................ (11)
Payable for Administrative Fees.................................. (6)
Payable for Directors' Fees...................................... (1)
Other Liabilities................................................ (18)
------
202
- ---------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 474,565 outstanding $ .001 par value Institutional
Class shares (authorized 25,000,000 shares)..................... $5,334
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.......... $11.24
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NWQ VALUE EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.2%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (3.2%)
Sundstrand Corp................................................. 350 $ 21
United Technologies Corp........................................ 650 58
------
79
- -------------------------------------------------------------------------------
BASIC RESOURCES (5.1%)
Cyprus Amax Minerals Co......................................... 1,750 46
IMC Global, Inc................................................. 525 37
Weyerhaeuser Co................................................. 950 42
------
125
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (16.0%)
BW/IP Inc....................................................... 225 4
Case Corp....................................................... 300 11
Caterpillar, Inc................................................ 2,025 114
CBI Industries, Inc............................................. 125 4
Cooper Industries, Inc.......................................... 50 2
Deere & Co...................................................... 1,100 98
Foster Wheeler Corp............................................. 300 11
Ingersoll-Rand Co............................................... 1,750 62
Kennametal, Inc................................................. 1,100 34
Trinity Industries, Inc......................................... 625 19
York International Corp......................................... 800 35
------
394
- -------------------------------------------------------------------------------
CHEMICALS (8.1%)
Air Products & Chemical, Inc.................................... 1,650 85
Dow Chemical Co................................................. 600 41
Du Pont (E.I.) de Nemours & Co.................................. 900 56
Grace (W.R.) & Co............................................... 225 13
Morton International, Inc....................................... 175 5
------
200
- -------------------------------------------------------------------------------
CONSUMER DURABLES (11.2%)
Black & Decker Corp............................................. 1,000 34
Chrysler Corp................................................... 425 22
Eaton Corp...................................................... 800 41
Echlin, Inc..................................................... 1,600 57
Exide Corp...................................................... 750 33
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
CONSUMER DURABLES--(CONTINUED)
General Motors Corp............................................ 1,175 $ 51
Maytag Corp.................................................... 2,000 38
------
276
- -------------------------------------------------------------------------------
ELECTRONICS (6.1%)
Emerson Electric Co............................................ 850 61
General Electric Co............................................ 175 11
General Signal Corp............................................ 1,500 48
Grainger (W.W.) Inc............................................ 500 31
------
151
- -------------------------------------------------------------------------------
ENERGY (8.9%)
Coastal Corp................................................... 1,475 48
Diamond Shamrock, Inc.......................................... 1,900 49
Dresser Industries, Inc........................................ 1,325 27
*Ensco International, Inc....................................... 1,400 24
Halliburton Co................................................. 575 24
McDermott (J. Ray) S.A......................................... 1,600 24
Tidewater, Inc................................................. 900 24
------
220
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (12.8%)
Allstate Corp.................................................. 900 33
American International Group, Inc.............................. 800 67
Comerica, Inc.................................................. 375 12
General RE Corp................................................ 475 69
Integra Financial Corp......................................... 700 41
National City Corp............................................. 675 21
Norwest Corp................................................... 2,450 72
------
315
- -------------------------------------------------------------------------------
METALS (6.9%)
*Alumax, Inc. .................................................. 975 29
*Bethlehem Steel Corp. ......................................... 3,100 41
Inco Ltd....................................................... 500 17
Newmont Mining Corp............................................ 200 8
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
METALS--(CONTINUED)
Reynolds Metals Co.............................................. 900 $ 45
USX-U.S. Steel Group............................................ 975 29
------
169
- -------------------------------------------------------------------------------
MULTI-INDUSTRY (2.4%)
Minnesota Mining & Manufacturing Co............................. 925 53
Service Corp. International..................................... 150 6
------
59
- -------------------------------------------------------------------------------
TECHNOLOGY (6.3%)
AMP, Inc........................................................ 1,100 43
Intel Corp...................................................... 400 28
Texas Instruments, Inc.......................................... 400 27
Thomas & Betts Corp............................................. 900 58
------
156
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.5%)
AT&T Corp....................................................... 925 59
GTE Corp........................................................ 50 2
------
61
- -------------------------------------------------------------------------------
TRANSPORTATION (1.7%)
Burlington Northern, Inc........................................ 325 27
CSX Corp........................................................ 175 15
------
42
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $2,231)................................ 2,247
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (9.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (9.4%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $231, collateralized by $204 U.S.
Treasury Bonds, 7.50%, due 11/15/16, valued at $236 (COST $231) $231 231
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.6%) (COST $2,462)......................... 2,478
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-0.6%)
- -------------------------------------------------------------------------------
Cash.................................................................. $ 1
Receivable due from Investment Adviser................................ 9
Receivable for Investments Sold....................................... 3
Dividends Receivable.................................................. 3
Other Assets.......................................................... 1
Payable for Investments Purchased..................................... (9)
Payable for Administrative Fees....................................... (5)
Payable for Directors' Fees........................................... (1)
Other Liabilities..................................................... (16)
------
(14)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 211,520 outstanding $.001 par value Institutional Class
shares
(authorized 25,000,000 shares)....................................... $2,464
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE............... $11.65
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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 Year Ended October 31, 1995
<TABLE>
<CAPTION>
NWQ NWQ
BALANCED VALUE EQUITY
(In Thousands) PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 30 $ 13
Interest......................................... 89 5
- -------------------------------------------------------------------------------
Total Income.................................... 119 18
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees................................ $ 20 $ 5
Less: Fees Waived......................... (20) -- (5) --
----- ---
Administrative Fees--Note C...................... 48 44
Audit Fees....................................... 12 12
Printing Fees.................................... 9 9
Custodian Fees................................... 6 4
Registration and Filing Fees..................... 5 5
Directors' Fees--Note F.......................... 2 2
Legal Fees....................................... -- 2
Other Expenses................................... -- 1
Expenses Assumed by the Adviser--Note B.......... (53) (70)
- -------------------------------------------------------------------------------
Total Expenses.................................. 29 9
Expense Offset--Note A .......................... (1) (2)
- -------------------------------------------------------------------------------
Net Expenses.................................... 28 7
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME............................. 91 11
- -------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.................. 30 3
NET CHANGE IN UNREALIZED APPRECIATION ON INVEST-
MENTS............................................ 268 17
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS .......................... 298 20
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERA-
TIONS............................................ $389 $ 31
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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>
AUGUST 2, 1994*
TO YEAR ENDED
(In Thousands) OCTOBER 31, 1994 OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income....................... $ 9 $ 91
Net Realized Gain........................... 1 30
Net Change in Unrealized Appreciation (De-
preciation)................................ (18) 268
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Re-
sulting From Operations................... (8) 389
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income....................... (4) (80)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular............................. 1,618 6,275
--In Lieu of Cash Distributions........... 4 80
Redeemed.................................... (26) (2,914)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transac-
tions..................................... 1,596 3,441
- --------------------------------------------------------------------------------
Total Increase.............................. 1,584 3,750
Net Assets:
Beginning of Period......................... -- 1,584
- --------------------------------------------------------------------------------
End of Period (2)........................... $1,584 $5,334
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued............................... 163 578
In Lieu of Cash Distributions............... 1 8
Redeemed.................................... (3) (272)
- --------------------------------------------------------------------------------
161 314
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital............................. $1,596 $5,037
Undistributed Net Investment Income......... 5 16
Accumulated Net Realized Gain............... 1 31
Unrealized Appreciation (Depreciation)...... (18) 250
- --------------------------------------------------------------------------------
$1,584 $5,334
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
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>
SEPTEMBER 21, 1994*
TO YEAR ENDED
(In Thousands) OCTOBER 31, 1994 OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income.................... -- $ 11
Net Realized Gain........................ -- 3
Net Change in Unrealized Appreciation
(Depreciation).......................... $ (1) 17
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations.............. (1) 31
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.................... -- (7)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular.......................... 254 2,266
--In Lieu of Cash Distributions........ -- 7
Redeemed................................. -- (86)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transac-
tions.................................. 254 2,187
- --------------------------------------------------------------------------------
Total Increase........................... 253 2,211
Net Assets:
Beginning of Period...................... -- 253
- --------------------------------------------------------------------------------
End of Period (2)........................ $253 $2,464
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued............................ 25 193
In Lieu of Cash Distributions............ -- 1
Redeemed................................. -- (7)
- --------------------------------------------------------------------------------
25 187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital.......................... $254 $2,441
Undistributed Net Investment Income...... -- 4
Accumulated Net Realized Gain............ -- 3
Unrealized Appreciation (Depreciation)... (1) 16
- --------------------------------------------------------------------------------
$253 $2,464
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Commencement of Operations
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>
AUGUST 2, 1994**
TO YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $10.00 $ 9.84
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+...................... 0.06 0.32
Net Realized and Unrealized Gain (Loss)..... (0.19) 1.40
- --------------------------------------------------------------------------------
Total from Investment Operations........... (0.13) 1.72
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....................... (0.03) (0.32)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $ 9.84 $11.24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN++............................... (1.30)% 17.80%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)........ $1,584 $5,334
Ratio of Expenses to Average Net Assets+..... 1.00%* 1.04%#
Ratio of Net Investment Income to Average Net
Assets+..................................... 3.59%* 3.30%
Portfolio Turnover Rate...................... 1% 31%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.21
and $.26 per share for the period ended October 31, 1994 and the year ended
October 31, 1995, respectively.
++ Total return would have been lower had the Adviser not waived and assumed
certain expenses 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 1.00% for the year ended October 31, 1995
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>
SEPTEMBER 21, 1994**
TO YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $10.00 $ 9.98
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income+.................. 0.01 0.12
Net Realized and Unrealized Gain (Loss). (0.03) 1.65##
- --------------------------------------------------------------------------------
Total from Investment Operations....... (0.02) 1.77
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................... -- (0.10)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........... $ 9.98 $11.65
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN++........................... (0.20)% 17.84%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands).... $ 253 $2,464
Ratio of Expenses to Average Net Assets+. 1.00%* 1.21%#
Ratio of Net Investment Income to Average
Net Assets+............................. 1.36%* 1.39%
Portfolio Turnover Rate.................. 0% 4%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $1.06
and $.82 per share for the period ended October 31, 1994, and the year
ended October 31, 1995, respectively.
++ Total return would have been lower had the Adviser not waived and assumed
certain expenses 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 1.00% for the year ended October 31, 1995.
## 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.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc. and UAM Funds Trust,
formerly known as The Regis Fund II (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"), which are portfolios of UAM Funds, Inc.,
began operations on August 2, 1994 and September 21, 1994, respectively. The
NWQ Balanced and NWQ Value Equity 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 October 31, 1995, the UAM
Funds were comprised of thirty-four 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.
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.
At October 31, 1995, cost and unrealized appreciation (depreciation) of
investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
NET
COST APPRECIATION DEPRECIATION APPRECIATION
NWQ PORTFOLIOS (000) (000) (000) (000)
-------------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balanced....................... $4,882 $339 $(89) $250
Value Equity................... 2,462 103 (87) 16
</TABLE>
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
19
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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: Any distributions from net investment
income are declared and paid quarterly. Any realized net capital gains will
be distributed annually. All distributions are recorded on ex-dividend
date. The amount and character of income and capital gain distributions to
be paid are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles.
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 determined 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.
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/or assume certain expenses, if
necessary, if the annual operating expenses, after the effect of expense
offset arrangements, of each portfolio exceeds 1% of average daily net assets
until February 28, 1996.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
20
<PAGE>
NWQ PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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. During the year ended October 31, 1995, purchases and
sales of investment securities other than U.S. Government and short-term
securities were:
<TABLE>
<CAPTION>
PURCHASES SALES
NWQ PORTFOLIOS (000) (000)
-------------- --------- -----
<S> <C> <C>
Balanced..................................................... $2,165 $88
Value Equity................................................. 2,022 30
</TABLE>
Purchases and sales of long-term U.S. Government securities totaled $2,232,000
and $714,000, respectively, for NWQ Balanced Portfolio. There were no
purchases or sales of U.S. Government securities for NWQ Value 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement of expenses
incurred in attending Board meetings.
G. LINE OF CREDIT. The NWQ 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 October 31, 1995, there were no borrowings under the agreement.
H. OTHER. At October 31, 1995, 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
NWQ PORTFOLIOS SHAREHOLDERS % OWNERSHIP
-------------- ------------ -----------
<S> <C> <C>
Balanced.......................................... 3 83.5%
Value Equity...................................... 2 74.7%
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
NWQ Balanced Portfolio
NWQ Equity Portfolio
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the NWQ Balanced Portfolio and the NWQ Value Equity Portfolio (the
"Portfolios"), Portfolios of the UAM Funds, Inc., at October 31, 1995, and the
results of each of their operations, the changes in each of their net assets
and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolios' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):
For the period ended October 31, 1995, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders is
24.8% and 100%, respectively, for NWQ Balanced Portfolio and NWQ Value Equity
Portfolio.
22
<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
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
UAM FUNDS TS&W PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Equity.................................................................... 9
Fixed Income.............................................................. 13
International Equity...................................................... 16
Statements of Operations.................................................... 22
Statement of Changes in Net Assets
Equity.................................................................... 23
Fixed Income.............................................................. 24
International Equity...................................................... 25
Financial Highlights
Equity.................................................................... 26
Fixed Income.............................................................. 27
International Equity...................................................... 28
Notes to Financial Statements............................................... 29
Report of Independent Accountants........................................... 34
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholder:
We are pleased to provide you with the annual report for the fiscal year ended
October 31, 1995 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 April 30, 1995. The Equity
Portfolio's total net asset value on October 31, 1995 was $60,351,513, the
Fixed Income Portfolio's total net asset value was $46,676,751 and the
International Equity Portfolio was valued at $77,553,107.
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 $60,351,513 on October 31,
1995 with $54,157,947 (89.7% of total net assets) invested in common and
preferred stocks, and the remainder in cash reserves. For the fiscal year
ended October 31, 1995, the TS&W Equity Portfolio returned 14.32% versus the
S&P 500 Index return of 26.41% and the Morningstar Growth & Income Composite
Average of 20.83%. This underperformance relative to the S&P 500 Index comes
on the heels of two years of achieving above S&P 500 Index returns.
The combination of moderating economic growth and falling inflationary
expectations have provided the underpinnings for a very exciting period for
financial assets. This has been reflected in the 1995 returns of the stock
market with the S&P 500 Index up 29.27% on a total return basis through
October. To put this in perspective, the 1926 to 1994 long-term average annual
total return for stocks is 10.2% as measured by the S&P 500 Index. It is in
the context of this euphoria that long-term objectives are often overlooked as
investors reach for excess returns at the expense of risk profiles. We have
found that the best level of long-term returns, especially when volatility of
return is included in the calculation, frequently goes to the investors who
protect principal in risky market environments. Underperforming in the
explosive periods, like the last twelve months, is the price one must pay to
earn above-average returns over the complete cycle at below-average risk. TS&W
has been successful from a long-term perspective in providing strong returns
for our clients without subjecting them to the level of risk inherent in the
latter stages of a market cycle. We typically will underperform in the late
stages of an economic or market cycle, such as today and in 1988 and 1989.
Because we tend to move the Portfolio to a more defensive posture late in the
cycle, we historically have outperformed in the inevitable down period of the
cycle, which in the past has caused our longer-term results to move above the
market.
1
<PAGE>
The Portfolio has produced good absolute returns during the last twelve months
with a return of 14.32%. Our results have trailed the extraordinary returns
provided by the S&P 500 Index during this period primarily due to our moderate
cash reserve position, our underweighted position in technology stocks as well
as our increased allocation to defensive stocks. While the technology sector
has been a source of exciting returns over the past year, our work indicates
this sector's valuations are out of line with earnings. We believe
technology's relative market value has increased far in excess of its rise in
relative earnings. As a value investor, this a sector of the market that TS&W
will not participate in to any major degree.
Given the fact that historical stock returns, as measured by the S&P 500
Index, have been 10.2% per year, this has been a very unusual period. The last
down year of the market was 1990, and the market has not experienced a decline
of 10% or more since then. Because of the extended nature of this cycle, and
the overvalued condition of stocks in general, we believe the risk of a major
correction has increased.
Given this increased risk, we have increased the Portfolio's defensive nature,
primarily through focusing on stocks which provide higher levels of current
income and by emphasizing more stable sectors of the economy. Among the stocks
added to the Portfolio during the quarter were Chevron and GTE Corp. which
offer current dividend yields of 4.1% and 4.8%, respectively. Along with the
increased emphasis on energy and utility stocks, we continue to increase our
exposure to consumer non-durable stocks such as CPC Intl. which exhibit a more
stable pattern of earnings growth.
The high levels of return and low levels of volatility which have
characterized the stock market over the last few years represent an
extraordinary period in market history. As risk continues to grow in the
market, TS&W will continue to practice the conservative, value-based
disciplines which have provided our clients with good levels of returns at a
low level of risk relative to the market.
TS&W FIXED INCOME PORTFOLIO
The TS&W Fixed Income Portfolio had total net assets of $46,676,751 on October
31, 1995. In the latest quarter ended October 31, 1995, the TS&W Fixed Income
Portfolio return was 3.47% versus 3.81% for the Lehman Brothers
Government/Corporate Index (the "Index"). For the period between November 1,
1994 and October 31, 1995, the Portfolio returned 14.73% versus the Index
return of 16.16%.
Long-term bond yields declined from 7.9% at the beginning of 1995 to 6.3% as
of October 31, 1995. By comparison, three-month U.S. Treasury Bill rates
dropped from 5.8% to 5.5%, and ten-year U.S. Treasury rates declined to 6.0%
from 7.8% during the same period. The decline in rates added 9.4% to the
principal return of the Index for the twelve months ended October 31, 1995.
The three principal reasons for the decline in U.S. rates this year have been
a slowing economy, subdued inflation, and optimism surrounding the apparent
commitment of Congress to balancing the budget. Of these three influences, the
primary factor has been the rapid deceleration in economic activity from the
torrid pace during the fourth quarter of 1994. While this slowing has been
most visible in the interest rate sensitive sectors, housing and autos, the
retail and manufacturing sectors have also experienced reduced activity. Each
sector has been negatively impacted by the higher rate environment engineered
by the Federal Reserve during its aggressive tightening begun in early 1994.
2
<PAGE>
Inflation, historically caused by rising unit labor costs and commodity price
increases, has not been a significant component of the current business
expansion as it has in past expansions. This is in large measure due to
corporate re-engineering, productivity gains restraining unit labor cost
increases, and the inability of corporate America to pass through higher
commodity prices. Bonds are attractive investment alternatives when inflation
is low because purchasing power does not suffer.
The final reason for the rate decline is the progress made towards a balanced
budget. Current negotiations, consisting of more definitive concessions and
cutbacks than past balancing efforts, nurture optimism about a fiscally
responsible government. A balanced budget is important because the supply of
Government bonds would decrease and capital could be deployed to more economic
ventures. Currently our government must borrow to offset the budget deficit it
is running.
Our strategy over this period has been to emphasize high quality intermediate
maturities. While we have been consistent in this structure for the balance of
the past year we have also incorporated tactical investing in 30 year issues.
This tactical investing has centered on investing in longer-dated U.S.
Treasury issues to enhance Portfolio performance. The Portfolio maturity was
extended in November, 1994 by increasing our weighting in long bonds to 15%.
This position was reduced from a high of 16.4% as of April 30, 1995 to a low
of 11.8% at the end of June, 1995. The long bond position was raised in August
at yields of 7.0% and as of October 31, 1995 represented 15.9% of Portfolio
assets.
The Portfolio, as of October 31, 1995, was composed of 73.8% U.S. Treasury
issues, 15.2% corporate bonds, 0.9% overnight funds, 4.1% Yankee bonds, and
6.0% mortgage-related securities. Our commitments to the mortgage sector
increased in September. Mortgages represent an attractive area of the market,
and we may continue to increase our weighting in this sector over the next two
quarters. The rating of the Portfolio is AGENCY--an average rating just below
that of an all Treasury Portfolio. The Portfolio duration was 4.7 years versus
5.1 years for the Index.
Our expectations are for a modest economic rebound in the fourth calendar
quarter of 1995. Simultaneously, we view the threat of a meaningful increase
in inflation to be remote. This view is based on continuing productivity
gains, benign unit labor cost increases, a reduction in commodity price
pressures, and a meaningful resolution of the budget impasse.
TS&W INTERNATIONAL EQUITY PORTFOLIO
The TS&W International Equity Portfolio had total net assets of $77,553,107 on
October 31, 1995. The Portfolio's total return declined 1.11% for the fiscal
year ended October 31, 1995. The Morgan Stanley Capital International EAFE
Index ("EAFE"), our benchmark index, was down 0.37% during this period.
The latter part of our fiscal year end was an unusual period. A stronger
dollar, particularly against the yen, negatively impacted EAFE. This period
was also characterized by increased worries of economic slowdown in the so-
called hard currency countries of Continental Europe. Cyclical stocks were
sold off on fears that profits had peaked and that the global economy was
easing. European pharmaceuticals, with their more stable earnings streams,
were the strongest performers in this environment.
For the full fiscal year healthcare, technology and re-insurance stocks have
been the best performers. Growth has been sought by investors and where
scarce, particularly in Europe, has been spectacularly bid up by investors.
3
<PAGE>
The insurance stocks strengthened thanks to a strong bond market, firmer
pricing after the slew of natural disasters in the previous 18 months, and the
further consolidation of the industry.
The two foreign stock markets with large exposures to health, technology and
insurance, Switzerland and Sweden, have substantially outperformed the other
markets. The Portfolio has averaged a double weighting in these two markets.
As the single largest financial market outside the U.S. and approximately 40%
of EAFE, Japan has an enormous impact on aggregate international return
figures. Because Japan suffered an 8% decline in local currency over the last
twelve months, it has been a drag on EAFE's return. However, the combination
of fiscal policy initiatives by the government and accommodative monetary
policy by the Bank of Japan have measurably improved market sentiment.
Although the market has been roughly flat over the last three months, we
believe Japan will eventually benefit from recent policy initiatives in
concert with the changing dynamics of its economy. Japanese companies are
restructuring their operations, and the stocks of many leading export-oriented
Japanese manufacturers sell at considerable discounts to their international
counterparts. As a result, we have recently increased our exposure to this
market, partially through additional investment in some of the world's
strongest electronics manufacturers such as Hitachi and Canon.
Europe has been very narrowly focused on growth sectors. We have avoided
chasing many of the growth stocks there due to abnormally rich valuations. An
extended economic cycle is our operating assumption, and we maintain
weightings in late cyclical and service sectors.
Asia, excluding Japan, has been re-evaluated. The long-term secular growth
characteristics are undeniably present, current difficulties notwithstanding.
We are patiently building up exposure there because this is still the greatest
area of sustainable, rapid growth. Infrastructurally-oriented companies are
the preponderant investment in this region.
Wall Street has hit many record highs over the past year. The recent strength
in the dollar will be beneficial to most foreign economies as it reduces the
huge currency advantage U.S. firms have in competing throughout the world. The
U.S. stock market's relative outperformance has been the just reward for
tremendous corporate restructurings during the 1980s. We expect similar
results from the companies abroad which have struggled to re-make themselves
during the past few years of unprecedented dollar weakness and believe the
outlook for improved international return is good. For a discussion of the
risks associated with international investing, please see the Portfolio's
prospectus.
CONCLUSION
In summary, while we continue to be constructive on the economic outlook, we
are concerned that the continued enthusiasm for stocks as well as expectations
for corporate earnings have created a more risky environment. Slower economic
growth will certainly produce earnings disappointments which to date have been
greeted very unfavorably by the market. Short-term interest rates appear to be
higher than necessary given the structure of interest rates and the condition
of the economy. Our guess is that they are being held artificially high as a
means of shoring up the dollar, and providing a boost to Japan in a period of
financial and economic turmoil. Meanwhile the monetary aggregates appear to be
increasing, and the outlook for the economy is good for the next several
quarters. The consumer appears overextended, and at some point a more
pronounced slowdown in consumer spending, together with weaker exports, may
bring this cycle to its conclusion. With 1996 as an election year, it
4
<PAGE>
is likely that the Federal Reserve will maintain a neutral to expansionary
posture, perhaps prolonging the recovery beyond its natural limits and
increasing the risk of a resurgence in cyclical inflation factors. Given these
economic cross-currents, together with unusually high market returns and fully
valued markets, a cautious approach is warranted. In spite of recent dollar
strength, we continue to believe that foreign markets hold more promise, and
should provide good relative performance in coming months.
Respectfully submitted,
/s/ Matthew G. Thompson, CFA
Matthew G. Thompson, CFA
Managing Director
/s/ John T. Siegel, CFA
John T. Siegel, CFA
Managing Director
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.
5
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE
TS&W EQUITY PORTFOLIO
AND THE STANDARD & POOR'S 500 INDEX (S&P 500).
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 1 SINCE
FOR PERIOD ENDED OCTOBER 31, 1995 YEAR 7/1/92*
TS&W EQUITY PORTFOLIO 14.32% 9.29%**
S&P 500 INDEX 26.41% 13.11%
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C>
TS&W S&P
EQUITY 500
PORTFOLIO+ INDEX+
7/17/92 100,000 100,000
10/31/92 96,701 99,450
10/31/93 111,802 114,280
10/31/94 117,191 118,691
10/31/95 133,969 150,037
</TABLE>
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations.
**Total return of the Portfolio reflects fees waived and expenses assumed by
the Advisor. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities in
the index
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 needs.
Please note that one can not invest in an unmanaged index.
6
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE
TS&W FIXED INCOME PORTFOLIO
AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INDEX.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 1 SINCE
FOR PERIOD ENDED OCTOBER 31, 1995 YEAR 7/1/92*
TS&W FIXED INCOME PORTFOLIO 14.73% 6.31%**
LEHMAN BROTHERS GOVT/CORP. INDEX 16.16% 7.47%
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C>
TS&W LEHMAN BROTHERS
FIXED GOVERNMENT/
INCOME CORPORATE
PORTFOLIO+ INDEX+
7/17/92 100,000 100,000
10/31/92 101,310 100,710
10/31/93 112,771 114,440
10/31/94 106,591 109,130
10/31/95 122,312 126,765
</TABLE>
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations.
**Total return of the Portfolio reflects fees waived and expenses assumed by
the Advisor. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities in
the index.
Definition of the Comparative Index
-----------------------------------
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 can not invest in an unmanaged index.
7
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE
TS&W INTERNATIONAL EQUITY PORTFOLIO
AND THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 1 SINCE
FOR PERIOD ENDED OCTOBER 31, 1995 YEAR 12/18/92*
TS&W INTERNATIONAL EQUITY PORTFOLIO -1.11% 11.74%**
MSCI EAFE INDEX -0.37% 14.79%
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
TS&W MORGAN STANLEY
INTERNATIONAL CAPITAL
EQUITY INTERNATIONAL
PORTFOLIO+ EAFE INDEX+
<S> <C> <C>
12/19/92 100,000 100,000
10/31/93 125,400 135,810
10/31/94 139,031 149,153
10/31/95 137,493 148,598
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be
worth more or less than the original cost.
* Commencement of Operations.
**Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities
(net of withholding taxes) in the index.
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.
Please note that one can not invest in an unmanaged index.
8
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (89.7%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (0.9%)
Raytheon Co. .................................................. 12,910 $ 563
- -------------------------------------------------------------------------------
AUTOMOTIVE (1.3%)
Ford Motor Corp. .............................................. 28,145 809
- -------------------------------------------------------------------------------
BANKS (5.8%)
BankAmerica Corp. ............................................. 20,950 1,205
Crestar Financial Corp. ....................................... 10,795 615
National City Corp. ........................................... 28,700 886
NationsBank Corp. ............................................. 12,500 822
-------
3,528
- -------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (6.0%)
CPC International, Inc. ....................................... 13,470 894
PepsiCo, Inc. ................................................. 28,625 1,510
Procter & Gamble Co. .......................................... 15,300 1,239
-------
3,643
- -------------------------------------------------------------------------------
CAPITAL EQUIPMENT (7.7%)
Albany International Corp., Class A............................ 24,025 498
BW/IP, Inc. ................................................... 36,295 590
Caterpillar, Inc. ............................................. 16,900 949
Deere & Co. ................................................... 11,055 988
Goulds Pumps, Inc. ............................................ 11,975 284
Keystone International, Inc. .................................. 26,935 599
Trinity Industries, Inc. ...................................... 25,380 752
-------
4,660
- -------------------------------------------------------------------------------
CHEMICALS (5.2%)
Air Products & Chemical, Inc. ................................. 12,450 643
Avery Dennison Corp. .......................................... 8,315 372
Dow Chemical Co. .............................................. 19,320 1,326
Nalco Chemical Co. ............................................ 27,340 820
-------
3,161
- -------------------------------------------------------------------------------
CONSTRUCTION (1.6%)
Masco Corp..................................................... 34,220 962
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL (2.2%)
Corning, Inc. .................................................. 50,800 $ 1,327
- --------------------------------------------------------------------------------
ELECTRONICS (5.9%)
Emerson Electric Co. ........................................... 7,050 502
General Electric Co. ........................................... 20,090 1,271
Hewlett-Packard Co. ............................................ 10,300 954
Teledyne, Inc. ................................................. 33,900 843
-------
3,570
- --------------------------------------------------------------------------------
ENERGY (12.7%)
Amerada Hess Corp. ............................................. 17,450 787
Chevron Corp. .................................................. 25,000 1,169
Coastal Corp. .................................................. 19,170 621
Dresser Industries, Inc. ....................................... 42,650 885
Elf Aquitaine ADR............................................... 33,340 1,125
Enron Corp. .................................................... 22,125 761
Schlumberger Ltd. .............................................. 16,570 1,031
Texaco, Inc. ................................................... 19,000 1,294
-------
7,673
- --------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE TIME (1.6%)
Eastman Kodak Co. .............................................. 15,360 962
- --------------------------------------------------------------------------------
HEALTH CARE (6.9%)
Bristol-Myers Squibb Co. ....................................... 18,175 1,386
Columbia/HCA Healthcare Corp. .................................. 21,000 1,032
Pfizer, Inc. ................................................... 10,700 614
Schering-Plough Corp. .......................................... 20,740 1,112
-------
4,144
- --------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (1.6%)
Sunbeam-Oster Co., Inc. ........................................ 61,180 918
- --------------------------------------------------------------------------------
LODGING & RESTAURANTS (3.2%)
Bob Evans Farm, Inc. ........................................... 53,250 959
McDonald's Corp. ............................................... 22,930 940
-------
1,899
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
METALS (2.1%)
Reynolds Metals Co. ............................................ 24,405 $ 1,229
- --------------------------------------------------------------------------------
PAPER & PACKAGING (2.4%)
Crown Vantage, Inc. ............................................ 1,521 30
International Paper Co. ........................................ 25,000 925
James River Corp. of Virginia................................... 15,212 489
-------
1,444
- --------------------------------------------------------------------------------
RETAIL (4.3%)
Circuit City Stores, Inc. ...................................... 18,625 622
Dayton-Hudson Corp. ............................................ 14,500 997
Kmart Corp. .................................................... 23,850 194
Nordstrom, Inc. ................................................ 21,000 777
-------
2,590
- --------------------------------------------------------------------------------
SERVICES (4.4%)
Minnesota Mining & Manufacturing Co. ........................... 25,565 1,454
WMX Technologies, Inc. ......................................... 43,320 1,218
-------
2,672
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (1.1%)
Springs Industries, Inc., Class A............................... 15,275 655
- --------------------------------------------------------------------------------
TRANSPORTATION (2.4%)
Burlington Northern, Inc. ...................................... 7,500 629
Conrail, Inc. .................................................. 12,000 825
-------
1,454
- --------------------------------------------------------------------------------
UTILITIES (10.4%)
American Telephone & Telegraph Corp. ........................... 23,807 1,524
Dominion Resources, Inc. ....................................... 37,250 1,481
GTE Corp. ...................................................... 27,500 1,134
Pacificorp...................................................... 62,600 1,182
Southern Co. ................................................... 40,600 969
-------
6,290
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $47,384)............................... 54,153
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK (0.0%)
- -------------------------------------------------------------------------------
MANUFACTURING (0.0%)
Teledyne, Inc., $1.20 Series E (COST $5)...................... 339 $ 5
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
SHORT-TERM INVESTMENT (10.3%) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (10.3%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $6,193, collateralized by $4,046
U.S. Treasury Bonds, 11.25%, due 2/15/15, valued at $6,317
(COST $6,192)................................................. $6,192 6,192
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%) (COST $53,581)...................... 60,350
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%)
- -------------------------------------------------------------------------------
Dividends Receivable.......................................... 97
Interest Receivable........................................... 1
Other Assets.................................................. 13
Payable to Custodian Bank..................................... (45)
Payable for Investment Advisory Fees.......................... (39)
Payable for Administrative Fees............................... (7)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (17)
-------
2
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 4,841,124 outstanding $.001 par value
Institutional Class shares (authorized 25,000,000 shares).... $60,352
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE....... $ 12.47
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT SECURITIES (72.6%)
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS (15.7%)
7.125%, 2/15/23.................................................. 1,300 1,416
8.125%, 8/15/19.................................................. 4,900 5,894
------
7,310
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (56.9%)
4.375%, 8/15/96.................................................. 1,250 1,239
5.125%, 2/28/98.................................................. 1,500 1,482
6.00%, 6/30/96................................................... 2,000 2,005
6.25%, 2/15/03................................................... 2,300 2,340
6.375%, 7/15/99-8/15/02.......................................... 5,240 5,357
6.50%, 8/15/05................................................... 30 31
7.125%, 2/29/00.................................................. 1,500 1,574
7.25%, 8/15/04................................................... 2,300 2,491
7.50%, 11/15/01-5/15/02.......................................... 3,550 3,849
7.875%, 11/15/99................................................. 1,940 2,083
8.00%, 5/15/01................................................... 1,750 1,925
8.125%, 2/15/98.................................................. 1,000 1,052
8.25%, 7/15/98................................................... 1,065 1,132
------
26,560
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES (COST $32,395)................... 33,870
- --------------------------------------------------------------------------------
AGENCY SECURITIES (5.9%)
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
REMIC Class C 92-112 PAC, 7.00%, 3/25/16......................... 810 811
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
Various Pools:
7.50%, 1/15/07.................................................. 2 2
7.50%, 12/15/22................................................. 1,915 1,941
12.50%, 11/15/13................................................ 7 8
- --------------------------------------------------------------------------------
TOTAL AGENCY SECURITIES (COST $2,760)............................. 2,762
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS (14.9%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (5.8%)
#CIT Group Holdings 5.75%, 5/2/97............................. $1,225 $ 1,225
Countrywide Funding Corp. 8.25%, 7/15/02...................... 810 875
Fleet/Norstar Group 8.125%, 7/1/04............................ 545 592
-------
2,692
- -------------------------------------------------------------------------------
INDUSTRIAL (9.1%)
#Ford Motor Credit Co. 5.80%, 5/20/97......................... 1,585 1,585
#G.E. Capital Corp. 5.70%, 8/11/97............................ 1,805 1,804
General Motors Acceptance Corp. 7.625%, 2/15/97............... 875 891
-------
4,280
- -------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS (COST $6,926)...................... 6,972
- -------------------------------------------------------------------------------
YANKEE BONDS (4.0%)
- -------------------------------------------------------------------------------
Quebec Province 8.80%, 4/15/03................................ 855 960
WestPac Banking Ltd. 9.125%, 8/15/01.......................... 815 917
- -------------------------------------------------------------------------------
TOTAL YANKEE BONDS (COST $1,853)............................... 1,877
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (0.9%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.9%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95 to be repurchased at $397, collateralized by $351 U.S.
Treasury Bonds,
7.50%, due 11/15/16, valued at $406 (COST $397)............... 397 397
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.3%) (COST $44,331)....................... 45,878
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.7%)
- -------------------------------------------------------------------------------
Cash.......................................................... 2
Interest Receivable........................................... 833
Other Assets.................................................. 13
Payable for Investment Advisory Fees.......................... (18)
Payable for Administrative Fees............................... (7)
Payable for Dividends......................................... (3)
Payable for Custodian Fees.................................... (1)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (19)
-------
799
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 4,480,097 outstanding $.001 par value Institutional
Class shares (authorized 25,000,000 shares)..................... $46,677
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.......... $ 10.42
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+See Note A to Financial Statements
#Variable/Floating rate security--rate disclosed is as of October 31, 1995
PACPlanned Amortization Class
REMICReal Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (89.5%)
- -------------------------------------------------------------------------------
AUSTRALIA (2.6%)
Brambles Industries Ltd. ..................................... 106,000 $ 1,127
Broken Hill Proprietary Co., Ltd. ............................ 67,010 907
-------
2,034
- -------------------------------------------------------------------------------
AUSTRIA (2.5%)
Flughafen Wien AG............................................. 20,100 1,292
Wienerberger Baustoffindustrie AG............................. 3,150 633
-------
1,925
- -------------------------------------------------------------------------------
BRAZIL (1.0%)
#Usiminas S.A. ADS............................................ 84,000 798
- -------------------------------------------------------------------------------
FRANCE (6.1%)
Banque Paribas................................................ 13,429 739
Castorama Dubois.............................................. 5,396 875
Cie Generale des Eaux......................................... 7,156 665
Elf Aquitaine................................................. 12,463 849
Elf Aquitaine ADR............................................. 3,227 109
PSA Peugeot................................................... 3,600 469
Valeo S.A. ................................................... 22,000 994
-------
4,700
- -------------------------------------------------------------------------------
GERMANY (5.8%)
Bayerische Motoren Werke AG................................... 1,750 936
Felten & Guilleaume........................................... 2,600 412
Mannesmann AG................................................. 3,681 1,209
#Tarkett AG................................................... 34,000 812
Veba AG....................................................... 28,000 1,147
-------
4,516
- -------------------------------------------------------------------------------
HONG KONG (3.5%)
HSBC Holdings plc............................................. 81,996 1,193
Hutchison Whampoa Ltd. ....................................... 135,000 744
Swire Pacific Ltd., Class A................................... 100,000 750
-------
2,687
- -------------------------------------------------------------------------------
INDIA (0.5%)
#Oryx Fund Ltd. .............................................. 40,000 420
- -------------------------------------------------------------------------------
</TABLE>
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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ISRAEL (0.7%)
Scitex Corp. .................................................. 30,000 $ 521
- --------------------------------------------------------------------------------
JAPAN (22.2%)
Canon, Inc. ................................................... 97,000 1,660
Dai-Tokyo Fire & Marine Insurance Co., Ltd. ................... 178,000 1,143
Hitachi Ltd. .................................................. 143,000 1,468
Ito-Yokado Co., Ltd. .......................................... 17,000 929
Japan Associated Finance Co., Ltd. ............................ 6,000 584
Kamigumi Co., Ltd. ............................................ 126,000 1,140
*Kobe Steel Ltd. .............................................. 322,000 844
Kyocera Corp. ................................................. 19,000 1,557
Mabuchi Motor Co., Ltd. ....................................... 12,200 738
Maezawa Kyuso Industries Co. .................................. 43,000 925
Mitsubishi Heavy Industries Ltd. .............................. 198,000 1,527
Mitsui & Co. Ltd. ............................................. 176,000 1,401
Murata Manufacturing Co., Ltd. ................................ 25,718 903
Nippondenso Co., Ltd. ......................................... 52,000 951
Nomura Securities Co., Ltd. ................................... 80,000 1,463
-------
17,233
- --------------------------------------------------------------------------------
KOREA (1.9%)
Korea Electric Power Corp. ADR................................. 60,000 1,485
*L.G. Chemical Ltd. ........................................... 1,061 25
-------
1,510
- --------------------------------------------------------------------------------
MALAYSIA (1.8%)
Land & General Bhd. ........................................... 320,000 743
Telekom Malaysia Bhd. ......................................... 94,108 674
-------
1,417
- --------------------------------------------------------------------------------
MEXICO (0.5%)
Telefonos de Mexico S.A. ADR, Class L.......................... 12,900 355
- --------------------------------------------------------------------------------
NETHERLANDS (5.1%)
Akzo Nobel N.V. ............................................... 8,500 968
Koninklijke KNP BT N.V. ....................................... 29,000 873
Philips Electronics N.V. ...................................... 22,000 851
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
NETHERLANDS--(CONTINUED)
Royal PTT Nederland N.V. ...................................... 19,710 $ 694
#Royal PTT Nederland N.V. ADR.................................. 15,394 541
-------
3,927
- --------------------------------------------------------------------------------
NORWAY (1.3%)
Kvaerner Industries, Class B................................... 25,500 1,016
- --------------------------------------------------------------------------------
SINGAPORE (1.2%)
Keppel Corp. .................................................. 118,000 969
- --------------------------------------------------------------------------------
SPAIN (2.7%)
ENDESA......................................................... 22,800 1,135
Repsol S.A. ADR................................................ 31,500 933
-------
2,068
- --------------------------------------------------------------------------------
SWEDEN (5.7%)
Astra AB, Class B.............................................. 25,500 922
Ericsson (LM) ADR.............................................. 55,000 1,175
Sparbanken Sverige AB, Class A................................. 110,000 1,160
Volvo AB....................................................... 53,000 1,194
-------
4,451
- --------------------------------------------------------------------------------
SWITZERLAND (7.8%)
BBC Brown Boveri AG (Bearer)................................... 780 905
Nestle S.A. (Registered)....................................... 1,145 1,200
Schweizerischer Bankverein (Bearer)............................ 3,143 1,290
Societe Generale de Surveillance Holding S.A. (Bearer)......... 695 1,313
Zurich Insurance Co. (Registered).............................. 4,550 1,303
-------
6,011
- --------------------------------------------------------------------------------
THAILAND (2.4%)
Siam Cement Co., Ltd. (Foreign)................................ 21,000 1,145
Thai Farmers Bank, Ltd......................................... 114,000 748
-------
1,893
- --------------------------------------------------------------------------------
UNITED KINGDOM (14.2%)
British Airport Authority plc.................................. 130,363 1,014
British Gas plc................................................ 207,000 789
British Steel plc.............................................. 320,000 827
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
UNITED KINGDOM--(CONTINUED)
*Flextech plc............................................... 153,000 $ 1,149
Glaxo Wellcome plc.......................................... 80,000 1,079
Marks & Spencer plc......................................... 101,000 677
Nurdin & Peacock plc........................................ 150,000 458
Rolls-Royce plc............................................. 400,000 974
RTZ Corp. plc (Registered).................................. 77,547 1,072
TI Group plc................................................ 125,148 858
Trafalgar House Corp. plc................................... 1,007,775 362
TransTec plc................................................ 550,000 745
Unilever plc................................................ 50,000 971
-------
10,975
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $65,017)........................... 69,426
- -------------------------------------------------------------------------------
PREFERRED STOCK (0.7%)
- -------------------------------------------------------------------------------
KOREA (0.7%)
*L.G. Chemical Ltd. (COST $727)............................. 36,500 553
- -------------------------------------------------------------------------------
WARRANT (0.0%)
- -------------------------------------------------------------------------------
INDIA (0.0%)
#*Oryx Fund Ltd. (COST $0)................................... 6,000 0
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (9.3%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (9.3%)
J.P. Securities, Inc., 5.35%, dated 10/31/95, due 11/1/95 to
be repurchased at $7,196, collateralized by $4,701 U.S.
Treasury Bonds, 11.25%, due 2/15/15 valued at $7,339 (COST
$7,195)..................................................... $ 7,195 7,195
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%) (COST $72,939)..................... 77,174
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.5%)
- -------------------------------------------------------------------------------
Cash........................................................ 154
Foreign Currency (COST $762)................................ 761
Receivable for Investments Sold............................. 154
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Dividends Receivable................................................. $ 102
Receivable for Withholding Tax Reclaims.............................. 60
Interest Receivable.................................................. 1
Other Assets......................................................... 14
Payable for Investments Purchased.................................... (761)
Payable for Investment Advisory Fees................................. (66)
Payable for Custodian Fees........................................... (12)
Payable for Administrative Fees...................................... (8)
Payable for Directors' Fees.......................................... (1)
Other Liabilities.................................................... (19)
-------
379
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 5,864,858 outstanding $.001 par value Institutional
Class shares
(authorized 25,000,000 shares)...................................... $77,553
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 13.22
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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.
20
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995 (Unaudited)
At October 31, 1995, sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Automotive..................................................... 3.7% $ 2,904
Basic Resources................................................ 11.2 8,718
Capital Equipment.............................................. 11.8 9,124
Chemicals...................................................... 0.7 579
Consumer Durables.............................................. 8.2 6,417
Electronics.................................................... 5.3 4,127
Energy......................................................... 7.7 5,948
Financial Services............................................. 11.3 8,740
Insurance...................................................... 1.7 1,303
Mining......................................................... 1.2 907
Multi Industry................................................. 3.5 2,714
Paper & Packaging.............................................. 1.0 743
Pharmaceuticals................................................ 1.4 1,080
Repurchase Agreement........................................... 9.3 7,195
Services....................................................... 17.8 13,807
Technology..................................................... 0.7 521
Telecommunications............................................. 2.4 1,849
Utilities...................................................... 0.6 498
- -------------------------------------------------------------------------------
Total Investments............................................ 99.5 77,174
Other Assets and Liabilities (Net)............................. 0.5 379
- -------------------------------------------------------------------------------
Net Assets................................................... 100.0% $77,553
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
TS&W PORTFOLIOS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1995
<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................................... $1,175 $ -- $ 1,134
Interest.................................... 332 2,522 549
Less: Foreign Taxes Withheld................ -- -- (128)
- --------------------------------------------------------------------------------
Total Income............................... 1,507 2,522 1,555
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B............ 373 180 602
Administrative Fees--Note C................. 78 80 84
Custodian Fees.............................. 9 5 65
Audit Fees.................................. 13 14 14
Printing Fees............................... 9 9 8
Registration and Filing Fees................ 6 5 5
Legal Fees.................................. 4 3 5
Directors' Fees--Note F..................... 3 3 4
Other Expenses.............................. 5 6 6
- --------------------------------------------------------------------------------
Total Expenses............................. 500 305 793
Expense Offset--Note A...................... (9) (4) (12)
- --------------------------------------------------------------------------------
Net Expenses............................... 491 301 781
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME........................ 1,016 2,221 774
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments................................. 1,569 (319) (64)
Foreign Exchange Transactions............... -- -- 48
- --------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN EXCHANGE TRANSACTIONS........... 1,569 (319) (16)
- --------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) ON INVESTMENTS............... 4,327 3,633 (1,034)
- --------------------------------------------------------------------------------
NET GAIN (LOSS) ON INVESTMENTS AND FOREIGN
EXCHANGE TRANSACTIONS....................... 5,896 3,314 (1,050)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................... $6,912 $5,535 $ (276)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
TS&W EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 607 $ 1,016
Net Realized Gain..................................... 399 1,569
Net Change in Unrealized Appreciation................. 751 4,327
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 1,757 6,912
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (577) (945)
Net Realized Gain..................................... (375) (399)
- --------------------------------------------------------------------------------
Total Distributions.................................. (952) (1,344)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 10,464 19,816
--In Lieu of Cash Distributions..................... 927 1,299
Redeemed.............................................. (4,770) (4,710)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 6,621 16,405
- --------------------------------------------------------------------------------
Total Increase........................................ 7,426 21,973
Net Assets:
Beginning of Year..................................... 30,953 38,379
- --------------------------------------------------------------------------------
End of Year (2)....................................... $38,379 $60,352
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 957 1,707
In Lieu of Cash Distributions......................... 86 114
Shares Redeemed....................................... (435) (397)
- --------------------------------------------------------------------------------
608 1,424
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $35,455 $51,860
Undistributed Net Investment Income................... 83 154
Accumulated Net Realized Gain......................... 399 1,569
Unrealized Appreciation............................... 2,442 6,769
- --------------------------------------------------------------------------------
$38,379 $60,352
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
TS&W FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Interest Income................................... $ 1,455 $ 2,221
Net Realized Loss..................................... (356) (319)
Net Change in Unrealized Appreciation (Depreciation).. (2,794) 3,633
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (1,695) 5,535
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,455) (2,221)
Net Realized Gain..................................... (274) --
In Excess of Net Realized Gain........................ (13) --
- --------------------------------------------------------------------------------
Total Distributions.................................. (1,742) (2,221)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 7,361 11,493
--In Lieu of Cash Distributions..................... 1,698 2,167
Redeemed.............................................. (2,491) (2,415)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 6,568 11,245
- --------------------------------------------------------------------------------
Total Increase........................................ 3,131 14,559
Net Assets:
Beginning of Year..................................... 28,987 32,118
- --------------------------------------------------------------------------------
End of Year (2)....................................... $32,118 $46,677
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 733 1,159
In Lieu of Cash Distributions......................... 169 216
Shares Redeemed....................................... (255) (239)
- --------------------------------------------------------------------------------
647 1,136
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $34,560 $45,805
Accumulated Net Realized Loss......................... (356) (675)
Unrealized Appreciation (Depreciation)................ (2,086) 1,547
- --------------------------------------------------------------------------------
$32,118 $46,677
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 270 $ 774
Net Realized Gain (Loss).............................. 1,518 (16)
Net Change in Unrealized Appreciation (Depreciation).. 1,819 (1,034)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... 3,607 (276)
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (118) (326)
Net Realized Gain..................................... -- (1,317)
- --------------------------------------------------------------------------------
Total Distributions.................................. (118) (1,643)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 17,971 32,154
--In Lieu of Cash Distributions..................... 118 1,641
Redeemed.............................................. (246) (3,685)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 17,843 30,110
- --------------------------------------------------------------------------------
Total Increase........................................ 21,332 28,191
Net Assets:
Beginning of Year..................................... 28,030 49,362
- --------------------------------------------------------------------------------
End of Year (2)....................................... $49,362 $77,553
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 1,339 2,459
In Lieu of Cash Distributions......................... 9 130
Shares Redeemed....................................... (18) (289)
- --------------------------------------------------------------------------------
1,330 2,300
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital................... ................... $42,454 $72,564
Undistributed Net Investment Income................... 319 815
Accumulated Net Realized Gain (Loss).................. 1,317 (64)
Unrealized Appreciation............................... 5,272 4,238
- --------------------------------------------------------------------------------
$49,362 $77,553
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
TS&W EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JULY 17,**
1992 TO YEARS ENDED OCTOBER 31,
OCTOBER 31, -------------------------
1992 1993 1994 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $10.00 $ 9.65 $ 11.02 $ 11.23
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.02+ 0.14 0.19 0.23
Net Realized and Unrealized Gain
(Loss).............................. (0.35) 1.36 0.33 1.34
- ---------------------------------------------------------------------------------
Total From Investment Operations.... (0.33) 1.50 0.52 1.57
- ---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ (0.02) (0.13) (0.18) (0.22)
Net Realized Gain.................... -- -- (0.13) (0.11)
- ---------------------------------------------------------------------------------
Total Distributions................. (0.02) (0.13) (0.31) (0.33)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........ $ 9.65 $ 11.02 $ 11.23 $ 12.47
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN.......................... (3.30%)++ 15.62% 4.82% 14.32%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands). $7,233 $30,953 $38,379 $60,352
Ratio of Expenses to Average Net As-
sets................................. 1.25%*+ 1.22% 1.10% 1.01%#
Ratio of Net Investment Income to Av-
erage Net Assets..................... 1.25%*+ 1.51% 1.74% 2.04%
Portfolio Turnover Rate............... 17% 23% 23% 17%
- ---------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.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, 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%.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
TS&W FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JULY 17,**
1992 TO YEARS ENDED OCTOBER 31,
OCTOBER 31, --------------------------
1992 1993 1994 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.. $10.00 $ 10.09 $ 10.75 $ 9.60
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.06+ 0.44 0.47 0.56
Net Realized and Unrealized Gain
(Loss).............................. 0.07 0.68 (1.05) 0.82
- ---------------------------------------------------------------------------------
Total From Investment Operations.... 0.13 1.12 (0.58) 1.38
- ---------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income................ (0.04) (0.46) (0.47) (0.56)
Net Realized Gain.................... -- -- (0.10) --
- ---------------------------------------------------------------------------------
Total Distributions................. (0.04) (0.46) (0.57) (0.56)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........ $10.09 $ 10.75 $ 9.60 $ 10.42
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN.......................... 1.31%++ 11.31% (5.46%) 14.73%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands). $9,385 $28,987 $32,118 $46,677
Ratio of Expenses to Average Net As-
sets................................. 1.30%*+ 1.15% 1.02% 0.76%#
Ratio of Net Investment Income to Av-
erage Net Assets..................... 4.70%*+ 4.39% 4.73% 5.56%
Portfolio Turnover Rate............... 5% 83% 27% 25%
- ---------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.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, 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%.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
TS&W INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
DECEMBER 18,** YEARS ENDED
1992 TO OCTOBER 31,
OCTOBER 31, ----------------
1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $ 10.00 $ 12.54 $ 13.85
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................... 0.05+ 0.07 0.13
Net Realized and Unrealized Gain (Loss)..... 2.49 1.29 (0.31)
- --------------------------------------------------------------------------------
Total From Investment Operations........... 2.54 1.36 (0.18)
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income....................... -- (0.05) (0.09)
Net Realized Gain........................... -- -- (0.36)
- --------------------------------------------------------------------------------
Total Distributions........................ -- (0.05) (0.45)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $ 12.54 $ 13.85 $ 13.22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN................................. 25.40%++ 10.87% (1.11%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIO AND SUPPLEMENTAL DATA
Net Assets, End of Year (Thousands).......... $28,030 $49,362 $77,553
Ratio of Expenses to Average Net Assets...... 1.37%*+ 1.38% 1.32%#
Ratio of Net Investment Income to Average Net
Assets...................................... 1.02%*+ 0.70% 1.29%
Portfolio Turnover Rate...................... 11% 30% 23%
- --------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser of $.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, 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%.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 October 31, 1995, the UAM Funds
were comprised of thirty-four 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.
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
mean of the bid and asked prices 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 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 quotations are not
readily available is determined in good faith at fair value using methods
determined by the Board of Directors.
2. 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 Portfolio accrues such taxes when the
related income is earned.
Undistributed net investment income and accumulated net realized gain
(loss) have been adjusted for permanent book-tax differences.
Reclassifications arose principally from differing book and tax treatments
for foreign currency transactions.
At October 31, 1995, cost and unrealized appreciation (depreciation) of
investments for Federal income tax purposes were:
<TABLE>
<CAPTION>
COST APPRECIATION DEPRECIATION NET
TS&W PORTFOLIOS (000) (000) (000) (000)
--------------- ------- ------------ ------------ ------
<S> <C> <C> <C> <C>
Equity.............................. $53,582 $8,305 $(1,537) $6,768
Fixed Income........................ 44,349 1,566 (37) 1,529
International Equity................ 72,945 7,545 (3,316) 4,229
</TABLE>
29
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At October 31, 1995, the following portfolios had approximate capital loss
carryovers for Federal income tax purposes available to offset future net
capital gains through the indicated expiration dates:
<TABLE>
<CAPTION>
EXPIRATION DATE 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 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 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 TRANSACTIONS: 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 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 or 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 forward 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 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 gains or losses. The
TS&W International Equity Portfolio recognizes 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. DISTRIBUTIONS TO SHAREHOLDERS: The TS&W Equity Portfolio distributes
substantially all of its net investment income quarterly. The TS&W Fixed
Income Portfolio declares distributions daily and distributes substantially
all of its net investment income monthly. The TS&W International Equity
Portfolio distributes
30
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
substantially all of its net investment income annually. Any realized net
capital gains will 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 determined 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 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.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income 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................................................................ .750%
Fixed Income.......................................................... .450%
International Equity.................................................. 1.000%
</TABLE>
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A. through its affiliate Chase Global Funds Services Company ("CGFSC")
(the "Administrator"), formerly Mutual Funds Service Company ("MFSC"),
provides administrative, fund accounting, dividend disbursing and transfer
agent services to the UAM Funds under an Administration Agreement (the
"Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive 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
31
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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. In addition, the Portfolio is charged
certain out of pocket expenses by the Administrator. Prior to September 1,
1995, MFSC was an affiliate of the United States Trust Company of New York and
provided administrative services to the UAM Funds under the same terms,
conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.) 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. During the year ended October 31, 1995, 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...................................................... $21,772 $7,425
Fixed Income................................................ 432 3,321
International Equity........................................ 40,222 11,836
</TABLE>
Purchases and sales of long-term U.S. Government and agency securities were
$20,784,000 and $6,315,000, 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement of expenses
incurred in attending Board meetings.
G. LINE OF CREDIT. The TS&W 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 October 31, 1995, there were no borrowings under the agreement.
H. OTHER. At October 31, 1995, 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 % OF
TS&W PORTFOLIOS SHAREHOLDERS OWNERSHIP
--------------- ------------ ---------
<S> <C> <C>
Equity................................................ 1 15.5%
International Equity.................................. 1 11.6
</TABLE>
32
<PAGE>
TS&W PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At October 31, 1995, the net assets of the TS&W International Equity Portfolio
was substantially comprised of foreign denominated securities and currency.
Changes in currency exchange rates will affect the value of and investment
income from such securities and currency. 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.
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
TS&W Equity Portfolio
TS&W Fixed Income Portfolio
TS&W International Equity Portfolio
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
TS&W Equity Portfolio, TS&W Fixed Income Portfolio, and TS&W International
Equity Portfolio (the "Portfolios"), Portfolios of the UAM Funds, Inc. at
October 31, 1995, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolios' management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
At October 31, 1995, the TS&W Equity and TS&W International Equity Portfolios
hereby designates $399,000 and $825,000, respectively, as a long-term capital
gain dividend for the purpose of the dividend paid deduction on its Federal
income tax return.
For the year ended October 31, 1995, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders for
the TS&W Equity Portfolio is 90%. Foreign taxes accrued during the fiscal year
ended October 31, 1994 amounting to $128,000 for the TS&W International Equity
Portfolio are expected to be passed through to the shareholders as foreign tax
credits on Form 1099--Dividend for the year ending December 31, 1995 which
shareholders of these Portfolios will receive in late January 1996.
34
<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
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor, 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholder:
During the fiscal year ended October 31, 1995, the Portfolio returned 13.57%
compared to the Russell 2000 Index return of 18.35%. The first quarter ended
January 31, 1995 was the most challenging for the Portfolio as November's loss
to the Russell 2000 was 3.0%. Small capitalization stocks, generally, have had
a very tough challenge from the S&P 500 Index which returned 26.41% during the
fiscal year.
Early in the year, market fears ran rampant that the economy would weaken
materially due to the Federal Reserve's (the "Fed") tight monetary stance.
Some even talked of recession. Generally speaking, weak economic environments
favor large cap stocks and the growth style of investing although there is no
guarantee this will occur. In addition, a weaker dollar gave currency benefits
to large multinational firms when compared to the more domestically oriented
small capitalization stocks. This was even more true for the Portfolio which
substantially underweighted technology and high P/E growth issues,
particularly IPO's. Searching for earnings momentum among cyclical and
economically sensitive groups was difficult this past year.
By the fourth quarter of the fiscal year, performance began to improve on
both an absolute and relative basis. The housing related and financial stocks
performed well, and the retail issues stabilized as the year progressed. This
was offset by underperformance among the underweighted technology area and the
auto and industrial related holdings in the Portfolio.
In our view, the probability of a recession remains low because economic
excesses have not begun to build in the economy. In addition, although certain
inflation numbers could rise somewhat from their present levels they should
not cause the Fed to aggressively tighten because labor costs remain under
control. Consequently, the Portfolio will focus on stocks that have fallen out
of favor as market psychology overtakes fundamentals. We also will be
evaluating individual stock weightings since the Portfolio's winners have had
strong moves and are vulnerable to profit taking. As always, the Portfolio
continues to be monitored for risk and volatility levels. We continue to
search for stocks with solid earning levels that are at attractive valuation
points and which have a visible catalyst for better market valuation in the
near term. We are optimistic that this approach can add substantial value to
the Portfolio's relative total return as we move into the next fiscal year.
Yours truly,
/s/Patricia A. Falkowski
Patricia A. Falkowski
Portfolio Manager
DEFINITIONS OF THE COMPARATIVE INDEXES
--------------------------------------
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 Standard & Poor's 500 Index is defined under the performance comparison
line graph.
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.
Without the Adviser's fee waiver, 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $250,000 PURCHASE IN THE FMA
SMALL COMPANY PORTFOLIO AND THE STANDARD & POOR'S 500 INDEX (S&P 500)
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995**
---------------------------------------
1 YEAR SINCE 7/31/91*
---------------------------------------
13.57% 13.32%
---------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
07/31/91* 10/31/91 10/31/92 10/31/93 10/31/94 10/31/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
FMA SMALL COMPANY PORTFOLIO+ 250,000 264,273 260,355 358,385 374,656 425,497
S&P 500 INDEX+ 250,000 255,000 280,375 322,175 334,611 422,982
</TABLE>
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations
** Total return for the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The
Portfolio's performance assumes the reinvestment of all dividends and
distributions. The comparative index has been adjusted to reflect
reinvestment of dividends on securities in the index.
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.
Please note that one can not invest in an unmanaged index.
2
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (92.2%)
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE (6.1%)
*Litton Industries, Inc......................................... 10,400 $ 412
*Rohr, Inc...................................................... 57,500 855
------
1,267
- -------------------------------------------------------------------------------
AUTOMOTIVE (1.8%)
Borg-Warner Automotive, Inc.................................... 12,700 375
- -------------------------------------------------------------------------------
BANKS (5.1%)
First Commerce Corp............................................ 20,700 637
Southern National Corp......................................... 16,300 420
------
1,057
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (2.7%)
Meredith Corp.................................................. 15,700 561
- -------------------------------------------------------------------------------
CONSTRUCTION (5.5%)
Lafarge Corp................................................... 10,800 189
*USG Corp....................................................... 33,000 961
------
1,150
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES (3.2%)
*Fruit of the Loom, Inc., Class A............................... 12,900 224
*International Family Entertainment, Class B.................... 23,600 437
------
661
- -------------------------------------------------------------------------------
ELECTRONICS (1.9%)
Wyle Electronics............................................... 9,500 405
- -------------------------------------------------------------------------------
ENERGY (1.9%)
Global Marine, Inc............................................. 61,800 402
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (17.0%)
First Financial Corp........................................... 20,600 433
Greenpoint Financial Corp...................................... 23,300 629
Leader Financial Corp.......................................... 19,100 680
Regional Acceptance Corp....................................... 82,950 788
Standard Federal Bancorporation................................ 12,600 447
SunAmerica, Inc................................................ 9,100 566
------
3,543
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ----------------------------------------------------------------------------
HEALTH CARE (5.4%)
*Health Management Associates, Inc. Class A.................. 19,200 $ 413
*Universal Health Services, Inc., Class B.................... 18,700 701
------
1,114
- ----------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (4.3%)
Legget & Platt, Inc......................................... 37,400 898
- ----------------------------------------------------------------------------
INSURANCE (4.2%)
*Triad Guaranty, Inc......................................... 33,700 885
- ----------------------------------------------------------------------------
MANUFACTURING (6.7%)
*LAM Research Corp........................................... 7,100 431
Measurex Corp............................................... 20,400 627
Watkins-Johnson Co.......................................... 7,100 342
------
1,400
- ----------------------------------------------------------------------------
METALS (3.0%)
Kennametal, Inc............................................. 19,900 619
- ----------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (8.1%)
Merry Land & Investment Company, Inc........................ 18,900 397
National Health Investors, Inc.............................. 21,800 654
Nationwide Health Properties, Inc........................... 15,700 646
------
1,697
- ----------------------------------------------------------------------------
RETAIL (8.3%)
Family Dollar Stores, Inc................................... 17,200 262
*Kohl's Corp................................................. 12,300 558
Vons Companies, Inc......................................... 36,200 919
------
1,739
- ----------------------------------------------------------------------------
TRANSPORTATION (5.0%)
GATX Corp................................................... 7,900 375
Kansas City Southern Industries, Inc........................ 14,200 662
------
1,037
- ----------------------------------------------------------------------------
UTILITIES (2.0%)
Southwest Gas Corp.......................................... 27,600 417
- ----------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $17,094)........................... 19,227
- ----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- ----------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (7.8%)
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.8%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $1,623, collateralized by
$1,470 U.S. Treasury Notes,
7.25%, due 5/15/16, valued at $1,656. (COST $1,623)....... $1,623 $ 1,623
- ----------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%) (COST $18,717)................... 20,850
- ----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.0%)
- ----------------------------------------------------------------------------
Dividends Receivable....................................... 20
Other Assets............................................... 11
Payable for Audit Fees..................................... (13)
Payable for Investment Advisory Fees....................... (7)
Payable for Administrative Fees............................ (6)
Payable for Custodian Fees................................. (2)
Payable for Directors' Fees................................ (1)
Other Liabilities.......................................... (5)
-------
(3)
- ----------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 1,579,988 outstanding $0.001 par value
Institutional Class
shares (authorized 25,000,000 shares)..................... $20,847
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE.................................................. $ 13.19
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
+ See Note A to Financial Statements.
* Non-Income Producing Security.
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
FMA SMALL COMPANY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
ENDED
OCTOBER 31,
(In Thousands) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends.................................................... $ 291
Interest..................................................... 54
- --------------------------------------------------------------------------------
Total Income................................................ 345
- --------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee................................................... $153
Less: Fees Waived........................................... (66) 87
----
Administrative Fees--Note C.................................. 76
Printing Fees................................................ 15
Audit Fees................................................... 13
Custodian Fees............................................... 6
Legal Fees................................................... 3
Directors' Fees--Note F...................................... 3
Other Expenses............................................... 8
- --------------------------------------------------------------------------------
Total Expenses.............................................. 211
Expense Offset--Note A....................................... (1)
- --------------------------------------------------------------------------------
Net Expenses................................................ 210
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME......................................... 135
- --------------------------------------------------------------------------------
NET REALIZED GAIN ON INVESTMENTS.............................. 2,532
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS.......... 121
- --------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS....................................... 2,653
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $2,788
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
FMA SMALL COMPANY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 11 $ 135
Net Realized Gain..................................... 664 2,532
Net Change in Unrealized Appreciation (Depreciation).. (32) 121
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 643 2,788
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. -- (133)
Net Realized Gain..................................... (3,348) (664)
- -------------------------------------------------------------------------------
Total Distributions.................................. (3,348) (797)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 4,780 1,692
--In Lieu of Cash Distributions.................... 3,182 765
Redeemed.............................................. (4,265) (3,162)
- -------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions................................................ 3,697 (705)
- -------------------------------------------------------------------------------
Total Increase........................................ 992 1,286
Net Assets:
Beginning of Period................................... 18,569 19,561
- -------------------------------------------------------------------------------
End of Period (2)..................................... $19,561 $20,847
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued......................................... 389 137
In Lieu of Cash Distributions......................... 276 69
Shares Redeemed....................................... (356) (239)
- -------------------------------------------------------------------------------
309 (33)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital....................................... $16,877 $16,172
Undistributed Net Investment Income................... 8 10
Accumulated Net Realized Gain......................... 664 2,532
Unrealized Appreciation............................... 2,012 2,133
- -------------------------------------------------------------------------------
$19,561 $20,847
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FMA SMALL COMPANY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
JULY 31,
1991** TO YEARS ENDED OCTOBER 31,
OCTOBER 31, -----------------------------------------
1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $10.00 $ 10.54 $ 10.36 $ 14.24 $ 12.13
- -----------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income
(Loss)+............... 0.04 (0.01) 0.02 0.01 0.08
Net Realized &
Unrealized Gain
(Loss)................ 0.53 (0.14) 3.88 0.50 1.47
- -----------------------------------------------------------------------------------
Total From Investment
Operations........... 0.57 (0.15) 3.90 0.51 1.55
- -----------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income.. (0.03) (0.01) (0.02) -- (0.08)
Net Realized Gain...... -- (0.01) -- (2.62) (0.41)
Return of Capital...... -- (0.01) -- -- --
- -----------------------------------------------------------------------------------
Total Distributions... (0.03) (0.03) (0.02) (2.62) (0.49)
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $10.54 $ 10.36 $ 14.24 $ 12.13 $ 13.19
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
TOTAL RETURN............ 5.71%++ (1.48)%++ 37.65%++ 4.54%++ 13.57%++
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of
Period (Thousands)..... $9,834 $18,071 $18,569 $19,561 $20,847
Ratio of Expenses to
Average Net Assets+.... 1.03%* 1.03% 1.03% 1.03% 1.03%#
Ratio of Net Investment
Income (Loss) to
Average Net Assets+.... 2.14%* (0.07)% 0.14% 0.06% 0.66%
Portfolio Turnover Rate. 7% 134% 163% 121% 170%
- -----------------------------------------------------------------------------------
</TABLE>
* Annualized
** Commencement of Operations.
+ Net of voluntarily waived fees and expenses assumed by the Adviser for the
period ended October 31, 1991, the years ended October 31, 1992, 1993, 1994
and 1995 of $0.04, $0.003, $0.03, $0.03 and $0.04 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.
# For the year ended October 31, 1995, 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.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 the UAM Funds, Inc., began operations on July 31,
1991. At October 31, 1995, the UAM Funds were comprised of thirty-four 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.
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. 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 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 permanent book-tax differences.
At October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $18,717,000. Net unrealized appreciation for Federal income tax
purposes aggregated $2,133,000 of which $2,391,000 related to appreciated
securities and $258,000 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: Any distributions from net investment
income will normally be distributed 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.
9
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
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 determined 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 adjusted to
include expense offsets for custodian balance credits.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income 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 the average daily net assets. 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 offsets arrangements, from
exceeding 1.03% of average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement'). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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 year ended October 31, 1995, the Portfolio
made purchases of $32,736,000 and sales of $35,708,000 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.
10
<PAGE>
FMA SMALL COMPANY PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS--(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, Inc. and reimbursement of
expenses incurred in attending Board meetings.
G. LINE OF CREDIT. The FMA Small Company Portfolio 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 year ended October 31, 1995, there were no
borrowings under the agreement.
H. OTHER. At October 31, 1995, 34.7% of total shares outstanding were held by
2 record shareholders owning 10% or greater of the aggregate total shares
outstanding.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of UAM Funds, Inc. and the Shareholders of FMA Small
Company Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
FMA Small Company Portfolio (the "Portfolio"), a Portfolio of the UAM Funds,
Inc., at October 31, 1995, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
The FMA Small Company Portfolio hereby designates $664,000 as a long-term
capital gain dividend for purposes of the dividend paid deduction on its
federal income tax return.
For the year ended October 31, 1995, the percentage of dividends that qualify
for the 70% dividend received deduction for corporate shareholders is 23.2%.
12
<PAGE>
- -------------------------------------------------------------------------------
UAM FUNDS
ACADIAN EMERGING MARKETS 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
Acadian Asset Management, Inc.
Two International Place Boston, MA 02110
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- -------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- -------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- -------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- -------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholder,
Please find enclosed the Annual Report for the Acadian Emerging Markets
Portfolio ("the Portfolio"). This commentary covers the twelve months from
November 1, 1994 to October 31, 1995, focusing on the Portfolio's performance
and some of the economic and market conditions that impacted returns.
ACADIAN EMERGING MARKETS PORTFOLIO
PORTFOLIO PERFORMANCE REVIEW
For the fiscal year ended October 31, 1995, the Acadian Emerging Markets
Portfolio returned -19.79% versus -23.98% for the IFC Investable Index, a
widely followed emerging markets benchmark.
It was a volatile year for the emerging markets, with a strong downturn in the
first six months offset by increasing signs of recovery in the second half of
the year. The Portfolio outperformed the IFC Investable Index in both falling
and rising markets, adding over 370 basis points of return above the benchmark
for the year. This was the result of both successful country allocations, as
well as strong individual stock selection.
The underperformance of emerging markets as a category over the last year can
be partially traced to the Mexican financial and economic crisis of December
1994, in which the peso was devalued and the equity market plunged. This led
to the so-called "tequila effect," in which investors indiscriminately put
pressure on many emerging markets and currencies, particularly in Latin
America.
Over the second half of the time period, Mexico's negative influence gradually
dissipated. Acadian's research on market correlations shows that while most
markets are likely to move together for a short period after a major
unanticipated event, they quickly return to a less correlated state. This was
borne out by the behavior of the emerging markets in the third and fourth
quarters, as they moved away from strong linkage with Mexico and returned to a
pattern of returns driven mainly by country-specific economic and market
developments.
Looking at the performance of individual markets, Mexico was significantly
down for the year but has shown recent signs of recovery. Elsewhere in Latin
America, Brazil declined sharply early in the year but has since shown strong
returns on booming trade. In Asia, many markets such as Thailand and Indonesia
have performed quite strongly, as capital flowed out of economically troubled
Japan towards its regional neighbors. European emerging markets had a volatile
but generally good year, with such markets as Greece, Turkey, and Portugal
showing positive returns.
The Portfolio benefited from being underweighted in Mexico at the start of the
year. After the significant market decline in December, the Portfolio moved to
a stronger weighting in Mexico and other Latin American countries, such as
Brazil. As it turned out, this move was slightly premature, but the
overweights were rewarded in the third and fourth quarters.
The Portfolio's Asian emerging markets investments had a mixed impact on
return. The Portfolio had a zero allocation to Thailand for the first half of
the time period, which helped returns as this market declined, then moved to
an overweight, which also proved very successful. The Portfolio's overweights
in the Philippines and Indonesia detracted from returns early in the year, but
had a modestly positive impact in the second half.
1
<PAGE>
Europe was a strong suit for the Portfolio, with overweights in some key
outperforming European countries. While there was considerable volatility over
the time period, the Portfolio ultimately benefited from its overweights in
Turkey and Greece. Portugal detracted from Portfolio return in the first half
of the year but contributed modest value in the second half. South Africa was
added to the IFC Investable Index during 1995, and the Portfolio took a
significantly underweighted position in this market. This had a positive
effect on Portfolio return.
ECONOMIC OUTLOOK AND PORTFOLIO STRATEGY
The events of the last twelve months have underscored the importance of
viewing the emerging markets as a long-term investment. While these markets do
have the strong potential to outperform developed markets over the long term,
they are characterized by high short-term volatility. Looking ahead, while we
expect many emerging markets to show continued volatility, our long-term
outlook is generally very positive. Recently released figures from the
Organization for Economic Cooperation and Development (OECD) world economic
agencies indicate that emerging markets' economic growth should continue to
outstrip that of the developed world. In the past, strong economic growth has
translated into equity market outperformance in most countries, although past
performance is no guarantee of future results. For a complete discussion of
the risks associated with international investing, please refer to the
Portfolio's prospectus.
We are currently finding the most attractively valued companies in the Latin
American region, with the result that the Portfolio is slightly overweighted
in this sector versus the IFC Investable Index. In particular, Brazil and
Argentina appear to have the strongest potential for future outperformance. We
also continue to overweight key countries in Europe, including Greece, Turkey,
and Portugal, and underweight South Africa. Asia's most attractive countries,
as represented in the Portfolio, include Thailand, the Philippines, and
Indonesia.
The Portfolio continues to evidence strong value characteristics, with a
price/earnings ratio of 13.1 versus 16.1 for the IFC Investable Index, and a
price/book ratio of 1.4 versus 1.7 for the IFC Investable Index. The weighted
average capitalization is U.S.$2.8 billion, showing a slightly smaller cap
orientation than the IFC Investable Index, which has a weighted average cap of
U.S.$4.0 billion.
For the long-term investor, we continue to feel that carefully selected
emerging markets may offer unmatched diversification benefits with the
prospects for exceptional performance, when combined in a Portfolio with
careful risk controls.
If we can provide any further information, please contact me at (617) 946-
3500.
Sincerely,
/s/ Churchill Franklin
Churchill Franklin
Senior Vice President
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Without the Adviser's temporary fee waiver, 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $1,000,000 PURCHASE IN THE
ACADIAN EMERGING MARKETS PORTFOLIO
AND THE IFC INVESTABLE INDEX
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995**
---------------------------------------
1 YEAR SINCE 6/17/93*
---------------------------------------
-19.79% 5.19%
---------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
6/17/93* 10/31/93 10/31/94 10/31/95
------- -------- -------- --------
<S> <C> <C> <C> <C>
ACADIAN EMERGING MARKET PORTFOLIO+ 1,000,000 1,134,000 1,408,800 1,127,592
IFC INVESTABLE INDEX+ 1,000,000 1,254,900 1,590,600 1,209,174
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return reflects fees waived by the Adviser. Without such waiver, total
return would be lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities
(net of withholding taxes) in the index.
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 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.
Please note that one can not invest in an unmanaged index.
3
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (85.7%)
- -------------------------------------------------------------------------------
ARGENTINA (6.1%)
Astra Cia Argentina de Petro.............................. 130,400 $ 193
Banco de Galicia y Buenos Aires S.A., Class B............. 49,900 235
*Banco del Sud S.A., Class B............................... 3,350 17
Cia Naviera Perez Companc, Class B........................ 87,222 385
Citicorp Equity Investments S.A., Class B................. 19,635 59
Indupa S.A................................................ 142,100 71
Ipako Industrias Petroquimicas Argentina S.A.............. 26,100 93
Juan Minetti S.A.......................................... 17,640 43
Molinos Rio de la Plata S.A., Class B..................... 12,355 77
Siderca S.A., Class A..................................... 232,900 175
Telecom Argentina S.A., Class B........................... 23,100 89
Telefonica de Argentina, Class B.......................... 130,000 274
Transportadora de Gas del Sur S.A., Class B............... 138,200 279
YPF S.A., Class D......................................... 3,800 65
-------
2,055
- -------------------------------------------------------------------------------
BRAZIL (8.0%)
Albarus S.A. ............................................. 112,000 140
Alparagatas S.A. ......................................... 980,000 120
Banco Itau S.A. .......................................... 98,000 29
Brahma.................................................... 305,172 125
*Brasilit S.A. ............................................ 169,000 315
Cia Acos Especiais--Acesita............................... 32,700,000 241
Cia Brasil Petroleo Ipiranga.............................. 16,200,000 154
Cia Energetica de Minas Gerais--CEMIG..................... 15,600,000 334
Cia Petroquimica Do Sul................................... 6,600,000 278
*Cia Siderurgica Nacional.................................. 18,000 --
Cia Vidraria Santa Marina................................. 20,000 75
Cigarros Souza Cruz....................................... 11,000 79
Copene Petroquimica do Nordeste S.A. ..................... 100,000 53
Eletrobras................................................ 400,000 114
Itausa Investimentos Itau S.A. ........................... 430,000 259
Light Servicos Electricas................................. 1,015,000 307
Moinho Santista Industrias Gerais......................... 31,000 23
Telebras.................................................. 1,511,790 50
-------
2,696
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
GREECE (8.4%)
Alpha Investment S.A. ..................................... 1,600 $ 20
Commercial Bank of Greece S.A. ............................ 16,440 592
Credit Bank of Athens...................................... 13,493 812
Elais Olegiaous Co. ....................................... 1,000 33
Ergo Bank S.A. ............................................ 13,100 565
Hellas Can Packaging Manufacturers......................... 1,000 21
Hellenic Bottling Co. S.A. ................................ 15,000 479
Hellenic Technodomiki...................................... 1,000 22
Heracles General Cement Co. S.A. .......................... 4,700 48
Intracom S.A. ............................................. 1,800 45
Ionian Bank................................................ 2,616 56
National Bank of Greece.................................... 1,600 80
Strintzis Lines............................................ 3,600 22
Titan Cement Co. .......................................... 1,600 67
-------
2,862
- -------------------------------------------------------------------------------
HUNGARY (1.3%)
Danubius Hotels Rt......................................... 5,300 47
EGIS Rt.................................................... 5,900 147
*Fotex Rt Budapest.......................................... 33,000 31
Gedeon Richter............................................. 2,700 42
Pharmavit Rt GDS........................................... 4,500 26
Pick Szeged Rt GDR......................................... 2,100 96
Primagaz Rt................................................ 2,200 64
-------
453
- -------------------------------------------------------------------------------
INDONESIA (5.6%)
Argha Karya Prima Industry (Foreign)....................... 27,500 22
Astra International (Foreign).............................. 43,200 87
Bank Dagang Nasional (Foreign)............................. 182,000 162
Barito Pacific Timber (Foreign)............................ 349,000 242
Dharmaal Intiland (Foreign)................................ 41,500 23
Gadjah Tunggal (Foreign)................................... 174,000 111
Hanjaya Mandala Sampoerna (Foreign)........................ 26,250 243
Indah Kiat Pulp & Paper Co. (Foreign)...................... 263,373 258
Indosat (Foreign).......................................... 15,000 51
Inti Indorayon Utama (Foreign)............................. 69,000 85
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
INDONESIA--(CONTINUED)
Jakarta International Hotels & Development (Foreign)....... 22,500 $ 31
Kabelmetal Indonesia (Foreign)............................. 14,000 13
Kalbe Farma (Foreign)...................................... 11,000 35
Mayora Indah Co. (Foreign)................................. 40,560 29
Pabrik Kertas Tjiwi Kimia (Foreign)........................ 102,030 189
Polysindo Eka Perkasa (Foreign)............................ 54,000 33
*Putra Surya Perkasa (Foreign).............................. 197,500 74
SMART Corp. (Foreign)...................................... 48,000 28
Tempo Scan Pacific (Foreign)............................... 27,000 145
United Tractors (Foreign).................................. 20,500 41
-------
1,902
- -------------------------------------------------------------------------------
KOREA (2.1%)
*Cheil Industrial, Inc...................................... 6,500 183
*Han Jin Transportation Co.................................. 2,000 73
*LG Chemical Ltd............................................ 5,300 80
Shinhan Investment & Finance............................... 2,000 41
*Tai Han Electric Wire Co. ................................. 6,700 213
Tongyang Investment & Finance.............................. 2,700 52
*Yuhan Corp. ............................................... 1,100 72
-------
714
- -------------------------------------------------------------------------------
MALAYSIA (8.9%)
Boustead Holdings Bhd. .................................... 132,000 265
Commerce Asset Holding Bhd. ............................... 59,000 293
Datuk Keramat Holdings Bhd. ............................... 124,000 216
Dunlop Estates Bhd. ....................................... 105,000 236
Econstates Bhd. ........................................... 20,000 24
Edaran Otomobil Nasional Bhd. ............................. 27,000 212
Golden Hope Plantations Bhd. .............................. 37,000 58
Hong Leong Industries Bhd. ................................ 35,000 167
KFC Holdings (Malaysia) Bhd. .............................. 19,000 96
Kian Joo Can Factory Bhd. ................................. 21,000 83
Kinta Kellas plc. ......................................... 18,000 21
Kuala Lumpur Kepong Bhd. .................................. 62,000 167
Landmarks Bhd. ............................................ 42,000 47
MBF Holdings Bhd. ......................................... 86,000 47
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
MALAYSIA--(CONTINUED)
Malayan United Industries Bhd. ............................ 202,000 $ 160
Multi-Purpose Holdings Bhd. ............................... 193,000 258
Oriental Holdings Bhd. .................................... 60,000 276
Pilecon Engineering Bhd. .................................. 53,000 42
Rashid Hussein Bhd. ....................................... 92,000 228
Sungei Way Holdings Bhd. .................................. 33,000 111
TA Enterprise Bhd. ........................................ 10,000 11
-------
3,018
- -------------------------------------------------------------------------------
MEXICO (8.8%)
Apasco S.A. de C.V., Class A............................... 51,000 189
Banacci, Class B........................................... 5,100 9
Banacci, Class L........................................... 523 1
Cemex S.A., Class B........................................ 13,837 43
Cemex S.A., Class CPO...................................... 6,000 18
Cifra S.A. de C.V., Class B................................ 202,700 216
Cifra S.A. de C.V., Class C................................ 220,000 225
Coca-Cola Femsa S.A., Class L.............................. 64,000 115
*Controladora Comercial Mexicana S.A. de C.V., Class B2 .... 64,000 37
Empresas ICA Sociedad Controladora......................... 34,800 337
Fomenta Economico Mexicano S.A. de C.V., Class B........... 101,800 211
Grupo Casa Autrey S.A. de C.V. ............................ 44,000 143
*Grupo Financiero Bancomer S.A. de C.V., Class B............ 19,300 5
*Grupo Financiero Bancomer S.A. de C.V., Class L............ 715 --
Grupo Financiero Inbursa S.A. de C.V., Class B............. 25,000 68
*Grupo Financiero Serfin S.A. de C.V., Class BCP............ 7,600 5
*Grupo Gigante S.A. de C.V., Class B........................ 2,008 --
Grupo Industrial Bimbo S.A. de C.V., Class A............... 4,000 15
Grupo Industrial Maseca, Class B........................... 239,000 149
Grupo Simec S.A. de C.V., Class B.......................... 30,000 10
Grupo Televisa S.A., Class CPO............................. 30,600 267
Industrias Penoles S.A. ................................... 78,000 294
Telefonos de Mexico S.A. de C.V., Class L ................. 410,300 567
*Transportacion Martima Mexicana S.A. de C.V., Class L ..... 8,000 58
-------
2,982
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
PHILIPPINES (5.3%)
Ayala Corp., Class B....................................... 81,200 $ 83
Ayala Land, Inc., Class B.................................. 75,187 87
First Philippine Holdings Corp., Class B................... 28,300 60
JG Summit Holding, Inc..................................... 414,700 117
Manila Electric Co......................................... 42,725 319
*Megaworld Properties & Holdings, Inc....................... 182,900 91
Petron Corp................................................ 645,200 286
Philippine Long Distance Telephone Co...................... 8,000 446
*Philippine National Bank................................... 2,964 25
*SM Prime Holdings, Inc..................................... 749,000 202
San Miguel Corp., Class B.................................. 26,000 86
-------
1,802
- -------------------------------------------------------------------------------
PORTUGAL (3.6%)
Banco Comercial Portugues S.A.............................. 14,400 196
Banco Espirito Santo e Comercial de Lisboa................. 18,840 277
Banco Portugues de Investimento (Registered)............... 5,780 89
Banco Totta & Acores, Class B (Registered)................. 4,691 81
Corticeira Amorim S.A...................................... 7,600 74
Empresa Fabril de Maquinas Electricicas--EFACEC............ 3,600 33
Mague-Gestao e Participacoes............................... 900 18
Modelo Continente SGPS S.A................................. 3,200 89
Portugal Telecom S.A. (Registered)......................... 4,642 88
Sonae Industria e Investimento............................. 12,000 278
-------
1,223
- -------------------------------------------------------------------------------
SOUTH AFRICA (8.8%)
Anglo-American Gold Investment Co., Ltd.................... 1,200 97
Driefontein Consolidated Ltd............................... 6,000 67
East Rand Gold & Uranium Co., Ltd.......................... 17,000 49
*Eastvaal Gold Holdings Ltd................................. 136,000 209
Ellerine Holdings Ltd...................................... 12,000 59
Free State Consolidated Gold Mines Ltd..................... 10,800 101
Harmony Gold Mining Co., Ltd............................... 9,500 81
Hartebeesfontein Gold Mining Co., Ltd...................... 11,500 29
Impala Platinum Holdings, Ltd.............................. 700 14
Kloof Gold Mining Co., Ltd................................. 17,000 161
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- ---------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- ---------------------------------------------------------------------------------
SOUTH AFRICA--(CONTINUED)
LibLife Strategic Investments Ltd............................ 22,400 $ 83
Murray & Roberts Holdings Ltd................................ 21,500 150
Nedcor Ltd................................................... 16,800 240
Polfin Ltd................................................... 7,800 17
Randfontein Estates Gold Mining Co., Ltd..................... 4,700 26
Rembrandt Group Ltd.......................................... 47,300 431
Sappi Ltd.................................................... 9,100 172
Sasol Ltd.................................................... 52,000 449
South African Breweries Ltd.................................. 13,400 440
Vaal Reefs Exploration & Mining Co., Ltd..................... 1,100 63
Western Deep Levels Ltd...................................... 1,300 36
-------
2,974
- ---------------------------------------------------------------------------------
SRI LANKA (1.9%)
Asian Hotels Ltd............................................. 12,800 4
Blue Diamond Jewelry World................................... 141,900 53
Development Finance Corp. of Ceylon.......................... 48,400 279
Hayleys Ltd.................................................. 30,000 91
John Keells Holdings Ltd..................................... 27,200 88
National Development Bank.................................... 7,100 30
Sampath Bank Ltd............................................. 105,000 96
-------
641
- ---------------------------------------------------------------------------------
THAILAND (10.1%)
Alphatec Electronics (Foreign)............................... 15,700 205
Asia Credit Co., Ltd. (Foreign).............................. 32,000 205
Bank of Ayudhya Ltd. (Foreign)............................... 49,800 287
First Bangkok City Bank Ltd. (Foreign)....................... 400,000 350
Italian-Thai Development Corp. (Foreign)..................... 16,300 184
Jasmine International plc (Foreign).......................... 52,000 297
Krung Thai Bank plc (Foreign)................................ 94,630 376
Land and House Co., Ltd. (Foreign)........................... 6,900 111
NTS Steel Groups Co., Ltd. (Foreign)......................... 48,700 75
National Finance & Securities Co., Ltd. (Foreign)............ 24,900 114
*PTT Exploration & Production (Foreign)....................... 19,800 179
Prime Finance & Securities Ltd. (Foreign)...................... 17,700 54
Samart Corp. plc (Foreign)................................... 29,600 201
- ---------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -----------------------------------------------------------------------------
THAILAND--(CONTINUED)
Siam City Cement Co., Ltd. (Foreign)....................... 6,200 $ 103
Siam Commercial Bank Co., Ltd. (Foreign)................. 13,000 152
*Thai Airways International Ltd. (Foreign)................ 161,200 290
United Communication Industry (Foreign).................. 19,400 244
-------
3,427
- -----------------------------------------------------------------------------
TURKEY (5.8%)
Akbank TAS............................................... 635,000 167
Aksa Akrilik Kimya Sanayii AS............................ 245,620 77
Alarko Holding AS........................................ 178,760 70
Altinyildiz Mensucat Ve Konfeksiyon Fabriklari AS........ 69,000 20
Arcelik AS............................................... 503,107 83
*Brisa Bridgestone Sabanci................................ 121,000 37
Cimentas AS.............................................. 41,000 25
Cukurova Elektrik AS..................................... 80,000 30
Ege Biracilik Ve Malt Sanayii AS ........................ 128,840 46
Erciyas Biracilik Ve Malt Sanayii........................ 82,000 52
Eregli Demir Ve Celik Fab. TAS........................... 769,000 91
*Finans Bank AS........................................... 618,665 34
Goodyear Lastikleri TAS.................................. 74,000 30
Guney Biracilik Ve Malt Sanayii.......................... 113,000 24
Kartonsan Kart Sanayi Ve Ticaret AS...................... 70,000 27
Marshall Boya Ve Vernik Sanayii.......................... 163,000 18
Migros Tirk TAS.......................................... 33,000 38
Netas Telekomunik........................................ 128,000 44
*Otosan Otomobil Sanayii AS............................... 108,000 29
Petkim Petrokimya Holdings AS............................ 51,000 38
Petrol Ofisi AS.......................................... 292,000 68
Tat Konserve Sanayii AS.................................. 48,000 32
Tofas Turk Otomobil Fabrikasi............................ 659,000 85
*Tupras Turkiye Petrol Rafinerileri AS.................... 181,499 37
Turcas Petrolculuk AS.................................... 384,000 99
*Turk Hava Yollari A.O. .................................. 479,600 182
Turk Sise Ve Cam Fabrikalari............................. 285,000 51
Turkiye Garanti Bankasi AS............................... 943,000 89
- -----------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
TURKEY--(CONTINUED)
Turkiye Tutunculer Bankasi................................ 536,000 $ 13
Yapi Ve Kredi Bankasi AS.................................. 4,978,000 345
-------
1,981
- -------------------------------------------------------------------------------
VENEZUELA (1.0%)
Electricidad de Caracas................................... 158,006 181
Manufacturas Textiles..................................... 60,720 8
Siderurgica Venezolana Sivensa............................ 84,000 48
Sudamtex de Venezuela, Class B............................ 150,040 24
Venezolana de Cementos.................................... 43,017 82
Venezolana de Pulp........................................ 9,355 8
-------
351
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $30,432)......................... 29,081
- -------------------------------------------------------------------------------
PREFERRED STOCKS (12.4%)
- -------------------------------------------------------------------------------
BRAZIL (12.4%)
Aracruz Celulose S.A., Class B............................ 105,000 198
Banco Bradesco............................................ 31,853,210 291
Banco Do Brasil S.A. ..................................... 21,000,000 348
Banco Itau................................................ 1,118,000 331
Brahma.................................................... 833,166 318
Cevel Alimentos S.A. ..................................... 8,000,000 104
Cia Acos Especiais Itabira................................ 18,800,000 157
Cia Brasileira de Petroleo Ipiranga....................... 3,600,000 41
Cia Siderurgica Riograndense S.A. ........................ 3,670,000 65
Cia Siderurgica Tubarao, Class B.......................... 11,890,000 227
Cia Vale do Rio Doce...................................... 2,495,000 402
Eletrobras................................................ 345,602 98
Fertilizantes Fosfatados.................................. 69,300,000 206
IKPC--Industrias Klabin de Papel E Celulose S.A. ......... 72,000 67
Iochpe Maxion S.A. ....................................... 310,000 97
Itausa Investimentos Itau S.A. ........................... 370,000 212
Petrobras................................................. 1,358,666 117
Petrobras Distribuidora S.A. ............................. 2,200,000 69
*Ripasa S.A. .............................................. 800,000 171
Telebras.................................................. 3,680,060 149
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
BRAZIL--(CONTINUED)
Telepar................................................... 150,000 $ 47
Telesp S.A. .............................................. 3,309,562 475
- -------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $4,067)....................... 4,190
- -------------------------------------------------------------------------------
<CAPTION>
NO. OF
RIGHTS
- -------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS (0.1%)
- -------------------------------------------------------------------------------
BRAZIL (0.1%)
*Cia Energetic de Minas Gerais--CEMIG, expiring 11/27/95... 744,895 16
*Moinho Santista Industrial Gerais, expiring 11/17/95...... 31,000 25
-------
41
- -------------------------------------------------------------------------------
SOUTH AFRICA (0.0%)
*Eastvaal Gold Holdings Ltd., expiring 11/3/95............. 27,220 1
- -------------------------------------------------------------------------------
TOTAL RIGHTS (COST $31).................................... 42
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (7.2%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (7.2%)
J.P. Morgan Securities, Inc., 5.35%, dated 10/31/95, due
11/1/95, to be repurchased at $2,452, collateralized by
$2,221 United States Treasury Note 7.25%, due 5/15/16,
valued at $2,501 (COST $2,452)............................ $2,452 2,452
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (105.4%) (COST $36,982).................. 35,765
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-5.4%)
- -------------------------------------------------------------------------------
Cash...................................................... 1
Foreign Currency (Cost $615).............................. 584
Dividends Receivable...................................... 18
Other Assets.............................................. 16
Payable for Investments Purchased......................... (2,362)
Payable for Investment Advisory Fees...................... (30)
Payable for Custodian Fees................................ (20)
Payable for Administrative Fees........................... (7)
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES--(CONTINUED)
- -------------------------------------------------------------------------------
Payable for Directors' Fees.......................................... $ (1)
Other Liabilities.................................................... (20)
-------
(1,821)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 3,021,765 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)......................... $33,944
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 11.23
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
GDRGlobal Depositary Receipt
GDSGlobal Depositary Shares
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995 (Unaudited)
At October 31, 1995 sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- ---------------------- ------ -------
<S> <C> <C>
Automotive..................................................... 2.2% $ 731
Banks.......................................................... 11.5 3,900
Beverages, Food & Tobacco...................................... 8.3 2,808
Capital Equipment.............................................. 1.4 459
Chemicals...................................................... 2.3 789
Construction................................................... 5.2 1,753
Consumer Durables.............................................. 0.6 206
Consumer Non-Durables.......................................... 0.2 53
Electronics.................................................... 1.4 463
Energy......................................................... 6.4 2,183
Financial Services............................................. 12.6 4,290
Holding Company................................................ 8.5 2,879
Home Furnishings & Appliances.................................. 0.2 83
Lodging & Restaurants.......................................... 0.2 83
Manufacturing.................................................. 1.0 335
Metals......................................................... 4.0 1,367
Mining......................................................... 2.7 932
Multi-Industry................................................. 2.5 841
Paper & Packaging.............................................. 4.2 1,438
Pharmaceuticals................................................ 1.6 531
Real Estate.................................................... 1.7 589
Repurchase Agreement........................................... 7.2 2,452
Retail......................................................... 2.6 874
Services....................................................... 0.1 22
Telecommunications............................................. 8.8 2,992
Textiles & Apparel............................................. 1.0 336
Transportation................................................. 2.0 673
Utilities...................................................... 5.0 1,703
----- -------
Total Investment Portfolio..................................... 105.4 35,765
Other Assets and Liabilities (Net)............................. (5.4) (1,821)
----- -------
Net Assets..................................................... 100.0% $33,944
===== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
ENDED
OCTOBER 31,
(In Thousands) 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................... $ 472
Interest.................................................... 75
Less Foreign Taxes Withheld................................. (58)
- -------------------------------------------------------------------------------
Total Income............................................... 489
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee.................................................. $186
Less: Fees Waived.......................................... (74) 112
----
Custodian Fees.............................................. 107
Administrative Fees--Note C................................. 71
Audit Fees.................................................. 14
Printing Fees............................................... 12
Registration and Filing Fees................................ 6
Directors' Fees--Note F..................................... 3
Legal Fees.................................................. 3
Other Expenses.............................................. 3
- -------------------------------------------------------------------------------
Total Expenses............................................. 331
Expense Offset--Note A...................................... (2)
- -------------------------------------------------------------------------------
Net Expenses............................................... 329
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME........................................ 160
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments................................................. 213
Foreign Exchange Transactions............................... (114)
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS................................................ 99
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION ON:
Investments................................................. (2,676)
Foreign Currency Translations............................... (31)
- -------------------------------------------------------------------------------
TOTAL NET CHANGE IN UNREALIZED DEPRECIATION.................. (2,707)
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS AND FOREIGN EXCHANGE TRANSACTIONS ... (2,608)
- -------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS......... $(2,448)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income (Loss).......................... $ (12) $ 160
Net Realized Gain (Loss).............................. (21) 99
Net Change in Unrealized Appreciation (Depreciation).. 1,003 (2,707)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... 970 (2,448)
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain..................................... (17) --
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 726 31,670
--In Lieu of Cash Distributions..................... 17 --
Redeemed.............................................. (65) (836)
- --------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 678 30,834
- --------------------------------------------------------------------------------
Total Increase........................................ 1,631 28,386
Net Assets:
Beginning of Year..................................... 3,927 5,558
- --------------------------------------------------------------------------------
End of Year (2)....................................... $5,558 $33,944
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued........................................ 54 2,692
In Lieu of Cash Distributions........................ 2 --
Shares Redeemed...................................... (5) (67)
- --------------------------------------------------------------------------------
51 2,625
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital...................................... $4,119 $34,952
Undistributed Net Investment Income.................. -- 47
Accumulated Net Realized Gain (Loss)................. (20) 193
Unrealized Appreciation (Depreciation)............... 1,459 (1,248)
- --------------------------------------------------------------------------------
$5,558 $33,944
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED
JUNE 17, 1993** OCTOBER 31,
TO OCTOBER 31, ----------------
1993 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $10.00 $11.34 $ 14.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (1).......... (0.01) (0.03) 0.05
Net Realized and Unrealized Gain (Loss)... 1.35 2.74 (2.82)
- -------------------------------------------------------------------------------
Total from Investment Operations......... 1.34 2.71 (2.77)
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain......................... -- (0.05) --
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $11.34 $14.00 $ 11.23
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN............................... 13.40%+ 23.97%+ (19.79)%+
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)...... $3,927 $5,558 $33,944
Ratio of Expenses to Average Net Assets
(1)....................................... 2.43%* 2.07% 1.78%#
Ratio of Net Investment Income (Loss) to
Average Net Assets (1).................... (0.37%)* (0.25%) 0.86%
Portfolio Turnover Rate.................... 2% 9% 21%
- -------------------------------------------------------------------------------
</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, and
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, 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%.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds
Trust, formerly known as The Regis Fund II, (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 the UAM Funds, Inc., began operations on June 17,
1993. At October 31, 1995, the UAM Funds were comprised of thirty-four 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.
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 mean of the
bid and asked prices 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. 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. 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 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 October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $36,982,000. Net unrealized depreciation for Federal income tax
purposes aggregated $1,217,000 of which $2,256,000 related to appreciated
securities and $3,473,000 related to depreciated securities.
For the year ended October 31, 1995, the Portfolio utilized a capital loss
carryover 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 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
18
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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
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 securities 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: Any distributions from net investment
income are declared and paid annually. Any realized net capital gains will
also 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 determined 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 affiliated closed-end management
investment company, based on their relative net assets. Custodian fees of
the Portfolio have been adjusted to include expense offsets for custodian
balance credits.
19
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income 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
the Portfolio's average daily net assets. The Adviser has agreed to waive all
of its advisory fees through June 30, 1995; going forward, 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
offsets arrangements, from exceeding 2.50% of average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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. During the year ended October 31, 1995, the Portfolio
made purchases of $34,319,000 and sales of $3,669,000 of investment securities
other than 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement for expenses
incurred in attending Board meetings.
20
<PAGE>
ACADIAN EMERGING MARKETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
G. OTHER. At October 31, 1995, 70.8% of total shares outstanding were held by
one record shareholder owning 10% or greater of the aggregate total shares
outstanding.
At October 31, 1995, the net assets of the Portfolio were substantially
comprised of foreign denominated securities. 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.
21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Acadian Emerging Markets Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Acadian Emerging Markets Portfolio (the "Portfolio"), a Portfolio of the UAM
Funds, Inc., at October 31, 1995, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION: (UNAUDITED)
Foreign taxes accrued during the year ended October 31, 1995 amounting to
$58,000 are expected to be passed through to the shareholders as foreign tax
credits on Form 1099-DIV for the year ending December 31, 1995 which
shareholders of this Portfolio will receive in late January 1996.
22
<PAGE>
- --------------------------------------------------------------------------------
UAM FUNDS
ACADIAN INTERNATIONAL EQUITY 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
Acadian Asset Management, Inc.
Two International Place Boston, MA 02110
- --------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- --------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square Philadelphia, PA 19103
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor 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
- --------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
Dear Shareholder,
Please find enclosed the Annual Report for the Acadian International Equity
Portfolio (the "Portfolio"). This commentary covers the twelve months from
November 1, 1994 to October 31, 1995, focusing on the Portfolio's performance
and some of the economic and market conditions that impacted returns.
THE ACADIAN INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO PERFORMANCE REVIEW
Total return for the fiscal year ended October 31, 1995 was -4.58% in U.S.
dollars. The benchmark index, the Morgan Stanley Capital International Index
for Europe, Australia, and the Far East (EAFE), returned -0.37% for the same
time period.
Over the twelve-month period, country allocation contributed positively to the
Portfolio's return, outperforming the benchmark index by a significant margin.
However, this was offset by the returns from stock selection, which
underperformed the benchmark. (The principal investment focus for the
Portfolio is on stock selection, since country attractiveness is but one of a
number of variables used for disciplined valuation of the stocks chosen for
the Portfolio.)
In general, a value-oriented stock-selection approach was at somewhat of a
disadvantage during the first six months of the fiscal year, when the majority
of the Portfolio's underperformance occurred. International equity markets
experienced a volatile period during the first half of the fiscal year, in
which the crisis in Mexico, a weak dollar, and the fear of a global economic
slowdown all shook investor confidence. This negatively impacted the returns
of value-oriented stocks as investors tended to seek out what they perceived
to be safe havens in larger, growth-oriented companies.
Another contributor to the Portfolio's underperformance was its focus on
smaller-to-medium sized companies. For example, the Portfolio had a median
market capitalization of U.S.$4.6 billion, versus U.S.$17.7 billion for EAFE.
Smaller securities were affected by the volatile international environment
more strongly than larger ones (just as small- and mid-caps often tend to
outperform large-caps under favorable economic conditions, although there is
no guarantee that this will occur). This trend reversed itself in the third
quarter, but was enough to cause the Portfolio to underperform for the year as
a whole.
The second half of the year saw a return to strong positive equity market
returns, as the "tequila effect" from Mexico faded and markets were again
driven by domestic concerns such as economic recovery and corporate events.
Europe had generally positive returns, while the Asia-Pacific region
fluctuated in step with Japan's alternate highs and lows. U.S.-based investors
saw their international returns eroded somewhat by the strong dollar, which
gained significantly against the yen and moderately against other world
currencies during the second half.
In terms of specific country allocations and how they affected performance,
the Portfolio continued to hold an overweighted position in France. This was
rewarded in the first half of the year as the French equity market
outperformed EAFE, but detracted from returns in the second half as the market
reacted unfavorably to the economic policies of newly elected President
Chirac. The United Kingdom was overweighted in the Portfolio for much of the
year. This was generally a successful strategy in terms of country allocation,
as the U.K. equity market reached an all-time high. Stock selection detracted
from U.K. returns in the first half but then came back strongly in the second,
driven largely by the utility stocks owned by the Portfolio. Germany was
generally underweighted, which detracted from Portfolio returns for the first
three quarters, then showed a positive
1
<PAGE>
contribution in the final quarter. In terms of the all-important Japanese
market, the Portfolio was underweighted for the entire time period. This
detracted from returns in the first half of the year as the strong yen led to
high Japanese equity returns in dollar terms. In the second half, however, the
underweight proved successful as the yen weakened and Acadian's stock
selection was generally strong.
ECONOMIC OUTLOOK AND PORTFOLIO STRATEGY
While there are signs of slowing economic growth in the world's major
economies, we do not see this near-term slowdown as leading to global
recession or having a major adverse effect on equity markets. Despite the run-
up in the U.S. market and the possibility of its suffering a correction or
flattening, we do not believe that such an event would automatically lead to a
similar reaction in the international markets.
We expect to see a continued slowdown of economic growth in many of the
world's economies, but view this as a pause in long-term global expansion
rather than a prelude to recession. As countries ease fiscal policy in the
midst of this slowdown, equity markets should show renewed vigor. We continue
to be encouraged by the attractive equity valuations we see in many global
markets, particularly in Europe. The dollar's renewed strength should have a
positive impact on international corporate earnings, especially in countries
with a large number of export-driven companies. Smaller-to-medium, value-
oriented equities stand to benefit from this environment, as the combination
of currently depressed valuations and potentially lower interest rates should
provide the impetus for better relative performance.
Thus, the Portfolio continues to have a weighted average market cap
significantly smaller than the EAFE index, and is positioned in more
economically sensitive or cyclical companies. We have maintained very
attractive fundamental value attributes in the Portfolio. Specifically, the
Portfolio has a price/book ratio of 1.2 (versus 2.0 for EAFE), a
price/earnings ratio of 11.2 (versus 20.6 for EAFE), and a price/sales measure
of 0.3 (versus 0.7 for EAFE).
In terms of specific allocations, our value-oriented stock selection process
has led to overweights in a number of key countries, including France,
Switzerland, Hong Kong, and Malaysia. We find relatively fewer attractively
valued equities in such markets as Japan, Germany, and Singapore, and have
moved to a small underweight in the United Kingdom.
It is our view that a value-oriented approach should prosper in the coming
months. We believe Acadian's investment process, which combines a fundamental
value approach with growth related data, should be adept at finding
outperforming companies for the Portfolio.
If we can provide any further information, please contact me at (617) 946-
3500.
Sincerely,
/s/ Churchill Franklin
Churchill Franklin
Senior Vice President
The investment results presented in the Adviser's letter represent past
performance and should not be construed as a guarantee of future results.
Without the Adviser's temporary fee waiver (also expenses assumed by the
Adviser) 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.
2
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $1,000,000 PURCHASE IN THE
ACADIAN INTERNATIONAL EQUITY PORTFOLIO AND THE
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX.
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995**
---------------------------------------
1 YEAR SINCE 3/29/93*
---------------------------------------
-4.58% 7.74%
---------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
3/29/93* 10/31/93 10/31/94 10/31/95
------- -------- -------- --------
<S> <C> <C> <C> <C>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO+ 1,000,000 1,177,000 1,270,400 1,213,170
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX+ 1,000,000 1,209,700 1,331,900 1,326,972
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of Operations
** Total return reflects fees waived and expenses assumed by the Adviser.
Without such waiver of fees and expenses assumed, total return would be
lower.
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities
(net of withholding taxes) in the index.
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.
Please note that one can not invest in an unmanaged index.
3
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.3%)
- -------------------------------------------------------------------------------
AUSTRALIA (2.4%)
Australia & New Zealand Banking Group Ltd..................... 10,900 $ 46
Caltex Australia Ltd.......................................... 4,000 13
------
59
- -------------------------------------------------------------------------------
CANADA (2.5%)
Bank of Nova Scotia........................................... 600 13
Canadian Imperial Bank of Commerce............................ 800 22
Metro-Richeliee, Inc., Class A................................ 2,100 28
------
63
- -------------------------------------------------------------------------------
FRANCE (15.1%)
Accor S.A. ................................................... 150 18
Bail Investissement........................................... 100 17
*Bollore Technologies S.A...................................... 150 14
Christian Dior S.A............................................ 500 49
Compagnie Generale D'Industrie et de Participations (C.G.I.P.). 187 35
Credit Local de France........................................ 200 16
De Dietrich et Compagnie S.A.................................. 500 25
Gaumont S.A................................................... 650 39
Marine-Wendel................................................. 450 36
Parisienne de Reescompte...................................... 440 34
Saint Louis................................................... 150 43
Societe Financiere Interbail.................................. 250 16
Sommer-Allibert Industrie AG.................................. 100 26
Union des Assurances Federales................................ 50 5
------
373
- -------------------------------------------------------------------------------
GERMANY (3.5%)
BASF AG....................................................... 150 33
Bayer AG...................................................... 200 53
------
86
- -------------------------------------------------------------------------------
HONG KONG (3.2%)
Kumagai Gumi Ltd.............................................. 44,000 33
Semi-Tech (Global) Ltd........................................ 17,000 27
Tai Cheung Properties.......................................... 21,000 18
------
78
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
ITALY (1.3%)
Banca Nazionale del Lavoro Di Risp (NCS)........................ 2,100 $ 15
Unipol.......................................................... 3,850 17
------
32
- --------------------------------------------------------------------------------
JAPAN (37.6%)
Asahi Denka Kogyo KK............................................ 5,000 39
Chibu Shiryu.................................................... 2,000 19
Chiyoda Fire & Marine Insurance Co., Ltd........................ 4,000 21
Daikyo, Inc..................................................... 5,000 33
Dowa Fire & Marine Insurance Co. ............................... 4,000 19
Fuji Fire & Marine Insurance.................................... 8,000 39
Fuji Oil........................................................ 4,000 26
Fuji Photo Film Co., Ltd........................................ 1,000 25
Fujikura Rubber................................................. 2,000 9
Fujita Corp. ................................................... 3,000 14
Gifu Bank....................................................... 600 2
Hitachi Ltd. ................................................... 6,000 62
*Japan Steel Works............................................... 14,000 34
Marubeni Corp................................................... 1,000 5
*Mazda Motor Corp. .............................................. 5,000 16
Matsushita Electric Industrial Co., Ltd. ....................... 3,000 43
Mitsubishi Electric Corp. ...................................... 6,000 45
Mitsubishi Oil.................................................. 5,000 40
Nichimen Corp................................................... 5,000 18
Nippon Chemical Industrial...................................... 4,000 30
Nippon Shinpan Co. ............................................. 6,000 37
Nissho Corp..................................................... 1,210 12
Nissho Iwai Corp................................................ 6,000 22
Pioneer Electronic Corp......................................... 2,000 31
Shinwa Bank Ltd. ............................................... 1,000 6
Shiseido Co Ltd. ............................................... 4,000 40
Sumitomo Realty & Development................................... 2,000 13
Suntelephone Co., Ltd........................................... 2,000 12
TDK Corp........................................................ 1,000 51
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
JAPAN--(CONTINUED)
Tokyo Construction Co............................................ 6,000 $ 27
Tokyo Sowa Bank.................................................. 1,000 4
Toyo Suisan Kaisha............................................... 3,000 30
Yakult Honsha.................................................... 3,000 38
Yamaichi Securities Co........................................... 8,000 42
Yamatake-Honeywell Co., Ltd...................................... 2,000 27
------
931
- --------------------------------------------------------------------------------
MALAYSIA (2.6%)
Bandar Raya Developments Bhd. ................................... 7,000 10
MBF Capital Bhd.................................................. 13,000 12
Oriental Holdings Bhd............................................ 6,000 28
Rashid Hussein Bhd............................................... 6,000 15
------
65
- --------------------------------------------------------------------------------
NETHERLANDS (3.1%)
DSM N.V. ........................................................ 500 38
International Muller N.V......................................... 104 7
Koninklijke Hoogovens CVA........................................ 930 32
------
77
- --------------------------------------------------------------------------------
NEW ZEALAND (0.4%)
Lion Nathan Ltd.................................................. 4,800 11
- --------------------------------------------------------------------------------
SINGAPORE (1.0%)
Singapore Bus Service (Foreign).................................. 3,600 24
- --------------------------------------------------------------------------------
SPAIN (0.4%)
Europistas Concesionaria Espanola SA............................. 1,583 11
- --------------------------------------------------------------------------------
SWEDEN (2.8%)
Mo Och Domsjo AB, Class B Free................................... 800 41
SSAB Svenkst Stal AB, Class B.................................... 1,200 12
Stena Line, Class B.............................................. 3,125 16
------
69
- --------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- -------------------------------------------------------------------------------
SWITZERLAND (7.9%)
Aare-Tessin AG (Registered)................................... 50 $ 34
Baer Holding AG (Bearer)...................................... 20 24
Baloise Holding Ltd........................................... 10 21
Ciba-Geigy AG (Registered).................................... 70 60
Compagnie Financiere Richemont AG, Class A.................... 30 42
SGS Societe Generale de Surveillance Holding S.A.
(Registered)................................................. 40 14
------
195
- -------------------------------------------------------------------------------
UNITED KINGDOM (14.5%)
Anglian Water plc............................................. 4,400 39
Bank of Scotland.............................................. 12,600 50
Bristol Water Holding plc..................................... 1,100 21
British Steel plc............................................. 13,000 34
General Accident plc.......................................... 4,000 41
Guardian Royal Exchange plc................................... 10,900 39
Kwik Fit Holdings plc......................................... 5,436 15
Midlands Electricity plc...................................... 2,200 34
*National Home Loans Holdings plc.............................. 7,800 11
Royal Insurance plc........................................... 6,800 42
Sun Alliance Group plc........................................ 5,600 33
------
359
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $2,258).............................. 2,433
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.3%) (COST $2,258)........................ 2,433
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.7%)
- -------------------------------------------------------------------------------
Cash.......................................................... 49
Foreign Currency (Cost $62)................................... 63
Receivable for Investments Sold............................... 200
Dividends Receivable.......................................... 10
Receivable due from Investment Adviser........................ 7
Other Assets.................................................. 2
Payable for Investments Purchased............................. (260)
Payable for Administrative Fees............................... (7)
Payable for Custodian Fees.................................... (4)
Payable for Directors' Fees................................... (1)
Other Liabilities............................................. (17)
------
42
- -------------------------------------------------------------------------------
</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)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
NET ASSETS (100%)
Applicable to 214,505 outstanding $0.001 par value Institutional Class
shares
(authorized 25,000,000 shares)........................................ $2,475
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE................ $11.54
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
+ See Note A to Financial Statements
* Non-Income Producing Security
NCS--Non-Convertible Shares
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995 (Unaudited)
At October 31, 1995 sector diversification of the Portfolio was as follows:
<TABLE>
<CAPTION>
% OF MARKET
NET VALUE
SECTOR DIVERSIFICATION ASSETS (000)
- ---------------------- ------ ------
<S> <C> <C>
Automotive...................................................... 2.7% $ 68
Banks........................................................... 3.3 81
Beverages, Food & Tobacco....................................... 6.2 154
Chemicals....................................................... 8.8 217
Construction.................................................... 4.7 117
Consumer Durables............................................... 2.0 49
Consumer Non-Durables........................................... 0.7 18
Consumer Staples................................................ 1.6 40
Electronics..................................................... 12.5 310
Energy.......................................................... 4.6 113
Entertainment & Leisure Time.................................... 1.6 39
Financial Services.............................................. 13.3 329
Holding Company................................................. 4.6 115
Insurance....................................................... 11.2 278
Lodging & Restaurants........................................... 0.7 18
Manufacturing................................................... 3.0 73
Metals.......................................................... 1.9 46
Paper & Packaging............................................... 1.7 41
Real Estate..................................................... 3.6 89
Services........................................................ 2.4 59
Telecommunications.............................................. 0.5 12
Transportation.................................................. 1.6 40
Utilities....................................................... 5.1 127
----- ------
Total Investment Portfolio...................................... 98.3 2,433
Other Assets and Liabilities (Net).............................. 1.7 42
----- ------
Net Assets...................................................... 100.0% $2,475
===== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR
ENDED
OCTOBER 31,
(In Thousands) 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................... $ 63
Interest.................................................... 2
Less: Foreign Taxes Withheld................................ (8)
- -------------------------------------------------------------------------------
Total Income............................................... 57
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee.................................................. $ 18
Less: Fees Waived.......................................... (18) --
----
Administrative Service Fees--Note C......................... 77
Custodian Fees.............................................. 17
Audit Fees.................................................. 13
Printing Expenses........................................... 11
Registration and Filing Fees................................ 4
Directors' Fees--Note F..................................... 3
Other Expenses.............................................. 2
Expenses Assumed by the Adviser--Note B..................... (67)
- -------------------------------------------------------------------------------
Total Expenses............................................. 60
Expense Offset--Note A...................................... (1)
- -------------------------------------------------------------------------------
Net Expenses............................................... 59
- -------------------------------------------------------------------------------
NET INVESTMENT LOSS.......................................... (2)
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON:
Investments................................................ 47
Foreign Exchange Transactions.............................. (4)
- -------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN ON INVESTMENTS AND FOREIGN EXCHANGE
TRANSACTIONS................................................ 43
- -------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED DEPRECIATION ON INVESTMENTS AND
FOREIGN EXCHANGE TRANSLATIONS............................... (153)
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS AND FOREIGN EXCHANGE TRANSACTIONS.... (110)
- -------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS......... $(112)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS:
Net Investment Loss................................... $ (9) $ (2)
Net Realized Gain..................................... 60 43
Net Change in Unrealized Appreciation (Depreciation).. 124 (153)
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... 175 (112)
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain..................................... (59) (51)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 147 161
--In Lieu of Cash Distributions.................. -- 50
Redeemed.............................................. (100) --
- -------------------------------------------------------------------------------
Net Increase from Capital Share Transactions......... 47 211
- -------------------------------------------------------------------------------
Total Increase........................................ 163 48
Net Assets:
Beginning of Year..................................... 2,264 2,427
- -------------------------------------------------------------------------------
End of Year (2)....................................... $2,427 $2,475
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Shares Issued and Redeemed:
Shares Issued......................................... 12 13
In Lieu of Cash Distributions......................... -- 5
Shares Redeemed....................................... (8) --
- -------------------------------------------------------------------------------
4 18
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(2) Net Assets Consist of:
Paid in Capital....................................... $2,046 $2,256
Undistributed Net Investment Income................... 5 --
Accumulated Net Realized Gain......................... 47 43
Unrealized Appreciation............................... 329 176
- -------------------------------------------------------------------------------
$2,427 $2,475
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
MARCH 29, YEAR YEAR
1993** TO ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1993 1994 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $10.00 $11.77 $12.37
- ---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss (1)................... (0.04) (0.04) (0.01)
Net Realized and Unrealized Gain (Loss)... 1.81 0.95 (0.56)
- ---------------------------------------------------------------------------------
Total from Investment Operations......... 1.77 0.91 (0.57)
- ---------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Realized Gain......................... -- (0.31) (0.26)
- ---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............. $11.77 $12.37 $11.54
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
TOTAL RETURN............................... 17.70%+ 8.02%+ (4.58)%+
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (Thousands)...... $2,264 $2,427 $2,475
Ratio of Expenses to Average Net Assets
(1)....................................... 2.50%* 2.50% 2.54%#
Ratio of Net Investment Loss to Average Net
Assets (1)................................ (0.76)%* (0.38)% (0.11)%
Portfolio Turnover Rate.................... 44% 56% 76%
- ---------------------------------------------------------------------------------
</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, and the years ended October 31, 1994
and 1995 of $0.14, $0.21 and $0.46 per share, respectively.
# For the year ended October 31, 1995, 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%.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds Trust,
formerly known as The Regis Fund II, (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 the UAM Funds, Inc., began operations on
March 29, 1993. At October 31, 1995, the UAM Funds were comprised of thirty-
four 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.
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 mean of the
bid and asked prices 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. 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. 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 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 October 31, 1995, the Portfolio's cost for Federal income tax purposes
was $2,258,000. Net unrealized appreciation for Federal income tax purposes
aggregated $175,000 of which $242,000 related to appreciated securities and
$67,000 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
13
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(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. 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 gain and loss resulting from changes in the foreign
exchange rate from fluctuations arising from changes in the market prices
of the securities. Net realized gain and loss on foreign currency
transactions represent net foreign exchange gains or losses from forward
foreign currency exchange contracts, disposition of foreign currencies,
currency gain or loss 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 securities 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: Any distributions from net investment
income are declared and paid annually. Any realized net capital gains will
also 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 determined 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 affiliated closed-end management
investment company, based on their relative net assets. Custodian fees have
been adjusted to include expense offsets for custodian balance credits.
Costs incurred
14
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
Current year permanent book-tax differences, if any, are not included in
ending undistributed net investment income for the purpose of calculating
net investment income 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. The Adviser has agreed to waive all of its advisory fees through June
30, 1995; going forward, 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 offsets arrangements, from exceeding 2.50% of
average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition, the
Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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. During the year ended October 31, 1995, the Portfolio
made purchases of $1,992,000 and sales of $1,753,000 of investment securities
other than 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 the UAM Funds and AEW, plus a quarterly retainer of
$150 for each active portfolio of the UAM Funds and reimbursement for expenses
incurred in attending Board meetings.
15
<PAGE>
ACADIAN INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
G. LINE OF CREDIT. The Acadian International Equity Portfolio, along with
certain other portfolios of the 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 year ended October 31, 1995, there were no
borrowings under the agreement.
H. OTHER. At October 31, 1995, 98.7% of total shares outstanding were held by
two record shareholders owning 10% or greater of the aggregate total shares
outstanding.
At October 31, 1995, the net assets of the Portfolio were substantially
comprised of foreign denominated securities. 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.
I. SUBSEQUENT EVENT. 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 offsets arrangements
from exceeding 1.00% of average daily net assets.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
Acadian International Equity Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Acadian International Equity Portfolio (the "Portfolio"), a Portfolio of the
UAM Funds, Inc. at October 31, 1995, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED)
Acadian International Equity Portfolio hereby designates $18,000 as a long-
term capital gain dividend for the purpose of the dividend paid deduction on
its federal income tax return.
17
<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 Assistant Treasurer
John T. Bennett, Jr.
Director Karl O. Hartmann
Secretary
J. Edward Day
Director Robert R. Flaherty
Treasurer
Philip D. English
Director Harvey M. Rosen
Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Dewey Square Investors Corporation
One Financial Center, Boston, MA 02111
- --------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank, N.A.
73 Tremont Street, Boston, MA 02108-3913
- --------------------------------------------------------------------------------
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street, New York, NY 10260
- --------------------------------------------------------------------------------
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
2600 One Commerce Square, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
DISTRIBUTOR
UAM Fund Distributors, Inc.
One International Place, 44th Floor, 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
- --------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 1995
<PAGE>
UAM FUNDS DSI PORTFOLIOS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Shareholder's Letter........................................................ 1
Statement of Net Assets
Disciplined Value......................................................... 7
Limited Maturity Bond..................................................... 12
Money Market.............................................................. 16
Statements of Operations.................................................... 19
Statement of Changes in Net Assets
Disciplined Value......................................................... 20
Limited Maturity Bond..................................................... 21
Money Market.............................................................. 22
Financial Highlights
Disciplined Value......................................................... 23
Limited Maturity Bond..................................................... 24
Money Market.............................................................. 25
Notes to Financial Statements............................................... 26
Report of Independent Accountants........................................... 30
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholders,
We are pleased to report on the investment results and strategies for the
Disciplined Value Portfolio, the Limited Maturity Bond Portfolio and the Money
Market Portfolio.
DISCIPLINED VALUE PORTFOLIO
For the year ended October 31, 1995, the Disciplined Value Portfolio had a
good year, returning 20.12% versus 17.88% for the Lipper Equity Income Funds
Average and 26.41% for the Standard & Poor's 500 Index.
The year ended October 31, 1995 was a strong year for the equity markets.
Although falling short of the near 10% gains of the first two quarters of
1995, the S&P 500 Index continued its powerful surge in the third calendar
quarter, rising almost 8% on a total return basis. Investors appear to believe
that the Federal Reserve has succeeded in creating an environment of moderate
growth and low inflation. In this scenario, the bond market becomes less
attractive relative to the stock market as interest rates stabilize within a
relatively narrow trading range. Fortunately, moderate economic growth allows
corporations to function efficiently and can lead to good earnings growth
without the need to resort to inflationary price increases. Corporate America
continues in a conservative mode, focusing on cost cutting and restructuring
rather than on massive capital spending and/or price gouging. A preliminary
survey of third quarter earnings reports reinforces our belief that the
earnings required to support the stock market at current levels will be
forthcoming.
During the first two calendar quarters, the Portfolio trailed the S&P 500
Index primarily due to the strength of the technology sector, however, stock
selection produced attractive returns relative to the broad market in the
third calendar quarter. Part of the reason was that the high-flying TECHNOLOGY
sector slowed substantially from its first half pace, (but still managed a 6%
rise). In addition, areas of the Portfolio with more of a value orientation
did even better. The FINANCIAL area, for example, rose 17% led by Chemical
Banking (+30%, as it plans to merge with Chase Manhattan Bank), American
Express (+27%), Aetna (+18%), Bank of New York (+16%), and BankAmerica (+15%).
Our significant overweighting here helped as well. The UTILITY sector
benefited greatly from the benign interest rate environment and rose 13%, led
in the Portfolio by AT & T (+25% on a massive restructuring), NYNEX (+19%),
and GTE (+16%).
The TRANSPORTATION sector of the Portfolio also performed very well (+37%),
largely due to the strength in Southern Pacific Rail (+54%, as it was acquired
by Union Pacific). The BASIC INDUSTRIAL sector was only a modest performer in
the overall market, but our stock picking was exceptional here and led to an
overall 12% gain (Olin +35%, James River +23%, Hercules +19%, and IMC Global
+17%). Lastly, the MEDICAL & HEALTH sector rose 16%, led by Tenet Healthcare
(+22%) and Upjohn (+20%, as it merged with Pharmacia).
After experiencing a very good third calendar quarter, October was a
challenging month. Much of the underperformance versus the S&P 500 Index was
due to our overweight in the Financial area, as holdings such as Chemical,
Bank of New York and BankAmerica gave back the gains they made in the previous
months by declining 15%. However, we used the weakness in the stocks as a
buying opportunity and believe the Portfolio is well positioned for the coming
months.
The Portfolio received two stocks that were spun-off from their parent
companies: Crown Vantage (a speciality paper company) spun from James River,
and Allstate (the insurer) spun from Sears, Roebuck. The only new name
1
<PAGE>
during the quarter was Jefferson Smurfit, a containerboard and box
manufacturing company selling at extremely attractive valuations.
LIMITED MATURITY BOND PORTFOLIO
The fixed income markets for the year ended October 31, 1995 reversed
themselves from the prior year as rates declined significantly. For example,
10-year U.S. Treasury Note yielded 6.02% on October 31, 1995, down from 7.82%
at the end of 1994. The majority of the decline came in the first half of 1995
and the third quarter saw only modest changes in the level of interest rates.
In this environment, the Portfolio returned 9.58% as compared to the Lipper 1-
5 Year Short Investment Grade Debt Funds Average return of 8.79% and the
Merrill Lynch 1-4.99 Year Corporate/Government Bond Index (gross of fees)
return of 10.48%. Beginning with this report, we are now comparing the
Portfolio's performance to the Merrill Lynch 1-4.99 Year Corporate/Government
Bond Index (gross of fees) rather than the Lehman Brothers Intermediate
Government/Corporate Index. The Merrill Lynch 1-4.99 Year Corporate/Government
Bond Index (gross of fees) is a better benchmark for the type and maturity
characteristics of securities we hold in the Portfolio.
A major reason for the drop in rates this year has been a conviction by credit
market participants that a Federal balanced-budget deal was possible. To
balance the Federal budget by 2002, we need to reduce government spending by a
total of $983 billion. To help achieve this lofty target, House Speaker
Gingrich introduced a new Medicare/Medicaid plan on September 21, 1995 that
aims for spending cuts in these areas of $450 billion by 2002. Achieving these
goals, however, will not be easy. To the extent that the Speaker's plan
becomes watered down significantly, a reversal in interest rates could occur.
We believe that only a portion of the $450 billion of targeted cuts will be
achieved.
While our budgetary drama plays out, global investors have other attractive
countries in which to invest. With the exception of deflationary Japan,
America has the lowest real yield at 3.42%--significantly below the 4.8%
average that has prevailed since the passage of the Humphrey/Hawkins bill in
1979. This combination of low absolute and relative yields has prompted us to
keep the average duration of the Portfolio 5% to 8% less than that of its
benchmark index.
The yield curve, which describes the yields available at various maturities,
is today flatter than normal. For example, short-term money market rates were
at 5.75% and the 10-year U.S. Treasury yields a mere 30 basis points (0.30%)
more at 6.05% as of September 30, 1995. This put us in the advantageous
position of taking a less aggressive (i.e. shorter duration) stance on
interest rate changes without incurring the usual penalty of a yield "give-
up."
We continue to believe that mortgage-backed securities offer the best value in
the domestic fixed income market today. We own a combination of U.S. Agency-
backed pass-throughs (issued by Fannie Mae, Freddie Mac, and Ginnie Mae) and
Collateralized Mortgage Obligations (CMOs). As always, we carefully screen the
CMO investment choices and avoid all derivative CMOs and those others that
exhibit volatile price characteristics. We also continue to use the F.F.I.E.C.
(Federal Financial Institutions Examining Committee) standard which Banks must
follow in investing in CMOs.
Corporate spreads are very tight relative to U.S. Treasuries, but we have no
expectation that they will widen in the near term. For this reason, we
continue to hold corporates but will not take an aggressive overweighting at
this time.
2
<PAGE>
MONEY MARKET PORTFOLIO
The Money Market Portfolio had a 7-day current yield as of October 31, 1995 of
5.93% verses 5.22% for the Donoghue Money Fund All Taxable Average.
We continue to pursue a strategy of investing in only the highest quality
short-term investments in the Portfolio. Within this framework, we seek to
find the best yielding commercial paper and repurchase agreement dealers for
the Portfolio. The Portfolio, as a percentage of net assets, is currently
invested 67% commercial paper, 29% repurchase agreements and 4% corporate
bonds. For your information, the Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government and there can be no assurance that the Money
Market Portfolio will be able to maintain a stable net asset value of $1.00
per share.
Sincerely,
/s/ Peter M. Whitman
Peter M. Whitman
President & Chief Investment Officer
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. 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>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN
THE DSI DISCIPLINED VALUE PORTFOLIO
AND THE STANDARD & POOR'S 500 INDEX (S&P 500).
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
---------------------------------------
1 YEAR 5 YEAR SINCE 12/12/89*
---------------------------------------
20.12% 16.64% 9.90%
---------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/12/89* 10/31/90 10/31/91 10/31/92 10/31/93 10/31/94 10/31/95
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DSI DISCIPLINED VALUE PORTFOLIO+ 100,000 80,739 107,345 115,024 140,236 145,120 174,318
S&P 500 INDEX+ 100,000 88,550 118,150 129,900 149,270 158,750 200,676
</TABLE>
[GRAPH APPEARS HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions. The comparative
index has been adjusted to reflect reinvestment of dividends on securities in
the index.
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.
Please note that one can not invest in an unmanaged index.
4
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN THE DSI LIMITED
MATURITY BOND PORTFOLIO, THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE
INDEX, THE LIPPER 1-5 YEAR SHORT INVESTMENT GRADE DEBT FUNDS AVERAGE, AND THE
MERRILL LYNCH 1-4.99 YEAR CORPORATE/GOVERNMENT BOND INDEX
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995
---------------------------------------
1 YEAR 5 YEAR SINCE 12/18/89*
---------------------------------------
9.58% 7.30% 7.05%
---------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/18/89* 10/31/90 10/31/91 10/31/92 10/31/93 10/31/94 10/31/95
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DSI LIMITED MATURITY BOND PORTFOLIO+ 100,000 104,885 119,276 131,234 138,083 136,166 149,211
LIPPER 1-5 YEAR SHORT INVESTMENT GRADE DEBT FUNDS AVERAGE 100,000 105,610 118,060 128,090 137,340 137,477 149,562
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE INDEX+ 100,000 106,080 120,751 132,826 146,029 143,210 161,169
MERRILL LYNCH 1-4.99 YEAR CORPORATE/GOVERNMENT BOND INDEX+ 100,000 106,941 120,239 131,411 141,487 140,737 155,492
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate.
When shares are redeemed, they man be worth more or less than the original cost.
* Commencement of Operations
+ The comparative index is not adjusted to reflect expenses or other fees that
the SEC requires to be reflected in the Portfolio's performance. The fees, if
reflected, would reduce the performance quoted. The Portfolio's performance
assumes the reinvestment of all dividends and distributions.
Definitions of the Comparative Indices and the Lipper 1-5 Year Short
--------------------------------------------------------------------
Investment Grade Debt Funds Average.
------------------------------------
The Lehman Brothers Intermediate Government/Corporate Index is an unmanaged
index composed or 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
non-convertible corporate debt. Also included are Yankee bonds and
nonconvertible debt issued by or guaranteed by foreign or international
governments and agencies. 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 Lipper 1-5 Year Short Investment Grade Debt Funds Average is an average of
160 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.
The Merrill Lynch 1-4.99 Year Corporate/Government Bond Index is an unmanaged
index composed or U.S. Treasuries, agencies and corporates with maturities form
1 to 4.99 years. Corporates are investment grade only (rated in the top four
grades).
Please note that one can not invest in an unmanaged index.
5
<PAGE>
Performance Comparison
- --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE IN VALUE OF A $100,000 PURCHASE IN
THE DSI MONEY MARKET PORTFOLIO
AND THE DONAGHUE'S MONEY FUND AVERAGE.
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED OCTOBER 31, 1995**
---------------------------------------
1 YEAR 5 YEAR SINCE 12/28/89*
---------------------------------------
5.48% 4.23% 4.74%
---------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/28/89* 10/31/90 10/31/91 10/31/92 10/31/93 10/31/94 10/31/95
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
DSI MONEY MARKET PORTFOLIO+ 100,000 106,587 113,083 117,224 120,312 124,283 131,094
DONAGHUE'S MONEY FUND AVERAGE 100,000 106,520 113,080 117,280 120,470 124,361 131,102
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate.
When shares are redeemed, they may be worth more or less than the original cost.
* Commencement of Operations
+ The Portfolio's performance assumes the reinvestment of all dividends and
distributions.
** Total return of the Portfolio reflects fees waived and expenses assumed by
the Adviser. Without such waiver of fees and expenses assumed, total return
would be lower.
Definition of the Donaghue's Money Fund Average
-----------------------------------------------
Donaghue's Money Fund Average is an average of all major money market fund
yields, published weekly for 7- and 30- day yields.
Please note that one can not invest in an unmanaged index.
6
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (85.7%)
- --------------------------------------------------------------------------------
AUTOMOTIVE (2.7%)
General Motors Corp............................................. 4,800 $ 210
*Varity Corp.................................................... 30,000 1,088
------
1,298
- --------------------------------------------------------------------------------
BASIC RESOURCES (1.5%)
IMC Global, Inc................................................. 10,000 700
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (0.5%)
ConAgra, Inc.................................................... 6,000 232
- --------------------------------------------------------------------------------
CONSUMER DURABLES (3.5%)
General Motors Corp., Class H................................... 40,000 1,680
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (6.0%)
Anheuser-Busch Cos., Inc........................................ 4,000 264
Kmart Corp...................................................... 30,000 244
Limited (The), Inc.............................................. 45,400 834
Liz Claiborne, Inc.............................................. 7,000 199
Philip Morris Cos., Inc......................................... 10,500 887
*Ryan's Family Steak House, Inc................................. 27,000 209
Sears, Roebuck & Co............................................. 6,800 231
------
2,868
- --------------------------------------------------------------------------------
ELECTRONICS (0.5%)
National Service Industries, Inc................................ 8,800 262
- --------------------------------------------------------------------------------
ENERGY (9.8%)
British Petroleum Co. plc ADR................................... 19,000 1,677
Exxon Corp...................................................... 8,500 649
Mobil Corp...................................................... 4,500 453
Texaco, Inc..................................................... 14,600 995
Union Texas Petroleum Holdings, Inc............................. 35,000 630
United Meridian Corp............................................ 11,000 186
Valero Energy Corp.............................................. 5,000 118
------
4,708
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (15.8%)
Aetna Life & Casualty Co....................................... 17,000 $ 1,196
American Express Co............................................ 20,000 812
Aon Corp....................................................... 1,000 41
Bank of New York Co., Inc...................................... 7,000 294
BankAmerica Corp............................................... 30,000 1,725
Chase Manhattan Corp........................................... 6,500 370
Chemical Banking Corp.......................................... 26,000 1,479
DeBartolo Realty Corp.......................................... 15,000 195
First Colony Corp.............................................. 7,000 191
Torchmark Corp................................................. 30,000 1,245
-------
7,548
- --------------------------------------------------------------------------------
HEALTH CARE (6.2%)
American Home Products Corp.................................... 2,500 222
Baxter International, Inc...................................... 48,000 1,854
*Tenent Healthcare Corp........................................ 50,000 894
-------
2,970
- --------------------------------------------------------------------------------
INDUSTRIAL (12.4%)
Cooper Industries, Inc......................................... 22,500 759
Hercules, Inc.................................................. 19,000 1,014
Imperial Chemical Industries plc, ADR.......................... 5,000 243
International Paper Co......................................... 24,000 888
Lubrizol Corp.................................................. 5,000 144
Olin Corp...................................................... 7,000 448
United Technologies Corp....................................... 20,000 1,775
USX-US Steel Group, Inc........................................ 20,000 598
*WHX Corp...................................................... 10,000 104
-------
5,973
- --------------------------------------------------------------------------------
INSURANCE (0.5%)
Allstate Corp.................................................. 6,400 235
- --------------------------------------------------------------------------------
MINING (1.7%)
Barrick Gold Corp.............................................. 35,000 809
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
PAPER & PACKAGING (2.4%)
Crown Vantage, Inc............................................. 18,500 $ 361
James River Corp. of Virginia.................................. 6,600 212
*Jefferson Smurfit Corp........................................ 50,000 594
-------
1,167
- --------------------------------------------------------------------------------
PHARMACEUTICALS (4.7%)
Smithkline Beecham plc ADR..................................... 38,500 1,997
Upjohn Co...................................................... 5,000 254
-------
2,251
- --------------------------------------------------------------------------------
SERVICES (4.2%)
*Information Resources, Inc.................................... 11,000 118
International Business Machines Corp........................... 19,300 1,877
-------
1,995
- --------------------------------------------------------------------------------
TECHNOLOGY (5.2%)
*Digital Equipment Corp........................................ 32,000 1,732
Xerox Corp..................................................... 6,000 778
-------
2,510
- --------------------------------------------------------------------------------
TRANSPORTATION (1.0%)
Norfolk Southern Corp.......................................... 6,000 463
- --------------------------------------------------------------------------------
UTILITIES (7.1%)
AT&T Corp. .................................................... 4,000 256
GTE Corp....................................................... 10,000 412
NYNEX Corp..................................................... 5,100 240
Telefonos de Mexico S.A. ADR, Class L.......................... 39,000 1,073
Texas Utilities Co............................................. 39,274 1,443
-------
3,424
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $38,151)............................. 41,093
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)+
- -----------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS (3.1%)
- -----------------------------------------------------------------------------
CONSUMER NON-DURABLES
(1.3%)
RJR Nabisco Holdings, Series C, $0.6012.................... 104,200 $ 651
- -----------------------------------------------------------------------------
INDUSTRIAL (1.8%)
*WHX Corp. Series A, 6.50%................................. 19,200 847
- -----------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $1,810)............................................. 1,498
- -----------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- -----------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE DEBENTURE (0.6%)
- -----------------------------------------------------------------------------
TECHNOLOGY (0.6%)
Data General Corp. 7.75%,
06/1/01 (Cost $254)....................................... $ 300 285
- -----------------------------------------------------------------------------
SHORT TERM INVESTMENT (8.7%)
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENT (8.7%)
J.P. Morgan Securities, Inc. 5.35%, dated
10/31/95, due 11/1/95, to be repurchased at $4,139,
collateralized by $3,748 United States Treasury
Bond, 7.25%, due 5/15/16, valued at $4,221. (Cost
$4,138)................................................... 4,138 4,138
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS (98.1%)
(Cost $44,353)............................................ 47,014
- -----------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (1.9%)
- -----------------------------------------------------------------------------
Cash....................................................... 75
Receivable for Investments Sold............................ 2,713
Dividends Receivable....................................... 103
Interest Receivable........................................ 10
Other Assets............................................... 11
Payable for Investments Purchased.......................... (1,916)
Payable for Investment Advisory Fees....................... (31)
Payable for Custodian Fees................................. (16)
Payable for Administrative Fees............................ (7)
Payable for Directors' Fees................................ (1)
Other Liabilities.......................................... (17)
-------
924
- -----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
NET ASSETS (100%)
Applicable to 4,077,623 outstanding $0.001 par value Institutional
Class shares (authorized 25,000,000 shares)......................... $47,938
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE............. $ 11.76
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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.
11
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES (50.3%)
- --------------------------------------------------------------------------------
GOVERNMENT AGENCY-BACKED (41.2%)
Collateralized Mortgage Obligation Trust II Series 3 Z
8.15%, 7/20/02................................................. $ 481 $ 482
Collateralized Mortgage Securities Corp. Series 88-16 B, PAC,
9.10%, 2/27/18................................................. 184 184
Federal Home Loan Mortgage Corp.:
Series 1004 G, PAC, CMO,
7.95%, 11/15/19............................................... 625 637
Series 1049 H, CMO,
8.75%, 2/15/20................................................ 1,000 1,011
Series 1098 F, PAC, CMO,
8.00%, 3/15/05................................................ 238 238
Series 1773 BC, CMO,
8.50%, 4/15/16................................................ 690 709
Gold, Various Pools
8.50%, 11/1/24................................................ 2,100 2,176
9.00%, 11/1/24-2/1/25......................................... 910 952
Federal National Mortgage Association:
Series 90-9 D, PAC, CMO,
8.50%, 8/25/18................................................ 688 700
Series 92-97 B, CMO,
8.00%, 3/25/19................................................ 103 102
Conventional, Various Pools
9.00%, 6/1/24................................................. 456 479
9.50%, 8/1/21................................................. 785 833
Government National Mortgage Association II, TBA
5.50%, 11/22/25................................................ 1,470 1,455
Home Mac Mortgage Securities Corp., Series 86-5 C, CMO,
8.55%, 7/1/08.................................................. 608 617
MDC Mortgage Funding Corp., Series P-4, CMO,
9.50%, 11/20/17................................................ 362 381
Merrill Lynch Trust Series 45-F, PAC, CMO,
9.10%, 9/20/14................................................. 570 602
Ryland Acceptance Corp. Series 81-B, PAC, CMO,
9.00%, 1/1/15.................................................. 475 494
-------
12,052
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES--(CONTINUED)
- --------------------------------------------------------------------------------
NON-GOVERNMENT AGENCY-BACKED (9.1%)
FBC Mortgage Securities Trust 1, Series B, CMO,
9.00%, 5/20/17................................................. $1,151 $ 1,154
Security Pacific National Bank, CMO,
8.15%, 6/15/20................................................. 404 412
TMS Home Equity Trust, CMO,
5.75%, 10/15/22................................................ 591 566
7.80%, 10/1/21................................................. 525 547
-------
2,679
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $14,736).................. 14,731
- --------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (27.2%)
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (1.8%)
Philip Morris, Inc.
9.25%, 12/1/97................................................. 500 529
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (12.4%)
American General Finance Corp.
7.70%, 11/15/97................................................ 500 515
First Chicago Corp.
6.83%, 9/8/97.................................................. 525 532
Morgan Stanley, Inc.
9.25%, 3/1/98.................................................. 900 957
Paine Webber Group, Inc.
7.765%, 8/11/05................................................ 670 687
Phoenix Re Corp.
9.75%, 8/15/03................................................. 750 793
Salomon Brothers, Inc.
6.875%, 12/15/03............................................... 150 144
-------
3,628
- --------------------------------------------------------------------------------
INDUSTRIAL (9.2%)
American Brands, Inc.
8.57%, 2/15/96................................................. 500 503
Arkla, Inc.
9.875%, 2/15/18................................................ 200 216
Crown Paper Co.
11.00%, 9/1/05................................................. 250 239
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES--(CONTINUED)
- -------------------------------------------------------------------------------
INDUSTRIAL--(CONTINUED)
Mobile Telecommunications Technology Corp.
13.50%, 12/15/02.............................................. $ 250 $ 284
News America Holdings, Inc.
8.45%, 8/1/34................................................. 250 280
Occidential Petroleum Corp.
8.50%, 9/15/04................................................ 475 512
11.125%, 6/1/19............................................... 550 674
-------
2,708
- -------------------------------------------------------------------------------
TRANSPORTATION (1.6%)
Moran Transportation Co.
11.75%, 7/15/04............................................... 500 470
- -------------------------------------------------------------------------------
UTILITIES (2.2%)
Midland Cogeneration Venture Series C-94
10.33%, 7/23/02............................................... 628 656
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES (Cost $7,809)................... 7,991
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES (14.5%)
- -------------------------------------------------------------------------------
Federal National Mortgage Association
9.05%, 5/10/21................................................ 1,500 1,611
++Principal Strip,
8/21/01....................................................... 1,300 1,241
U.S. Treasury Notes
6.50%, 9/30/96................................................ 1,000 1,008
6.875%, 7/31/99............................................... 375 389
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (Cost $4,219)....... 4,249
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENT (11.5%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (11.5%)
Lehman Brothers, 5.85%, dated 10/31/95, due 11/1/95, to be
repurchased at $3,356, collateralized by $3,075 United States
Treasury Bonds, 7.875%, due 8/15/01, valued at $3,429. (Cost
$3,355)....................................................... 3,355 3,355
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (103.5%) (Cost $30,119)....................... 30,326
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES (-3.5%)
- -------------------------------------------------------------------------------
Cash................................................................. $ 45
Interest Receivable.................................................. 415
Other Assets......................................................... 11
Payable for Investments Purchased.................................... (1,460)
Payable for Investment Advisory Fees................................. (11)
Payable for Administrative Fees...................................... (8)
Payable for Custodian Fees........................................... (3)
Payable for Directors' Fees.......................................... (1)
Other Liabilities.................................................... (20)
-------
(1,032)
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 3,081,881 outstanding $0.001 par value Institutional
Class shares
(authorized 25,000,000 shares)...................................... $29,294
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.............. $ 9.51
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</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.
TBA--TBAs are securities traded under delayed delivery commitments settling
after 10/31/95. Income on the securities will not be earned until
settlement date. The cost of the TBA purchased at 10/31/95 is $1,455.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
DSI MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS
October 31, 1995
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)+
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (66.6%)
- --------------------------------------------------------------------------------
BEVERAGES, FOOD & TOBACCO (2.4%)
PepsiCo, Inc. 11/3/95........................................ $ 3,000 $ 2,999
- --------------------------------------------------------------------------------
CHEMICALS (3.2%)
Air Products & Chemicals, Inc. 1/4/96........................ 4,000 3,959
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES (2.4%)
Philip Morris Cos., Inc. 12/1/95............................. 3,000 2,986
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (37.2%)
American Honda Corp. 12/8/95................................. 4,000 3,976
Barnett Bank, Inc. 11/9/95................................... 4,000 3,995
Caisse Centrale Desjardins du Quebec (Yankee) 11/8/95........ 4,000 3,996
Cooperative Association of Tractors Dealers, Inc.:
11/16/95.................................................... 2,000 1,995
12/7/95..................................................... 2,000 1,989
Countrywide Funding Corp. 11/17/95........................... 4,000 3,990
CWS Credit, Inc. 11/10/95.................................... 4,000 3,994
Delaware Funding Corp. 11/30/95.............................. 3,000 2,986
Ford Motor Credit Co. 11/17/95............................... 3,000 2,992
G.E. Capital Corp. 11/30/95.................................. 4,385 4,365
General Motors Acceptance Corp. 11/16/95..................... 4,000 3,990
Great Western Bank 11/14/95.................................. 4,000 3,992
Pearson, Inc. 11/29/95....................................... 4,000 3,982
--------
46,242
- --------------------------------------------------------------------------------
INDUSTRIAL (16.0%)
Bausch & Lomb, Inc. 11/17/95................................. 4,000 3,990
Cooper Industries, Inc.:
11/8/95..................................................... 3,000 2,997
11/20/95.................................................... 1,000 997
Echlin, Inc. 11/10/95........................................ 3,975 3,969
Northern Rock Building Society 1/25/96....................... 4,000 3,946
XEROX Corp. 11/2/95.......................................... 4,000 3,999
--------
19,898
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
DSI MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
FACE AMORTIZED
AMOUNT COST
(000) (000)+
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER--(CONTINUED)
- -------------------------------------------------------------------------------
UTILITIES (5.4%)
Pennsylvania Power & Light Co. 11/3/95...................... $ 2,690 $ 2,689
PSE&G Fuel Corp. 12/7/95.................................... 4,000 3,977
--------
6,666
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (Cost $82,750)........................ 82,750
- -------------------------------------------------------------------------------
CORPORATE BONDS (3.8%)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (3.8%)
C.I.T. Group Holdings 5.875%, 12/1/95....................... 675 675
Shearson Lehman 6.906%, 3/11/96............................. 4,000 4,011
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (Cost $4,686).......................... 4,686
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS (29.4%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (29.4%)
J.P. Morgan Securities, Inc. 5.82%, dated 10/31/95, due
11/1/95, to be repurchased at $12,457, collateralized by
$11,196 United States Treasury Bonds, 7.25%, due 5/15/04,
valued at $12,832.......................................... 12,455 12,455
Lehman Brothers, 5.85%, dated 10/31/95, due 11/1/95, to be
repurchased at $24,004, collateralized by $25,065 United
States Treasury Bills, due 4/4/96, valued at $24,484....... 24,000 24,000
- -------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $36,455).................. 36,455
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%) (Cost $123,891).................... $123,891
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2%)
- -------------------------------------------------------------------------------
Cash........................................................ 3
Receivable for Portfolio Shares Sold........................ 799
Interest Receivable......................................... 61
Other Assets................................................ 13
Dividends Payable........................................... (550)
Payable for Investment Advisory Fees........................ (19)
Payable for Custodian Fees.................................. (15)
Payable for Administrative Fees............................. (10)
Payable for Directors' Fees................................. (1)
Other Liabilities........................................... (25)
--------
256
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
DSI MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS--(CONTINUED)
October 31, 1995
<TABLE>
<CAPTION>
VALUE
(000)+
- -------------------------------------------------------------------------------
<S> <C>
NET ASSETS (100%)
Applicable to 124,146,172 outstanding $0.001 par value Institutional
Class shares (authorized 400,000,000 shares)........................ $124,147
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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.
18
<PAGE>
DSI PORTFOLIOS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1995
<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 ............................... $1,377 $ -- $ --
Interest ................................ 191 2,351 6,934
- -------------------------------------------------------------------------------
Total Income ........................... 1,568 2,351 6,934
- -------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fees.............................. 362 132 475
Less: Fees Waived....................... -- -- (82) 393
---
Administrative Fees--Note C ............. 78 87 134
Custodian Fees .......................... 2 3 2
Directors' Fees--Note F ................. 4 3 5
Audit Fees .............................. 13 17 15
Legal Fees............................... 4 2 11
Other Expenses .......................... 18 15 29
- -------------------------------------------------------------------------------
Total Expenses ......................... 481 259 589
Expense Offset--Note A................... (2) (3) (2)
- -------------------------------------------------------------------------------
Net Expenses............................ 479 256 587
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME..................... 1,089 2,095 6,347
- -------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) ON INVESTMENTS... 4,215 (127) 2
NET CHANGE IN UNREALIZED APPRECIATION ON
INVESTMENTS.............................. 3,655 722 --
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS................... 7,870 595 2
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $8,959 $2,690 $6,349
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 885 $ 1,089
Net Realized Gain..................................... 4,349 4,215
Net Change in Unrealized Appreciation (Depreciation).. (3,736) 3,655
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 1,498 8,959
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (855) (1,098)
Net Realized Gain..................................... (5,810) (4,355)
- --------------------------------------------------------------------------------
Total Distributions.................................. (6,665) (5,453)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 8,791 6,300
--In Lieu of Cash Distributions..................... 6,663 5,430
Redeemed.............................................. (3,455) (16,300)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... 11,999 (4,570)
- --------------------------------------------------------------------------------
Total Increase (Decrease)............................ 6,832 (1,064)
Net Assets:
Beginning of Year..................................... 42,170 49,002
- --------------------------------------------------------------------------------
End of Year (2)....................................... $49,002 $ 47,938
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 791 585
In Lieu of Cash Distributions......................... 606 554
Shares Redeemed....................................... (299) (1,473)
------- --------
1,098 (334)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $45,697 $ 41,127
Undistributed Net Investment Income................... 76 63
Accumulated Net Realized Gain......................... 4,223 4,087
Unrealized Appreciation (Depreciation)................ (994) 2,661
------- --------
$49,002 $ 47,938
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 1,762 $ 2,095
Net Realized Loss..................................... (1,701) (127)
Net Change in Unrealized Appreciation (Depreciation).. (538) 722
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations.......................................... (477) 2,690
- -------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (1,582) (2,011)
- -------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 2,926 4,784
--In Lieu of Cash Distributions....................... 1,517 1,947
Redeemed.............................................. (5,888) (8,336)
- -------------------------------------------------------------------------------
Net Decrease from Capital Share Transactions......... (1,445) (1,605)
- -------------------------------------------------------------------------------
Total Decrease....................................... (3,504) (926)
Net Assets:
Beginning of Year..................................... 33,724 30,220
- -------------------------------------------------------------------------------
End of Year (2)....................................... $30,220 $29,294
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 307 513
In Lieu of Cash Distributions......................... 161 209
Shares Redeemed....................................... (611) (886)
------- -------
(143) (164)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $32,153 $30,548
Undistributed Net Investment Income................... 197 231
Accumulated Net Realized Loss......................... (1,615) (1,692)
Unrealized Appreciation (Depreciation)................ (515) 207
------- -------
$30,220 $29,294
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
DSI MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
(In Thousands) 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income................................. $ 5,527 $ 6,347
Net Realized Gain..................................... -- 2
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations. 5,527 6,349
- --------------------------------------------------------------------------------
DISTRIBUTIONS:
Net Investment Income................................. (5,527) (6,347)
- --------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (1)
Issued--Regular....................................... 828,150 604,560
--In Lieu of Cash Distributions..................... 10 76
Redeemed.............................................. (904,494) (592,576)
- --------------------------------------------------------------------------------
Net Increase (Decrease) from Capital Share Transac-
tions............................................... (76,334) 12,060
- --------------------------------------------------------------------------------
Total Increase (Decrease)............................ (76,334) 12,062
Net Assets:
Beginning of Year..................................... 188,419 112,085
- --------------------------------------------------------------------------------
End of Year (2)....................................... $ 112,085 $ 124,147
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Shares Issued and Redeemed:
Shares Issued......................................... 828,150 604,560
In Lieu of Cash Distributions......................... 10 76
Shares Redeemed....................................... (904,494) (592,576)
--------- ---------
(76,334) 12,060
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(2)Net Assets Consist of:
Paid in Capital....................................... $ 112,087 $ 124,147
Accumulated Net Realized Loss......................... (2) --
--------- ---------
$ 112,085 $ 124,147
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
DSI DISCIPLINED VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------------------
1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 7.86 $ 10.17 $ 10.62 $ 12.72 $ 11.11
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........... 0.26 0.26 0.22 0.22 0.25
Net Realized and Unrealized
Gain........................... 2.31 0.46 2.09 0.17 1.70
- --------------------------------------------------------------------------------
Total from Investment
Operations.................... 2.57 0.72 2.31 0.39 1.95
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income........... (0.26) (0.27) (0.21) (0.22) (0.25)
Net Realized Gain............... -- -- -- (1.78) (1.05)
- --------------------------------------------------------------------------------
Total Distributions............ (0.26) (0.27) (0.21) (2.00) (1.30)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD... $ 10.17 $ 10.62 $ 12.72 $ 11.11 $ 11.76
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN..................... 32.95% 7.15% 21.92% 3.48% 20.12%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands)..................... $41,558 $37,202 $42,170 $49,002 $47,938
Ratio of Expenses to Average Net
Assets.......................... 1.05% 0.99% 1.04% 1.09% 1.00%#
Ratio of Net Investment Income to
Average Net Assets.............. 2.60% 2.44% 1.88% 2.02% 2.26%
Portfolio Turnover Rate.......... 62% 74% 149% 184% 121%
- --------------------------------------------------------------------------------
</TABLE>
# For the year ended October 31, 1995, 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%.
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
DSI LIMITED MATURITY BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------------
1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 9.87 $ 10.40 $ 10.56 $ 9.95 $ 9.31
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income.......... 0.77 0.66 0.68 0.56 0.69
Net Realized and Unrealized
Gain (Loss)................... 0.53 0.35 (0.16) (0.70) 0.17
- --------------------------------------------------------------------------------
Total from Investment
Operations................... 1.30 1.01 0.52 (0.14) 0.86
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income.......... (0.77) (0.67) (0.70) (0.50) (0.66)
Net Realized Gain.............. -- (0.18) (0.43) -- --
- --------------------------------------------------------------------------------
Total Distributions........... (0.77) (0.85) (1.13) (0.50) (0.66)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.. $ 10.40 $ 10.56 $ 9.95 $ 9.31 $ 9.51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN.................... 13.72% 10.03% 5.22% (1.39)% 9.58%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(Thousands).................... $34,896 $33,206 $33,724 $30,220 $29,294
Ratio of Expenses to Average Net
Assets......................... 0.75% 0.72% 0.79% 0.88% 0.88%#
Ratio of Net Investment Income
to Average Net Assets.......... 7.39% 6.19% 6.50% 5.68% 7.12%
Portfolio Turnover Rate......... 306% 238% 167% 274% 126%
- --------------------------------------------------------------------------------
</TABLE>
# For the year ended October 31, 1995, 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%.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
DSI MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA & RATIOS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------------
1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 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 0.530
- -------------------------------------------------------------------------------
Total from Investment
Operations.............. 0.059 0.035 0.026 0.033 0.530
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income..... (0.059) (0.035) (0.026) (0.033) (0.530)
- -------------------------------------------------------------------------------
Total Distributions...... (0.059) (0.035) (0.026) (0.033) (0.530)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD.................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL RETURN............... 6.10% 3.66% 2.63% 3.30% 5.48%++
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL
DATA
Net Assets, End of Period
(Thousands)............... $168,490 $182,807 $188,419 $112,085 $124,147
Ratio of Expenses to
Average Net Assets+....... 0.68% 0.64% 0.58% 0.56% 0.50%#
Ratio of Net Investment
Income to Average Net
Assets+................... 5.98% 3.65% 2.60% 3.07% 5.35%
- -------------------------------------------------------------------------------
</TABLE>
+ Net of voluntarily waived fees of $0.001 per share for the year ended
October 31, 1995.
++ Total return would have been lower had certain expenses not been waived for
the period indicated.
# For the year ended October 31, 1995, 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%.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
UAM Funds, Inc., formerly known as The Regis Fund, Inc., and UAM Funds
Trust, formerly known as The Regis Fund II, (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"), which are portfolios of the 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 October 31, 1995. At October 31, 1995, the UAM Funds were
comprised of thirty-four 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.
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 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.
Money market securities are valued at amortized cost, if it approximates
market value.
The value of other assets and securities for which no market 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 permanent book-tax differences. Reclassifications
arose from differing book and tax treatments for paydown losses on
mortgage-backed securities.
At October 31, 1995, cost and unrealized appreciation (depreciation) of
investments for Federal income tax purposes was:
<TABLE>
<CAPTION>
COST APPRECIATION DEPRECIATION NET
DSI PORTFOLIOS (000) (000) (000) (000)
- -------------- -------- ------------ ------------ ------
<S> <C> <C> <C> <C>
Disciplined Value..................... $ 44,520 $4,059 $(1,565) $2,494
Limited Maturity Bond................. 30,128 319 (121) 198
Money Market.......................... 123,891 -- -- --
</TABLE>
26
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At October 31, 1995, DSI Limited Maturity Bond Portfolio had capital loss
carryforwards totaling $1,684,000 which $8,000, $1,607,000 and $69,000 can
be used to offset capital gains until October 31, 2001, October 31, 2002
and October 31, 2003, respectively. DSI Money Market Portfolio utilized
capital loss carryforwards for Federal income tax purposes of approximately
$2,000.
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. DISTRIBUTIONS TO SHAREHOLDERS: The DSI Money Market Portfolio declares
distributions daily and distributes substantially all of its net investment
income monthly. The DSI Disciplined Value and DSI Limited Maturity Bond
Portfolios will normally distribute substantially all of their net
investment income to shareholders in the form of quarterly distributions.
Any realized net capital gains will 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.
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 determined 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 adjusted
to include expense offsets for custodian balance credits.
Current year permanent book-tax differences if any are not included in
ending undistributed net investment income for the purpose of calculating
net investment income per share in the financial highlights.
B. ADVISORY SERVICES. Dewey Square Investors Corporation ("DSI"), a wholly-
owned subsidiary of United Asset Management Corporation ("UAM"), provides
investment advisory services to the Portfolios under an Investment Advisory
Agreement. Under the terms of the Investment Advisory Agreement for DSI
Disciplined Value Portfolio, DSI is paid 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 Limited Maturity
Bond
27
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Portfolio, DSI is paid a fee calculated at an annual rate of 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 Money Market Portfolio, DSI is paid a fee calculated at
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. In addition, effective
July 1, 1995, DSI has voluntarily agreed to cap its investment advisory fee,
for the DSI Money Market Portfolio, at 0.18% of average daily net assets.
C. ADMINISTRATIVE SERVICES. Effective September 1, 1995, The Chase Manhattan
Bank, N.A., through its affiliate Chase Global Funds Services Company
("CGFSC") (the "Administrator"), formerly Mutual Funds Service Company
("MFSC"), provides administrative, fund accounting, dividend disbursing and
transfer agent services to the UAM Funds under an Administration Agreement
(the "Agreement"). Pursuant to the Agreement, the Administrator is entitled to
receive annual fees, computed daily and payable monthly, based on the combined
aggregate average daily net assets of the UAM Funds and AEW, as follows: 0.20%
of the first $200 million of the combined aggregate net assets; plus 0.12% of
the next $800 million of the combined aggregate net assets; plus 0.08% of the
combined aggregate net assets in excess of $1 billion but less than $3
billion; plus 0.06% of the combined aggregate net assets in excess of $3
billion. The fees 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. In addition,
each Portfolio is charged certain out of pocket expenses by the Administrator.
Prior to September 1, 1995, MFSC was an affiliate of the United States Trust
Company of New York and provided administrative services to the UAM Funds
under the same terms, conditions and fees as stated above.
D. DISTRIBUTION SERVICES. UAM Fund Distributors, Inc. (the "Distributor"),
formerly known as RFI Distributors (a division of Regis Retirement Plan
Services, Inc.), 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 year ended October 31, 1995, 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............................................. $54,729 $65,038
Limited Maturity Bond......................................... 11,498 6,327
</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 $27,742,000 and $28,450,000, 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 the UAM Funds and AEW, plus a
quarterly retainer of $150 for each active portfolio of the UAM Funds, Inc.
and reimbursement for expenses incurred in attending Board meetings.
28
<PAGE>
DSI PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
G. LINE OF CREDIT. The DSI 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. For the year ended
October 31, 1995, there were no borrowings under the agreement.
H. OTHER. At October 31, 1995, the percentage of total shares outstanding
and the number of record shareholders owning 10% or greater of the Portfolios
were as follows:
<TABLE>
<CAPTION>
NO. OF %
DSI PORTFOLIOS SHAREHOLDERS OWNERSHIP
- -------------- ------------ ---------
<S> <C> <C>
Disciplined Value........................................ 1 47.7%
Limited Maturity Bond.................................... 1 52.8
Money Market............................................. 1 97.4
</TABLE>
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
UAM Funds, Inc. and Shareholders of
DSI Disciplined Value Portfolio
DSI Limited Maturity Bond Portfolio
DSI Money Market Portfolio
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
DSI Disciplined Value Portfolio, DSI Limited Maturity Bond Portfolio, and DSI
Money Market Portfolio (the "Portfolios"), Portfolios of the UAM Funds, Inc.,
at October 31, 1995, and the results of each of their operations, the changes
in each of their net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolios' management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 14, 1995
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED):
At October 31, 1995, the DSI Disciplined Value Portfolio hereby designates
$1,070,000 as a long-term capital gain dividend for the purpose of the
dividend paid deduction on its Federal income tax return.
For the year ended October 31, 1995, the percentage of dividends paid that
qualify for the 70% dividend received deduction for corporate shareholders was
28% for the DSI Disciplined Value Portfolio.
30
